I've mentioned this post before - it ties in to the idea of 'stickiness' that I've been blogging about in my synopsis of Made to Stick. Stickiness is a way of describing how memorable an idea is and how easy it is to transfer that idea from one person to another.
Say I write a blog post that gets 12 readers. How many people does that first generation of 12 readers tell it to? How many people does that second generation tell? As Seth says:
If you start with 10,000 fans and have an idea that on average nets .8 new people per generation, that means that 10,000 people will pass it on to 8000 people, and [they'll pass it on to] 6400 people, etc.
... Pretty soon, [your idea] dies out.
On the other hand, if you start with 100 people (99% less!) [but your] idea is twice as good (1.5 net passalong) it doesn't take long before you overtake the other plan. That's not even including the compounding of new people getting you people.
But wait! If your idea is just a little more viral, a 1.7 passalong, wow, huge results. Infinity, here we come.
The New Thing takes this as its starting point.