#7 The Power Law

This week let's explore a counterintuitive and peculiar law in nature that I came across in my reading. You know the feeling you get when you come across something that might change the way you think?

That's the feeling I got from coming across the Power Law.

Firstly, the concept had a catchy name but when I started diving deeper in it, it almost felt like a 'hack' in my understanding of the world that was hiding in plain sight.

The formal definition of the power law is

A power law is a relationship in which a relative change in one quantity gives rise to a proportional relative change in the other quantity, independent of the initial size of those quantities.

This means that there are many things around us that are non-linear relationships, a small change in the input can produce a large change in its output.

This has huge implications on how the world really works behind the scenes, let's dive in deeper to understand why.

Peapods and Venture Capital

The origins of the discovery of the Power Law came from economist Vilfred Pareto when he discovered that 20% of the peapods in his garden produced 80% of the total peas.

He then observed the same thing with other events in the world like how 20% of the people owned 80% of the land in Italy.

Or how in some industries 80% of production typically came from just 20% of the companies. The generalization became

This principle became to be known as the famous 80-20 rule or the Pareto Principle and is one example of a Power Law relation where a small number of inputs (20%) are responsible for majority of the outputs (80%).

The Power Law is also commonly seen in venture capital where the best investment in a successful fund equals or outperforms the returns from the rest of the fund combined.

An example would be how for the Founders Fund in 2005, the investment in Facebook returned more money than all of the funds other investments combined.

When I first read about these relations I was dumbfounded but also realized that I could see the Power Law everywhere around me

• In wealth distribution around the world: large sums of the world's capital are held by a few people or corporations
• In my personal relationships: a small set of close friends and family give me more happiness than all the people I know combined
• In my career as well: a few skills that I have honed, have allowed me to generate more value than the sum total of all the skills I know.

Once you start looking for it, Power Law relations start appearing everywhere around you and and the weirdest part is as humans we are not trained to look for these relations or take advantage of them.

Peter Thiel famously talks about it in his seminal book Zero to One

"We Don't Live In A Normal World; We Live Under A Power Law."

Note: The Power Law is not a universal rule, many things like human height, blood pressure, intelligence follow a normal distribution instead of the power law distribution.

Here's what they look side by side:

Most of us expect reality to be normally distributed (left curve) where the amount of effort put into a thing will be matched with an equal output, this is known as 'symmetric payoff' but the existence of a Power Law distribution means that the world clearly is not 'normal' or biased which is known as an asymmetric payoff'.

An asymmetric world

This gives rise to an important insight about the world. Many things around us are unevenly distributed.

And there are two ways to look at this

1. The world is 'unfair' with all its inequity and there's nothing you can do about it.
2. The world is disproportionate towards certain outcomes and it is rational to take advantage of this bias.

If you know me well enough, you'll know that I resonate with the latter point which is a more optimistic view of the situation.

Applying Asymmetry

Now that we know of the existence of the Power Law, there are two things that can help you take advantage of it in your creative pursuit.

1) Look out for Power Law distributions in your area of interest: This is where the opportunity for high growth lies.

2) Double down on these opportunities to gain asymmetric gains

A real life example of this process is actually part of the core philosophy of Super[set] as follows:

Trying multiple things in life is important because, if creative success follows a Power Law distribution, in effect out of all the things you try out in life a few of them will give exponential returns most will give a out marginal returns and many won't give any at all.

And that's completely okay. It is just how the game works.

The key is to find the things that provide those exponential rewards in different metrics such as internal satisfaction, money and happiness. Then doubling down on them to more further up the graph.

In essence, the Power Law world hides in plain sight all around us we just need to get better at identifying which things follow the power distribution.

That's it for this week's Super[set], before ending this article I would love some feedback to gauge interest on developing a Mini Course on using 'Writing as a Vehicle for creative exploration'.

Visit the link below to sign up and be the first to know more about how you can use writing to add more value to your Creative Practice through the Super[set] philosophy.

Keep me updated on the course!

Thank you for reading and see you on the left side of the graph!

-Advait