Joining the Mafia 99
funds, and similar assets. If the recipient didn’t have an
X.com account, the system automatically sent an e-mail
where the recipient was asked to register for an account.
When X.com demonstrated these two features, they
realized the smaller feature was more popular. “Whenever
we’d show the system off, we’d show the hard part, the
conglomeration of financial services, which is difficult to
put together, nobody was interested,” Elon said. “Then we
showed people e-mail payments, which was easy to put
together, and everyone was interested. So, it’s important
to take feedback from your environment. You want to be
as closed-loop as possible.”^63
Because of this new insight, X.com decided to focus
on e-mail payments. To succeed with e-mail payments,
and because of Metcalfe’s Law, growth of users would
become the most important task. Robert Metcalfe came
up with the law and it says that the value of a network
equals the square of its users. A network with twice as
many users as a competitor is four times as valuable. So
to crush the competitors, X.com needed to achieve a so-
called network effect which says that a large established
network is valuable to enter and costly to leave. If many
people used X.com, it would be difficult for competitors to
attract new customers because everyone is already using
X.com. They wanted to lock in their members to prevent
competitors from growing. This is why it’s difficult for
Google+ to attract users from Facebook.^189
To achieve this network effect, Elon came up with a
clever way to attract new customers. X.com offered $20