This quote is by one of my most favorite tech startups investors. A quick word about Peter Thiel, he is one of the cofounders of paypal along with Elon Musk, he later invested very early in Linkedin, Facebook. He also is the founder of Palantir, a big data analytics company used by countries (mostly for spying on people). Peter have also published a book “zero to one”, in which he discusses the conditions for startup success.
I have written an article based on Peter Thiel’s book: 7 conditions for Startup success by Peter Thiel
Let’s jump to the quote:
We Don’t Live In A Normal World; We Live Under A Power LawPeter Thiel
I have previously explained what is a power law, especially in business. But to summarize, it is when a small minority get the majority of the item available, or for example 1% of a population has 95% of the money.
We don’t live in a normal world:
Funnily, this part is a pun, it is referring to the normal distribution, where the majority reside in the middle and both extremes have a minority. In a Normal world, you would expect heavy equality, where only some minorities being better or worse. This would work if maybe everyone is putting enough effort to produce good results / or average results. It could also work in a society heavily influenced by social ideals.
This will lead, to very few rich, very few poor and the majority being average. (This is a reality in many European countries, due to high taxes and the social net). However, the world, does not refer only to money, it means everything. And indeed, if we extend it to everything, you will often notice some kind of a power law.
We Live Under A Power Law:
The power law always existed in nature, that’s why humanity practiced selective breeding for some animals, and selective cultivation for plants.
But from a financial point of view, the power law is even much more prominent. For example in the U.S.A. the top 10% own 70% of the U.S. Wealth.
The power law is visible most in companies, startups, investments, stocks, entrepreneurs. I attribute the power law in wealth distribution, to the will of overachievers, like Elon Musk and others.
Thus from a business and financial point of view, we might be living in a world under a power law. But for most other cases, i disagree with Peter Thiel.