Zollman explains how this happens and draws out some of its less obvious implications. One that seems particularly important is a variation of the friendship paradox
- the fact that in a network of people, it can be the case for most
people that most
of their friends have a particular belief, even if that belief is rare. How?
It’s interesting to speculate about how, because venture capital is a tightly networked industry, this might contribute to (until recently) ever rising startup valuations. If the best investors are both (a) the best networked and (b) investing in the best, and so most expensive, companies, it might lead most of the industry to believe that valuations are rationally
increasing across the board. Of course, that’s not the only explanation
, but it’s a useful nudge to pay attention to what we we think
we know about what others believe.