Power Law

date
Mar 28, 2021
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powerlaw
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Published
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Post
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"There are decades where nothing happens; and there are weeks where decades happen"--Vladimir Ilyich Lenin.
Power Law: A power law, which measures the relationship between an event frequency and the magnitude of the event.

The Power Law in Life

Everyone should be aware of the power law—a minority of effort leads to a majority of results—because we’re all investors in time.
One thing you’re doing in your day is probably more valuable than all the other tasks combined. One person in your life is likely more important than all the other people combined. What you work on matters, and matters far, far more than how hard you work.
  • An entrepreneur invests by spending time on a startup and therefore should think about the company’s chances of taking off.
  • The average person investing in a career should consider how valuable that type of work will be decades into the future.
  • All people can learn to think in power law terms and focus intensely on something they’re good at rather than trying to do well on a predefined menu.

The Power Law in Startup

The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined. — Peter Thiel
You don’t need to start an extraordinary company to benefit from the law of power. You may find huge success in joining a great company on its upward trajectory. If you do start a company, operate it according to the power law. A narrow focus on the right thing will produce the greatest results:
  • One market will bring the greatest success.
  • One distribution strategy will outperform all others.
  • Some moments will count more than others.
  • What’s most important probably won’t be obvious.
Peter Thiel once told Marc Andreessen:
"Listen, Marc. I got into Stanford, so I could get into the best law firm. I got into the law firm so I could start a hedge fund. Then I met Max Levchin, So I could found PayPal, then sold it to eBay. All the time, effort, the energy I spent got me 1 hour with Marc Zuckerberg. And that hour was worth more than any accumulated sum of hours I spend in my life."

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© Allen Lee 2022