Only Jay Fienberg and John Hagel make blog postings so dense and meaningful that I actually have print them out and write on them. For some reason I haven't blogged about Hagel for a while. If you go back to the beginnings of this blog, you'll find him mentioned quite prominently.
Today, though, he took on Power Laws and it's some pretty intense stuff. I'm going to just ask you to refer to his post for background because it's too much to try and summarize.
Suffice it to say, power laws (the Paretian model) are structurally different than bell curves (the Gaussian model). Bell curves assumed a great leveling and averaging of capabilities, contact, and cause & effect. Power curves assume a massing of a very few of these and then a nearly infinite number of minor ones.
In the past we've focused on a Gaussian model because it was more relevant (less travel, less contact, difficult supply chains, high cost of change). Today, we are rapidly shifting to a Paretian model as all these elements are turned on their head.
Our institutions (not just businesses, but also educational and governmental) are largely designed for a Gaussian world where averages and forecasts are meaningful. As a result, we have evolved a sophisticated set of push programs that have delivered significant efficiency. In a world of sudden, severe and difficult to anticipate shifts, push programs become much less viable and we need to become a lot more creative in terms of designing pull platforms ... Bottom line: our institutional architectures, not to mention our technology architectures, will need to be redesigned to cope with a Paretian world.
There’s another form of extreme event that also becomes more prominent in a Paretian world – this is the tendency for extreme forms of clustering in social networks, whether it takes the form of clustering in mega-cities in physical space or clustering of links and traffic on web sites in virtual space. Economic value inexorably follows these social clusters. This also has powerful implications for business, ranging from where to locate operations in physical space to how to redesign institutional architectures to accommodate thousands of business partners. There’s also a public policy implication – in many domains we are likely to see degrees of concentration and consolidation of economic power that is unprecedented (although Pareto just over 100 years ago observed that 20% of the population in Italy owned 80% of the land).
So we end up with a strange Push-me-pull-you situation here. Large institutions are built to push information to a most common user archetype. People, being largely unable to communicate with those who might share their deviations from the archetypes in the Gaussian world, had to deal with the one-size-fits-all model.
But now, because people can cluster, they no longer fit into the big artificial cluster of the imposed bell curve. People can find "social clusters" which have economic value - but increasingly in the long tail.
My wife is currently thinking about opening a chocolate business. We've already been talking to potential buyers for her extremely-high-end chocolates. These are hand-made, have all organic ingredients, highly temperature sensitive and a very very short shelf life.
This ain't your Mars Bar, here.
So we had to find a very specific niche that would be willing to pay and had the ability to rapidly use the product.
It's a business model that is entirely doable in the Paretian world that would have been highly unlikely to succeed in the Gaussian world.
John also said:
In a Paretian world, surface events can become a distraction, diverting attention from the deep structures molding these surface events. Surfaces are extraordinarily complex and rapidly evolving while the deep structures display more simplicity and stability. These deep structures are profoundly historical in nature – they evolve through positive feedback loops and path dependence. Snapshots become misleading and understanding requires a dynamic view of the landscape.
The key here is that an understanding of your architecture is vital. Architectures need to be able to support changing demands of their users.
At Gray Hill Solutions, we are developing a new technology that stores specialized data in a very flexible way and provides an immediately customizable interface. The data that we have will be constant, but our end-users have very different needs to that data from day-to-day. The Interface framework is designed to allow users to completely change their interactions at-will.
I thought we were doing that because it made sense. I thought my wife was working with chocolates and her clientele because they were fun and interesting. But now I see we're reacting to a larger shift in the perception of human interaction.
Blogged at Gray Hill Harbor Offices in Seattle using Windows Live Writer