If you focus on the average, you miss the majority

November 14, 2011 by · 2 Comments
Filed under: Social Brain 

I picked a copy of the Guardian out of a (relatively clean) bin on Saturday, and immediately congratulated myself on the discovery. The highlight was the science column by Alok Jha which gives some mathematical insight into the ‘We are the 99%’ mantra of the Occupy movement.

The vast inequality of wealth is related to broader natural patterns, described as power laws. Power laws have been simplified by trainers and consultants and turned into the so-called ’80/20 rule’ which looks less and less like a rule the more you think about it, and more like a rough and ready heuristic to explain something much more complex and important, which is what it is.

Jha writes: “The maths underlying the 80/20 rule, known as the power law distribution, is found in many natural systems over which no single human has much influence. Its concentration of the extremes seems built into the fabric of complex systems that depend on numerous factors that continually change over time.

The simplest version says that 80% of your company sales will come from 20% of your customers; that 80% of the world’s internet traffic will go to 20% of the websites; 80% of the film industry’s money gets made by 20% of its movies; 80% of the usage of the English language involves just 20% of its words. You get the picture.”

I could dwell on this for hours, but need to get back to serious work. Suffice to say that power laws are important correctives to the human intuitions on what is ‘natural’.

As Jha puts it: “The average height of the people in a room (following the normal distribution) might tell you a lot about the spread heights of people in that room, but the average wealth of a country’s citizens (which follows a power law distribution) tells you little or nothing about how rich or poor most people are.”