Jordan Peterson | Price's Law and How it Relates to Many Things Including Business

Summary

The script discusses the distribution of productivity and creativity, highlighting the 'Price's Law' which states that the square root of individuals in a domain contributes to 50% of the work. It emphasizes the exponential growth of incompetence and linear growth of competence as companies scale, leading to a concentration of wealth and productivity among a small percentage. The speaker uses examples from classical music, sports, and city sizes to illustrate this universal principle, suggesting that the disparity is not just a result of inequality but a deeper systemic issue. The script also touches on the challenges of integrating creative individuals into corporate structures and the difficulty of maintaining success in dynamic landscapes.

Takeaways

• 📊 The distribution of creative output or productivity often follows a dismal pattern where the median person contributes very little.
• 🔍 'Price's Law' states that the square root of the number of people in a domain does about 50% of the work, highlighting the concentration of productivity among a small group.
• 📉 As companies grow, incompetence grows exponentially while competence grows linearly, suggesting a potential for organizational inefficiency.
• 💡 In large organizations, the most productive employees (those who do half the work) might not be recognized, but they are crucial to the company's success.
• 🚨 When layoffs occur in large companies, the most productive employees are often the first to leave, leading to a decline in overall productivity.
• 🎓 Price's Law was observed in academia, where the median number of publications for a PhD graduate is one, indicating a highly skewed distribution of scholarly output.
• 🎼 In classical music, the works of just five composers make up 50% of the repertoire, illustrating the dominance of a few in cultural impact.
• 🏦 The principle of wealth distribution is similar across various domains, including savings accounts, where the median person has none, and the top 1% holds the majority.
• 🏆 Success in fields like sports, music, and business often follows a similar distribution pattern, with a few individuals or entities dominating.
• 🎲 The outcome of iterated trading games, like Monopoly, can lead to a concentration of resources, reflecting the underlying dynamics of wealth and success distribution.
• 💼 Companies can quickly enter a 'death spiral' where they lose their most productive employees and struggle to recover, emphasizing the importance of recognizing and retaining top talent.
• 🔄 There is significant churn at the top of wealth distribution, with individuals cycling in and out of the top percentiles, indicating fluidity at the highest levels of success.

Q & A

What does the speaker describe as 'dismal' in the context of the script?

The speaker describes the distribution of scores or achievements as 'dismal', indicating that the majority of people have not done anything creative in their lives.

What is the 'Price's Law' mentioned in the script?

Price's Law is the principle that the square root of the number of people in a domain does 50% of the work, highlighting the disproportionate contribution of a small number of highly productive individuals.

How does the speaker illustrate the concept of Price's Law with employees in a company?

The speaker uses the example of employees in a company to illustrate Price's Law, stating that as the company grows, the number of employees doing half the work remains a small percentage, while the majority contribute less.

What is the consequence of a company experiencing layoffs according to the script?

The consequence of layoffs, as described in the script, is that the most productive employees, who have options, tend to leave first, leaving the company with less productive employees and potentially entering a death spiral.

What does the speaker suggest about the distribution of wealth or productivity in various domains?

The speaker suggests that the distribution of wealth or productivity follows a similar pattern across various domains, with a small percentage of individuals holding or contributing a significant majority.

How does the speaker relate the distribution of wealth or productivity to the game of Monopoly?

The speaker relates the distribution to Monopoly by explaining that as the game progresses, one player ends up with most of the property and money, while others end up with none, illustrating how a few can accumulate a majority of resources.

What does the speaker imply about the difficulty of maintaining success for companies?

The speaker implies that maintaining success for companies is challenging due to the underlying landscape shifting and the difficulty of integrating creative people into a company's structure.

What is the significance of the '1%' in the context of the script?

The '1%' signifies the small fraction of people who consistently hold or contribute the majority of wealth or productivity in various domains, and it is highlighted as a common phenomenon across different areas of life.

How does the speaker describe the churning at the top of wealth distribution?

The speaker describes the churning at the top as a dynamic process where individuals have a certain probability of being in the top percentiles for at least a year of their life, indicating that it's not always the same people at the top.

What challenges does the speaker mention regarding creative people in a company?

The speaker mentions that creative people are troublesome to work with because they constantly come up with new ideas, making it difficult to evaluate them using traditional strategies, and they are often filtered out at the bottom of a company.

What does the speaker suggest about the difficulty of escaping from a state of 'zero'?

The speaker suggests that escaping from a state of 'zero', such as poverty or lack of achievement, is very difficult due to systemic barriers and the compounding effect of having nothing to begin with.