Price’s Law & Pareto Distribution Inequality – Success & Failure

What is Price’s Law, how it relates to work productivity and how it is connected to inequality and wealth distribution (Pareto Distribution), success in life and also decline?

Derek J. De Solla Price discovered this particular pattern when it came to scientific productivity. However, he discovered that it also applies to productivity in all creative and academic fields. Also, in sports and any field where there is a high level of skill required.

What is Price’s Law?

The square root of the total number of people contributes to half of the productive work. So, 100 academic papers submitted by 100 people, 10 of those papers will equal 50 percent of the productive work or achievement. Another example would be, 1000 sales people, 31 of those would contribute to 50 percent of all sales made. 300 musicians or authors, 17 of those would make up for half of the most popular music played or books read.

Inequality & Wealth – Pareto Distribution

Pareto Distribution is a phenomenon of how things, including wealth is distributed. Basically, a small number or minority has the majority of a particular thing.

Pareto distribution chart.

There is a middle point, that is where most people are. However, when success or decline begins to happens, it can take hold very quickly.

The most productive or creative people are obviously more likely to be successful in some particular field or endeavor. When somebody gains some success, more opportunities start to come their way, which leads to more success and more opportunities. This is one reason why you end up with a small percentage of people having the majority of the wealth. So, the opportunities and wealth are not naturally spread out evenly.

People can also decline in a similar way. A negative decline can lead to fewer and fewer opportunities and wealth. Stress and depression can result from the lack of opportunities and financial stability. This often leads to more and more problems speeding up the decline. Possibly leading to drug problems and homelessness.

This triggering of success and decline can also be down to luck. Even accidental success or hardships can lead to more success or decline. You can test this yourself by playing a trading game like Monopoly. Play it with as many people as you can, and with time a Pareto distribution will develop. There have been several other experiments and money distribution games conducted, with enough people and enough time a Pareto distribution, aka inequality of wealth always develops.

This law (Pareto Distribution) is not just limited to human civilization either, Cities, Companies, Stars, Trees, Rain Forests and Asteroids also follow this pattern or law. Some trees, a small minority gain the majority of the nutrients and grow larger than others in the forest. There is a small minority of giant stars in the galaxy that have the majority of the matter.

Some of the far leftists seem to attribute inequality to capitalism. However, the examples of how price’s law and Pareto distribution works, suggests it’s a law that affects much more than how wealth is distributed in a human capitalist society. It’s a minority that gets the majority, this is a law of the universe that cannot be attributed to capitalism or human corruption or greed.

How Companies Collapse?

Both Price’s Law and Pareto Distribution are connected to how companies can rise and fall.

Most of the most productive people will be very aware of their own value, and If they are working for a company that starts to have difficulty, maybe one or two bad decisions has put some strain on the company and the share price starts to drop. These top productive people may start to look elsewhere for opportunities, and if they leave, the company is left with the least productive people. For a company that is already struggling this is obviously not good, and it will only speed up the decline and possible collapse of the company.

This is also how sports teams can decline. Successful teams can fall down the ranking due to one or two managerial mistakes, which may lead to the most talented players seeking transfers.

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