Doing the Work, dirty hands Photo by jesse orrico on Unsplash

Price’s Law

The square root of the number of people in a domain do 50% of the work.

This means that in a company of 10 employees, 3 of them do 1/2 the work. The remaining 50% of the work is done by the other 7 people.

This scales too.

When there are 100 employees, 10 of them do 1/2 the work. The other 90% are doing the other half of the work.

As your company grows, incompetence grows exponentially and competence grows linearly.

Price’s Law specifically applies to creative work. Meaning the creation of something “new” like new products, ideas, software, music compositions, basketball shots made, artwork, etc.

The “Price” in Price’s Law is Derek J. de Solla Price.

Practical Impacts

I have seen this in my various workplaces. I also note when company leadership doesn’t even know who their top performers are. They don’t know that these 3-4 people are doing 50% of the important creative work of the company.

I have seen this law play out time and time again. I just didn’t know it was an actual law until recently. Now I am better able to pay attention and see it.

Knowing this now, it becomes incredibly important to identify who the top performs are in our organizations. They are worth keeping and add incredible value. They may be fairly quiet too.

I am a member of 3 different volunteer organizations, I work full time, and from time to time I have other creative efforts I works on outside of my other involvements.

I recognize that in 1 volunteer group, I am “along for the ride” and am coasting. While in another, I am very involved, creating and leading.

So the same person can occupy different creative positions and levels of involvement in their different social groups and at different times.

Short Video of Lecture

Jordan Peterson on Price’s Law - A portion of his lecture where he explains it well.

Notes from Lecture Video

  • 10 employees, 3 of them do 1/2 the work
  • 100 employees, 10 of them do 1/2 the work - that’s a problem, the other 90% are doing the other half.
  • 10,000 employees 100 of them do 1/2 the work

As your company grows, incompetence grows exponentially and competence grows linearly.

When a company has poor performance over a couple quarters, the 100 talented people who have options, leave. They are doing half the work. Another round of layoffs comes, the next set of top performers leaves. The company is now in a death spiral.

This law applies in every single realm where there is creative production.

Applies to city size, baskets scored, hockey goals scored.

Compared to Monopoly game and the current 1% of rich people. It is an inevitable conclusion of iterated trading games. We don’t know how to fight it.

The top 1% end churns. It isn’t the same 1% all the time.

In companies, people get stuck in their niche and don’t move. The redistribution of people after losing the top performers doesn’t get picked back up very well by the remaining people. The effect is attenuated.

Companies can go into a death spiral that is almost impossible to get out of. Can happen extraordinarily quickly. Fortune 500 company’s churn. They only spend about 30 years at that level and value.

Creative people are troublesome to work with. How do you evaluate a creative person? They are continually creating new things that are difficult to evaluate.