The Power Law Is Everywhere: How a Few Things Control Most of the Outcome
Unveiling the Power Law: A Tale of Unequal Distribution ⚖️
"Money makes money. 'For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them' (Matthew 25:29)." Ever heard the saying, "The rich get richer"? Well, there's a fundamental truth behind that, and it's called the Power Law. It's the idea that a small number of things—people, events, companies—disproportionately influence the majority of outcomes. It's like that old saying, "The squeaky wheel gets the grease" – only in this case, the "squeaky wheel" gets all the grease, and everyone else is left dry.
The 80/20 Rule: Pareto's Principle 🇮🇹
Now, you might be thinking, "Sounds a bit unfair, doesn't it?" And you're right, the Power Law doesn't play fair. But that's how a lot of the world works. "In 1906, economist Vilfredo Pareto discovered what became the 'Pareto principle,' or the 80-20 rule, when he noticed that 20% of the people owned 80% of the land in Italy—a phenomenon that he found just as natural as the fact that 20% of the peapods in his garden produced 80% of the peas." It's like that old saying, "The straw that broke the camel's back" – only in this case, 20% of the straws are doing all the breaking!
Examples of the Power Law in Action 🎬 🌎 💰
- Earthquakes 🌋 "The most destructive earthquakes are many times more powerful than all smaller earthquakes combined." The 2011 earthquake and tsunami in Japan, for example, released an energy equivalent to 9,320 gigatons of TNT, hundreds of times more powerful than all the smaller earthquakes in Japan that year. Talk about a tail event!
- Cities 🏙️ "The biggest cities dwarf all mere towns put together." The population of Tokyo is 37 million, larger than the combined population of the next 30 biggest cities in Japan.
- Businesses 🏢 "Monopoly businesses capture more value than millions of undifferentiated competitors." Apple, for example, is worth more than $2 trillion, more than all the other publicly traded computer companies combined.
- Venture Capital 💸 "In venture capital, where investors try to profit from exponential growth in early-stage companies, a few companies attain exponentially greater value than all others." Think of Facebook: It's worth more than $1 trillion, more than the combined value of all the other social media companies ever started.
These are just a few examples, but the Power Law is everywhere! It's in the way music is streamed, books are sold, movies are watched, websites are visited, and even how we spend our time.
Why Most People Don't See the Power Law 👀
"Power law distributions are so big that they hide in plain sight." Most people miss the Power Law because it contradicts our intuition about how the world works. We’re taught to think that things are more or less evenly distributed – that most people are of average intelligence, most companies are moderately successful, and most events have a moderate impact.
But the truth is, the world is full of extreme inequalities – and that’s what the Power Law is all about. "The power law—so named because exponential equations describe severely unequal distributions—is the law of the universe."
What the Power Law Means for You 🤔
"The power law is not just important to investors; rather, it’s important to everybody because everybody is an investor." Even if you don’t think of yourself as an investor, you are!
Choosing a Career 💼 When you choose a career, you’re making a long-term bet on the value of the skills you're developing. "When you choose a career, you act on your belief that the kind of work you do will be valuable decades from now." In a Power Law world, some skills and some industries are far more valuable than others. It's not just about "doing it well" – it's about choosing the right thing to do well.
Starting a Company 🚀 If you’re an entrepreneur, the Power Law is even more crucial. You're betting your time, your energy, and your reputation on the success of your company. And in the startup world, a few companies radically outperform all others. "The power law means that differences between companies will dwarf the differences in roles inside companies." You’re far more likely to succeed by joining a great company while it’s growing fast than by starting a mediocre company on your own, even if you own 100% of it.
Making Decisions 🧠 Even in everyday life, the Power Law influences our decisions. We tend to overestimate the value of small, incremental improvements and underestimate the importance of a few big wins. It’s tempting to spread your time and energy across lots of different things, but you’ll get better results by focusing relentlessly on the few things that truly matter.
Embracing the Power Law 💪
"It does matter what you do. You should focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future."
Don't be afraid to bet on the few things you believe in. Embrace the Power Law, and use it to make smarter decisions—in your career, in your business, and in your life.
Remember: The Power Law doesn't play fair. But it's a game we can all win—if we understand the rules.
17 (Comments)
Kiss Laura Product Designer
I highly recommend [real estate agent's name] as a professional and knowledgeable real estate agent. They provided valuable guidance throughout the selling process, demonstrating excellent communication skills and a proactive approach to marketing my property...
Kristin Wastson Cloud Software and Network Engineer
I highly recommend [real estate agent's name] as a professional and knowledgeable real estate agent. They provided valuable guidance throughout the selling process, demonstrating excellent communication skills and a proactive approach to marketing my property...