April 06, 2004
Power Law
Strategy and Business has a nice introduction to power laws in physics and economics. Power law is conceptually similar to the 80-20 rule which you may be familiar with. Buchman has also written several books on the topic.
Weblogs also seem to follow power law.
"Physicists have learned that hidden order of this sort comes with a very simple mathematical signature. A power law is a relationship in which one quantity A is proportional to another B taken to some power n; that is, A~Bn. Trees, clouds, and fractured surfaces all conform to power laws, as do river drainage basins, fluctuations in Internet traffic, the response of the immune system, and a vast range of other natural phenomena. Surprisingly, power laws also arise in the statistics of events that would seem to be utterly random, such as earthquakes and forest fires. For example, the number of earthquakes that release energy E — a measure of their strength — is simply proportional to 1/E2."
This also applies to companies -
"sociologist Robert Axtell of the Brookings Institution, who has studied the empirical distribution of U.S. firms according to their total sales, has found a strikingly simple pattern: The number of firms having total sales S is proportional to 1/S2. In words, firms with sales of $1 million are four times as numerous as those with $2 million, which are four times as numerous as those with $4 million, and so on, right across the board for firms ranging from tiny news agents up to vast multinationals."