In another context, Amazon has the right idea. On many of the books listed on Amazon.com (the ones of which you can “look inside”), you can see a list of Statistically Improbable Phrases (SIPs). Here is an example. These SIPs are not so informative that they obviate the need to read the book, but they are certainly more informative than “most common phrases” or “random phrases.”

I wonder if something similar could be done for social networking profiles. Instead of listing your favorite books, profiles should list the books that you like that are surprising or statistically improbable for your age, gender, SES, and IQ. This would allow people to connect much more meaningfully than current profiles do. It usually takes months or years of close friendship to learn about people’s quirks. But if your Statistically Improbable Characteristics (SICs) were available for all to see, it might be possible to form serious relationships online more easily.

How could SICs be determined? This is likely (literally) a billion dollar question. It’s obviously not possible for people to accurately and on a widespread basis self-report their SICs. There would be a serious temptation to signal coolness instead of telling the truth, and in any case, I doubt that people are aware of their SICs. Maybe some sort of browser plugin/phone app/set top box/bank account combination could provide data suitable for mining for this purpose.

Even if the technological problem could be solved, I wonder if people would be comfortable publicizing their SICs. We spend so much effort trying to fit in. Would we really allow our friends to see how weird we are? I’d like to live in a world in which we would, but I’m just not sure that’s reality for most of us. But maybe if everyone else was doing it…

Let me preface my argument by reiterating that there is a lot about Facebook that I don’t like. I hate the “walled garden” approach, and would prefer that decentralized protocols like those used in Google Buzz take off. I’m not a cheerleader for Facebook or its strategy by any means. Nevertheless, I don’t think Internet users have much to fear.

The way to start thinking about network effects is to think about fax machines. A fax machine is absolutely useless if you are the only one who has one. It’s only when other people have fax machines that they become useful. A fall in the price of fax machines has two effects. First, it will induce people to buy more fax machines—this is the ordinary demand effect of moving along the demand curve. Second, because people are buying more fax machines, fax machines become more useful, which increases demand for fax machines—the demand curve shifts out, amplifying the effect of the price drop on quantity. Since the effect is amplified, the true demand curve, the one that takes this into account, is very “flat” or elastic.

Facebook accounts are like fax machines—they are only useful if other people have them. There is the same positive feedback effect of price on quantity. As a thought experiment, imagine that Facebook started charging $10/month for access. My intuition is that many people get more than $10/month of value out of Facebook, and therefore would be willing to pay the fee. However, a lot of marginal users would drop the service. The fact that a lot of users would drop the service would make Facebook less useful to those people who remained; they may no longer get $10/month worth of value out of Facebook if half their friends weren’t on it any more.

I’m not suggesting that Facebook is going to start charging a fee for access. But nevertheless, elastic demand plays a role in how it relates to its users. For instance, one way of cashing in on the service’s popularity would be to plaster it with interstitial ads. This would be kind of like charging a “price” for the service. Why doesn’t Facebook do this? Elastic demand. And elastic demand places limits on the amount of “evil” that Facebook can do, or at least the amount of wealth it can transfer from its users to itself.

Finally, think about network effects and monopoly. Goods and services that exhibit network effects are going to tend toward monopoly (at least if the network effect applies to the good or service directly, and not the protocol, as with fax machines). We should not be surprised that Facebook is becoming huge; if it wasn’t huge, something else would be huge. That’s just how these industries work. But with very elastic demand, having lots of users doesn’t translate into a large monopoly rent. And meanwhile, Google has a strong incentive to ensure that the Facebook tax is not very high.

So my advice is stop worrying and enjoy your consumer surplus. Facebook is not good or evil—it is profit-oriented and faces a serious demand constraint due to the nature of its own product.

While I still find the Buzz user interface to be inferior to Facebook’s, it is important to look beneath the UI to see what Buzz is all about: open protocols. You can visit the Buzz API page to see what protocols are in use. The three that I find most interesting are PubSubHubbub (a.k.a. PuSH), Salmon, and WebFinger.

PuSH is about distributing content in real time. Any subscriber or client that is PuSH enabled can subscribe to any publisher that is PuSH enabled and get new content as soon as it is available. I recently outfitted my blog with PuSH, which means that new posts show up immediately in Google Reader and in Buzz.

Salmon is about unifying comment streams. If you spend time on both Google Reader and Google Buzz, you will notice that comments on one service get transferred to the other service. Imagine this happening across the whole web. That is the point of Salmon.

WebFinger is a way to get profile information and other data from an email address. If your email provider supports webfinger (just Gmail so far), someone who knows your email address can access whatever profile information you want to be made public. This means that disparate web services can find each other, so your Twitter account can discover your Flickr account.

Putting these protocols (and others) together, it becomes clear that Buzz is not just another social network. It is a recipe for a decentralized social network. Once the Buzz API is complete, if Yahoo! wanted to, they could launch a social network that would completely integrate with Buzz. So could anyone else. The result will be a less monopolized social networking experience, which will ultimately be a better social networking experience.

Dear Facebook: 1994 called, and they want AOL back.