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Hmmmm... I think the post is a bit fast and loose. I recall reading one study of happiness that concluded small purchases/investments were best because one some

Hmmmm... I think the post is a bit fast and loose. I recall reading one study of happiness that concluded small purchases/investments were best because one some gets used to new things. Can't find a link right now, unfortunately. Power laws have become a kind of popular science meme, but I don't think they are as common or powerful an explanatory tool as some would like I to believe. Or perhaps I've just been reading too much of Cosima Shalizi's blog.

jackaltman 14y ago
right, that's the study that says you should buy new clothes one at a time because you get diminishing marginal happiness from each successive item. it's possible that the prevalence of power laws in normal life have been overstated by people trying to drive home a point ("normal life" curves are definitely less slack than something like VC returns) but I still suspect that the majority of people underestimate them.
minimax 14y ago
"Power laws have become a kind of popular science meme..." The blog post is essentially restating the Pareto (80/20) principle, first espoused by management consultant Joseph Juran in 1941. In the blog post he calls it a power law -- the Pareto distribution is a a power law distribution -- but it's an observation that has been made before and is known by many.
- jackaltman 14y ago
  Power law and the pareto principle are definitely very related, but I think one is an instance of the other. I'd argue that power law is one manifestation under the umbrella of pareto principle, as compared to a stepwise function where 80% of actions/people/whatever act one way, and then another class of 20% act dramatically different from the 80% but similar to each other. VC fund returns aren't driven by 80/20 (although they may fit that description), but by the much smaller number of outliers.
  - minimax 14y ago
    You have it backwards. The Pareto principle is based on a Pareto distribution with specific coefficients. The Pareto distribution is a power law distribution. Ergo the Pareto principle is based on a power law distribution. There is nothing stepwise about a Pareto distribution. Maybe VC returns follow 80/20 and maybe they don't. It isn't exactly a public dataset that we can readily get our hands on. The point I was trying to make in my original comment was that although power law distributions seem to be a popular topic of conversation for the past few years, they aren't exactly a new discovery. Given that wealth and income follow a Pareto distribution, perhaps it isn't that surprising that VC returns do too.
    - jackaltman 14y ago
      You're right, we shouldn't be surprised that VC returns looks like this, and it's well known that they do. The point I'm making in the post is that more mundane things our lives may look like this than we expect. Pareto power laws can't be stepwise, the point I was trying to make is that 80/20 distribution can be, and they are related to but not necessarily the same as power laws.

jackaltman 14y ago

right, that's the study that says you should buy new clothes one at a time because you get diminishing marginal happiness from each successive item. it's possible that the prevalence of power laws in normal life have been overstated by people trying to drive home a point ("normal life" curves are definitely less slack than something like VC returns) but I still suspect that the majority of people underestimate them.

minimax 14y ago

"Power laws have become a kind of popular science meme..." The blog post is essentially restating the Pareto (80/20) principle, first espoused by management consultant Joseph Juran in 1941. In the blog post he calls it a power law -- the Pareto distribution is a a power law distribution -- but it's an observation that has been made before and is known by many.

jackaltman 14y ago
Power law and the pareto principle are definitely very related, but I think one is an instance of the other. I'd argue that power law is one manifestation under the umbrella of pareto principle, as compared to a stepwise function where 80% of actions/people/whatever act one way, and then another class of 20% act dramatically different from the 80% but similar to each other. VC fund returns aren't driven by 80/20 (although they may fit that description), but by the much smaller number of outliers.
- minimax 14y ago
  You have it backwards. The Pareto principle is based on a Pareto distribution with specific coefficients. The Pareto distribution is a power law distribution. Ergo the Pareto principle is based on a power law distribution. There is nothing stepwise about a Pareto distribution. Maybe VC returns follow 80/20 and maybe they don't. It isn't exactly a public dataset that we can readily get our hands on. The point I was trying to make in my original comment was that although power law distributions seem to be a popular topic of conversation for the past few years, they aren't exactly a new discovery. Given that wealth and income follow a Pareto distribution, perhaps it isn't that surprising that VC returns do too.
  - jackaltman 14y ago
    You're right, we shouldn't be surprised that VC returns looks like this, and it's well known that they do. The point I'm making in the post is that more mundane things our lives may look like this than we expect. Pareto power laws can't be stepwise, the point I was trying to make is that 80/20 distribution can be, and they are related to but not necessarily the same as power laws.