Beckstrom's Law - A Model for Valuing Networks and Security

Presented at DEF CON 17 (2009), July 31, 2009, 10 a.m. (50 minutes)

Beckstrom's Law is a new model or theorem of economics formulated by Rod Beckstrom. It purports to answer 'the decades old question of "how valuable is a network." It is granular and transactions based and can be used to value any network. It applies to any network: social networks, electronic networks, support groups and even the Internet as a whole. To read a white paper explaining the law and mathematics in detail, please see Economics of Networks. This new model values the network by looking from the edge of the network at all of the transactions conducted and the value added to each. It states that one way to contemplate the value the network adds to each transaction is to imagine the network being shut off and what the additional transactions costs or loss would be. Beckstrom's Law differs from Metcalfe's law, Reed's law and other concepts that proposed that the value of a network was based purely on the size of the network, and in Metcalfe's law, one other variable.


  • Rod Beckstrom
    Rod Beckstrom is the former Director of the National Cyber Security Center (NCSC) in the U.S. Department of Homeland Security where he reported to Secretary Michael Chertoff and Secretary Janet Napolitano, respectively. Rod co-authored The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations that presents a new model for analyzing organizations, leadership style and competitive strategy. He has co-authored three other books including one on Value at Risk (VAR), a fundamental theory of financial risk management now used to regulate banking globally. He has recently developed a new economic model for valuing technical and social networks, referred to as Beckstrom's law. As an entrepreneur Rod started his first company when he was 24 in a garage apartment and subsequently grew it into a global enterprise with offices in New York, London, Tokyo, Geneva, Sydney, Palo Alto, Los Angeles and Hong Kong. The company, CATïS Software Inc., went public under Rod's leadership and was later sold. Nobel Laureates Myron Scholes and William F. Sharpe served on the company's boards of advisors and directors, respectively. Rod also co-founded Mergent Systems with Dr. Amos Barzilay and Assistant Professor Michael Genesereth of the Stanford Graduate School of Computer Science. Mergent was a pioneer in inferential database engines and was sold to Commerce One for $200 million. He also co-founded TWIKI.NET, a company offering service and support for an open source wiki and collaboration software system. From 1999 to 2001 Rod served as the Chairman of Privada, Inc. Privada was a pioneer in technology to enable private, anonymous and secure credit card transaction processing over the Internet. Rod has helped to start numerous non-profit groups and initiatives. In 2003 he co-founded a peace network of CEO's which initiated Track II diplomatic efforts between India and Pakistan. This group took symbolic actions which led to opening the borders to citizens, trade and contributed to ending the most recent Indo-Pak war. He serves on the boards of the Environmental Defense Fund and the Jamii Bora Trust (micro-lending) in Africa. Rod graduated from Stanford University with an MBA and a BA with Honors and Distinction. He served as Chairman of the Council of Presidents of the combined Stanford student body (ASSU) and was a Fulbright Scholar at the University of St. Gallen in Switzerland.


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