Applications
Identify whether you're operating in normal or power law domain. If power law, concentration beats diversification. If normal distribution, diversification beats concentration. Most business books assume normal distributions; many modern markets exhibit power laws. Know which you're in.
When in power law domain, make concentrated bets on potential winners. Don't index across opportunities—you'll own all the losers and not enough of the winners. Focus resources where you have conviction about exceptional outcomes. This requires courage and willingness to be dramatically wrong sometimes.
Understand that power law success requires enough attempts. You need portfolio approach, but concentrated portfolio. Ten investments with real conviction beats fifty token investments. Enough at-bats to catch winner, but meaningful position sizes to benefit from it.
Recognize power laws only become obvious in retrospect. In the moment, future Facebooks look like long shots. This is why you need process for finding potential outliers and courage to back them substantially. Most people recognize power law winners only after they've already won.