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@ O.M
2025-03-10 08:34:05Introduction: The Power of the Few
Most people assume that effort and results follow a linear relationship—that every action contributes equally to success. However, reality follows a very different pattern: Power Laws.
The Power Law Principle, championed by thinkers like Peter Thiel and Jeff Bezos, states that a small number of key efforts drive the majority of outcomes. Instead of distributing energy evenly across tasks, investments, or decisions, the smartest individuals and companies focus on the few areas that truly matter—the ones that yield outsized returns.
In this article, we’ll explore:
✔ What the Power Law is and why it matters
✔ Examples of Power Laws in business and investing
✔ How to apply the Power Law Principle in your own work and life
What Is the Power Law?
The Power Law is a mathematical relationship where a small input leads to a disproportionately large output. It is the foundation of Pareto’s Principle (the 80/20 rule), which states that:
- 80% of results come from 20% of efforts
- 80% of revenue comes from 20% of customers
- 80% of profits come from 20% of investments
But Power Laws go even further. In reality, it’s not just 80/20—it’s often 90/10 or even 99/1.
In venture capital, for example, a handful of companies (like Facebook, Google, and Tesla) account for nearly all of the industry’s profits. If you had invested in 100 startups, it wouldn’t be the case that 20 of them returned good money—it would be that just one or two produced nearly all the profits, while the rest failed or broke even.
Power Laws appear everywhere in business, investing, technology, and even personal development.
Examples of the Power Law in Action
1. Venture Capital: Peter Thiel and Facebook
Peter Thiel, co-founder of PayPal and early investor in Facebook, built his fortune using Power Law thinking.
- In 2004, he invested $500,000 in Facebook—a small startup most people ignored.
- That one investment turned into billions of dollars, while dozens of other startups he backed failed.
- One bet made up for every loss—and much more.
Thiel himself says:
"We don’t live in a normal world. We live under a Power Law."
Venture capitalists don’t succeed by investing in 100 decent companies—they succeed by finding the 1 company that dominates an industry.
2. Jeff Bezos and AWS: One Decision That Built a Trillion-Dollar Empire
Amazon started as an online bookstore, but one decision made Amazon a tech giant: Amazon Web Services (AWS).
- In the early 2000s, Jeff Bezos realized that cloud computing could be the foundation of the internet.
- He shifted massive resources into AWS, even though it had nothing to do with selling books.
- AWS became the backbone of the internet, powering companies like Netflix, Airbnb, and even government agencies.
- Today, AWS generates over 60% of Amazon’s total profits, funding Amazon’s entire e-commerce business.
Without one key decision, Amazon might still just be an online retailer. But by following the Power Law, Bezos doubled down on what truly mattered—and that made all the difference.
3. Sam Altman and AI: Betting on the Future
Sam Altman, CEO of OpenAI, has focused his entire career on one high-upside opportunity: Artificial Intelligence (AI).
- Instead of investing in many different technologies, he put all his energy into AI.
- He believes AI will reshape every industry, making it one of the highest-upside bets in history.
- OpenAI’s ChatGPT is now one of the fastest-growing software products ever, with 100 million+ users in a matter of months.
Altman’s approach? Find the area with the biggest possible impact—and go all in.
How to Apply the Power Law Principle in Your Life
Most people waste time by treating all tasks equally. But if you want real success, you need to identify and focus on the few things that actually matter.
1. Identify the 20% That Drives 80% of Results
Ask yourself:
- What 20% of my efforts produce 80% of my success?
- Which investments or decisions have the biggest impact?
- What skills, relationships, or habits generate the highest returns?
2. Cut the Noise—Eliminate Low-Impact Tasks
Once you identify the high-impact areas, cut distractions mercilessly.
- In investing: Stop spreading your money across 20 mediocre bets. Instead, find the 1-2 asymmetric opportunities that could change everything.
- In business: Instead of launching 10 different products, focus on the one product that dominates your industry.
- In personal development: Instead of learning random skills, master one rare, valuable skill that sets you apart.
3. Double Down on What Works
Once you find what works, go all in.
- If a stock, business, or skill is compounding massively, allocate more resources to it.
- If an investment is performing exponentially better than others, increase your stake.
- If one product or strategy is dominating the market, scale it up aggressively.
Most people diversify too much because they’re afraid of missing out. But true success comes from concentrating on what actually works.
Final Thoughts: The Few That Matter
The Power Law is one of the most important concepts in business, investing, and life. The majority of success comes from a small number of actions—so the key is to:
✅ Find the few things that truly drive results
✅ Eliminate distractions and low-impact efforts
✅ Double down on what works and scale it massivelyThe difference between mediocrity and massive success is simple:
Most people work hard on everything. The smartest people work hard on the right things.
Start thinking in Power Laws—and you’ll see exponential results. 🚀
Resources to Learn More
- 📖 Understanding Power Laws – Farnam Street
- 🎥 Peter Thiel on Power Laws in Investing – NFX
- 📰 How to Apply Power Laws in Business – Medium
Action Step: 🔥 Look at your current projects, tasks, or investments. What is the 20% that drives 80% of your success? Cut the rest, and focus more on what truly matters.
Let me know what you think—drop a comment below! 🚀