Wednesday, September 29, 2010

The Power Law Distribution Applies in Ways You Might Not Expect

Sonic Charmer, and Steve Sailer have been commenting on some sociological aspects of "prestige" education
9in the context of the new documentary "Waiting for Superman"), here, here, and here.

You should read all three; but I want to make a comment on a different aspect of this issue.

There IS an economic calculus to "elite" education, elite performance... to making the sacrifices and setting the priorities necessary to make it into that top 10%.

Unfortunately, most people don't understand this... and many of those that do, make the calculation improperly; because they have the wrong base assumptions.

Simply put, people presume there is some kind of linear relationship, or at least some kind of smooth curve, of input (time, effort, sacrifice) to output (reward, opportunity).

This presumption is entirely incorrect. There is a curve, but nowhere near as gentle a slope as people intuitively expect.

Both reward, and opportunity, tend to exhibit the power law distribution pattern.

You might know the power law distribution as the "80-20 rule" or the "90-10" rule; where 90 percent of the output, comes from 10 percent of the input (or 90% of the reward goes to 10% of the players).

There is a genuine benefit to being in the top 10% of “prestigious” schools; both in the peer group you form, and in the perception of future employers. Significantly better opportunities will be open to you in future.

Otherwise, nope nothing.

Oh, you get the benefit of a college degree; but at that point, all college degrees NOT from a top 10% university are effectively the same, or at most marginally different.

Doesn’t matter if you go to a $200,000 private college that isn’t a top 10%, or you go to Fresno state, or you get an extension campus degree at night; your future opportunities will be approximately equal (unless the specific academic program you attend it well known enough to be considered a prestige program within the field. I went to Embry Riddle for example, which in the aerospace industry is one of the top schools, but outside of it, is basically unknown).

Similarly, there is a genuine benefit to being in the top 10% of performers in any organization (maybe even the top 20% even in some organizations); whether it be work, or school, or the military.

You will receive better rewards and better opportunities will be open to you…

...otherwise, nope, nothing.

Being number number 10 of 100 is substantially more rewarding than being number 11. Being number 11, is only slightly more rewarding than being number 49.

Almost all endeavors in life with a competitive element end up being the same. 10% or 20% of the players get 80% or 90% of the rewards.