Normal distribution power law distribution

Concept: Normal distribution & Power-law distribution

Normal distribution:

Let's do a small experiment. In a WeChat group with more than 200 people, please report your exact height. Then, take 5cm as the unit, count the number of people in each 5cm segment. Then you draw a picture with height as the horizontal axis and the number of people as the vertical axis. Look carefully at this picture. What do you find? You may be surprised to find that this picture almost certainly looks like an inverted clock.

Picture sent from the brief book app

Don't doubt it. After finishing the experiment, you can compare the experimental results with other students. Maybe the middle point of this clock is different and its flatness is different, but as long as there are enough people, the shape is a clock that is high in the middle, low on both sides, or even symmetrical. The more, the more.

This inverted clock is: normal distribution. Interesting, but why is this?

Normal distribution is the most common distribution in nature, even in the business world. When there are many factors that affect the results (or success), and no factor can completely influence the results, the results usually show a normal distribution. For example, height.

But not all phenomena conform to normal distribution. There is also a common distribution on the earth, called power law distribution.

Power law distribution:

Let's do another small experiment. If you are willing to cooperate with you, you can ask everyone to report their total assets in the WeChat group with more than 200 people just now. Then arrange the order from high to low and draw a picture. You will find that the rich are rich enough to surprise you, while the poor are poor enough to make you unimaginable.

Picture sent from the brief book app

Image source: Hacker Blog

Does this picture look familiar? Yes, this sharp knife like figure is what I said before“ Long tail theory ”The "pointed head and long tail" in. In some natural or commercial phenomena the matthew effect , network effect, leading to the stronger, the winner takes all. At this time, the distribution of results will show another kind of "sharp knife": those rich people with sharp knives, on the whole, will have more money.

Comparative understanding:

The inverted bell type "normal distribution", that is, it tends to the middle; The "power law distribution" with sharp knife shape, that is, it tends to extreme, and dominates most forms of the business world. With these two pictures as tools, you can see many business phenomena and make correct strategic decisions.

Picture sent from the brief book app

A friend of mine once said to me excitedly like discovering the new continent: President Run, I found that up to now, no company in the catering industry can occupy more than 5% of the market share of the country; But in the Internet industry, one company can account for 70%. It shows that there are still huge opportunities in the catering industry.

Is that true?

The catering industry is a service industry. Like haircuts, the "marginal delivery time" is not zero. What is "marginal delivery time"? When I cook for you, I can't cook for him. Every time I cook a meal, it is rigid. No matter how delicious I am, I can cook 3~5 meals a day at most. If I can't serve the guests, I can only give them to others. The higher the "marginal delivery time" is, the more diversified the market is, which conforms to the normal distribution: fewer people make big money, and fewer people lose big money. Most people tend to earn average profits.

What about the Internet industry? Its "marginal delivery time" is zero, because the "network effect" in Lesson 12, the more users, the more positive incentive each other, and more users. Once the leader passes the tipping point, the winner will take all and monopolize. This industry is destined to be the head market, which conforms to the power law distribution: no matter there was a hundred regiments war or a thousand regiments war, it will eventually tend to be concentrated in a few hands.

You can click directly to review the 14th and 12th courses

Business 014 | Long Tail Theory: Is the future of business a niche market?

Business Part 012 | Network Effect: the inherent power of the Internet

Application: real business phenomenon

What other business phenomena conform to the normal distribution?

For example, product quality. The quality of most products is mediocre. There are very few really good products, but there are few products that are rotten to the bone. This is why there is "Six Sigma" management in Lesson 117 in the field of quality management.

For example, employee performance. The performance of most employees is average, and very few of them have done particularly well, and very few of them have done particularly badly. This is why in the field of performance management, there will be a "vitality curve" in Lesson 96, where 2-7-1 distribution is mandatory to assess performance.

What other business phenomena conform to the power law distribution?

For example, GDP. The higher the GDP of a city, the higher it will be. The more excellent a city is, the more people it will attract and become better because of the Matthew effect.

Picture sent from the brief book app

Image source: Hacker Blog

For example, universities. The better the university, the more it can attract good students; The better the students are, the better the university will be. Because of the network effect, good universities will get better and better, and bad universities will get worse and worse.

You can click directly to review the 117th and 96th courses

Management 117 | Six Sigma: Abnormal Quality, Derived from Abnormal Process Management

Management 096 | Employee Turnover Rate: Never fired an employee, not a good manager

Summary: understanding normal distribution power law distribution

What is normal distribution? In the business world, the normal distribution is caused by such factors as "marginal delivery time". There are few good and few bad ones. Most enterprises tend to have an inverted clock distribution in the middle;

What is power law distribution? In the business world, the power law distribution is caused by "network effect" and other factors. The stronger the stronger, the weaker the weaker, and most enterprises go to the extreme.

Mastering the tools of normal distribution and power law distribution will help us understand the basic business forms in the business world, and be able to follow the trend and seek success with different business logics in different business form distributions.

[Thinking about application]:

① Normal distribution: in the business world, normal distribution is caused by such factors as "marginal delivery time". There are few good and few bad ones. Most enterprises tend to a "backward bell" distribution in the middle;

Power law distribution: In the business world, power law distribution is caused by "network effect" and other factors. The stronger the stronger, the weaker the weaker, and most enterprises go to the extreme.

Mastering the tools of normal distribution and power law distribution will help us understand the basic business forms in the business world, and be able to follow the trend and seek success with different business logics in different business form distributions.

② In the company, the salary of employees conforms to the normal distribution. In the classroom, the students' scores conform to the power law distribution, and the people with good scores will get better and better.

③ The good will get better and better, and the bad may get worse. The service industry belongs to the normal distribution, and the public is more. Didi and Meituan belong to the power law distribution. The good will get better, and the bad will get worse.

Author: Potato g
Link: https://www.jianshu.com/p/075e1f0fce74