Price's Law: Understanding the Power Law Distribution of Knowledge
By Derek Neighbors on February 7, 2023
Price’s Law is a mathematical principle that states that a small number of individuals within an organization possess a disproportionate amount of knowledge and expertise. This principle, first introduced by Derek J. de Solla Price in 1965, has been widely accepted and used in the fields of management, economics, and sociology.
Price’s Law states that the square root of the number of contributors to a system is proportional to the number of contributors who produce half of the output. In simpler terms, 50% of the work in an organization is done by just the square root of the total number of employees. This law holds true in a variety of industries and organizations, from large corporations to small startups.
“As your company grows, incompetence grows exponentially and competence grows linearly.” – Jordan Peterson
Immediately Microsoft’s practice of stack ranking comes to mind as something likely influenced by Price’s Law. Microsoft killed the practice, but recently Yahoo! implemented something similar.
Right after that the recent changes at Twitter leading to aggressive layoffs by Elon Musk and now running rampant in big tech across the board certainly seem to applying this concept.
For individual contributors I think this signals the importance of harnessing knowledge and expertise that add value to the company.
For leaders it means focusing on the following:
- Identify key contributors: Use data and metrics to identify the individuals within your team who are making the greatest contributions.
- Encourage knowledge sharing: Leverage your best contributors to share their knowledge and expertise with others within the team to amplify others.
- Allocate resources accordingly: Deploy your key contributors to work the hardest problems and most important initiatives.
- Foster a culture of learning: Encourage your team to continuously improve their skills and knowledge, and provide them with opportunities to do so.
- Monitor and adjust: Regularly monitor your team’s performance and adjust your strategies and initiatives as needed.
By following these steps, you can apply Price’s Law to your team and ensure that the knowledge and expertise within your team is being effectively leveraged and utilized. By doing so, you can drive efficiency, innovation, and growth within your organization.
