You've (Likely) Been Playing The Game of Life Wrong

Some things are not normal. By that I mean if you go out in the world and start measuring things like human height, IQ or the size of apples on a tree, you will find that for each of these things, most of the data clusters around some average value. This is so common that we call it the normal distribution. But some things in life are not like this.

Nature shows power laws all over the place. That seems weird. Like is nature tuning itself to criticality? >> If you make a crude measure of how big is the world war by how many people it kills, you find that it follows a power law.

The outcome will vary in size over 10 million, 100 million. >> It's much more likelihood of really big events than you would expect from a normal distribution and they will totally skew the average. >> The system you're looking at doesn't have any inherent physical scale. It's really hard to know what's going to happen next.

The more you measure, the bigger the average is, which is really weird. It sounds impossible. >> It's it's very important to try to understand, you know, which game you're playing. And what are the payoffs going to be in the in the long run?

>> In the late 1800s, Italian engineer Vilfredo Paro stumbled upon something no one had seen before. See, he suspected there might be a hidden pattern in how much money people make. So he gathered income tax records from Italy, England, France and [music] other European countries. And for each country, he plotted the distribution of income.

Each country he looked at, he saw the same pattern, a pattern which still holds in most countries to this day. And it's not a normal distribution. If you think about a normal distribution like height, there's a clearly defined average. And extreme outliers basically never happen.

I mean, you're never going to find someone who is, say, five times the average height. That would be physically impossible. But Paro's income distributions were different. Take this curve for England.

It shows the number of people who earn more than a certain income. The curve starts off declining steeply. Most people earn relatively little, but then it falls away gradually, much more slowly than a normal distribution would, and it spans several orders of magnitude. There ...