Power Laws and Bell Curves

The Pareto principle, or 80/20 rule, is an example of a power law, and stands in contrast to a bell curve distribution. The former rule suggests 80 percent of outcomes are produced by 20 percent of actions. The latter rule suggests most outcomes are produced by “average” people or instances. 

The power law can be illustrated using the 80/20 principle. 

source: Visual Capitalist 

source: Visual Capitalist 

Contrast that with the bell curve, where most instances or outcomes cluster. That is why a bell curve is known as a standard distribution.  

source: Cate Bakos 

Which curve you believe applies to any endeavor suggests where to apply additional effort. Large social networks, for example, show a heavy tail distribution rather than a bell curve. 

Your organizational or personal outcomes might be affected by which distribution you believe applies. If most people and organizations can expect most of their results from a bell distribution, then broad measures might be conducive to higher performance. If, on the other hand, a power law holds, then it might be better to focus only on a relative handful of instances, actions or priorities. 

I was recently interviewed by a news outlet about the content of the Pacific Telecommunications Council’s annual conference. “Everything we do is about computing these days,” I said. You might say that is an example of a bell curve. There are a relatively small number of members whose concerns are not primarily digital services, infrastructure or products. 

But if you look at membership growth, a power law emerges. The fastest-growing category of firm members over the past half decade or so has been firms in the data center business. But that is because a bell curve also applies. 

Most member firms are in the global capacity business, either as enterprise end users or suppliers of capacity. And, by volume, global capacity demand is generated by hyperscale applications and data centers. 

And much of the value of data centers now comes from connectivity: within each data center and between data centers; between application providers, networks and ecosystem partners. In other words, the bell distribution installed base enables the power law growth.