On twitter tonight, @tdhopper posted a citation to a journal article on the fluctuating tails of power law distributions. In my last post, I mentioned how black swans moved the tail of a normal distribution. So I took a look at those power law distributions. We’ll talk about that first. Then, I’ll go back and look at tail fluctuations and more for normal distributions.

**Power Law Distributions**

I drew a two-tailed distribution. This distribution has an axis of symmetry. In the past, I talked about this axis of symmetry as being a managerial control. In the age of content marketing, a question we might ask is what is the ratio of developers to writers. The developers would have a their tail, a frequency of use per UI element histogram, and the writers would have their tail, the SEO page views histogram. Add a feature, a few pages–not just one. So that axis of symmetry becomes a means of expressing a ratio. That ration serves as a goal, or as a funding reality. Adding features or pages would constitute fluctuations in the tails of a power law distribution.

The commoditization of some underlying technology, say the day relational databases died, would result in loss of functionality, content. That would be a black swan. In it’s original sense, financial, against a normal distribution, the losses would be in stock price. In a more AI sense that I’ve written about before, world size, the losses would be in bits.

So I’ve illustrated three cases of fluctuating tails for a power law distribution.

The first power law distribution is A shown in orange. It’s tails have a ration of 1:1. Each tail has the same length. On the figure, the arrowheads represents the point of convergence and provides us with a side of a rectangle representing the size of our world. The point of convergence is represented by a black dot for emphasis.

The second power law distribution is B shown in green. It’s tails have a ration of 2:1, as in x:y. The green arrow give us the right side of our rectangular world. Changing the angle of the axis of symmetry is one way of expressing fluctuation or volatility. The axis of symmetry runs from the origin to the opposing corner of that rectangle.

The third example is C shown in red. This power law distribution has undergone a black swan. The black swan is represented by a black vertical line intersecting the power law distribution B. That point of intersection becomes the new point of convergence for power law distribution C. Notice that this means the black swan effectively moves the x-axis. This makes the world smaller in width and height. The new x-axis is indicated by the red x’ axis on the figure. If this figure were data driven the ratio for the axis of symmetry could be determined. Black swans are another means of expressing fluctuation. Realize that stock price changes act similarly to black swans, so there is daily volatility as to the location of the x-axis.

**Normal Distributions**

I’ve talked about the normal distributions and black swans in the past. But, this time I found some tools for making accurate normal distributions where I freehanded them in the past. The technology adoption lifecycle is represented by a normal distribution. The truth is that it is at least four different normal distributions and a bowling ally’s worth of Poisson distributions. And, if you take the process back to the origination of a concept in the invisible college you’ll find a Dirac function.

Let’s look at a standard normal, a normal with a mean of zero and a standard deviation of 1, and a normal with a mean of zero and a larger standard deviation. The value of that larger standard deviation was limited by the tool I was using, but the point I wanted to make is still obvious.

Lets just say that the standard normal is the technology adoption lifecycle (TALC). Since I focus on discontinuous innovation, I start with the sale to the B2B early adopter. That sale is a single lane in the bowling ally. That sale can likewise be represented by a Poisson distribution within the bowling ally. The bowling ally as a whole can be represented as a Poisson game.

The distribution with a larger standard deviation is wider and shorter than the standard normal. That larger standard deviation happens as our organizations grow and we serve an economics of scale. Our margins fall as well. That larger standard deviation is where our startups go once they M&A. Taking a Bayesian view of the two normal, the systems under those distributions are by necessity very different. The larger normal is where F2000 corporations live, and what MBAs are taught to manage. Since VCs get their exits by selling the startup to the acquirer, the VCs look for a management that looks good to the acquirer. They are not looking for good managers of startups.

After drawing the previous figure, I started on the normal undergoing a black swan. With a better tool, I was surprised.

Now a warning, I started this figure thinking about Ito processes beyond Markov processes, and how iteration and recursion played there. Programmers see iteration and recursion as interchangeable. Reading the definitions makes it hard to imagine the difference between the two. The critical difference is where the memory or memories live. Ultimately, there is a convergent sequence, aka there is a tail. The figure is annotated with some of that thinking.

So the figure.

I started with a standard normal, shown in dark blue. The gray horizontal line at y=4 is the top of the rectangle representing the size of the world, world n, associated with the standard normal. This is the world before the black swan.

The black swan is shown in red. The new x-axis, x’, runs through the point where the normal intersects with the horizontal line representing the black swan. Notice that the normal is a two-tailed distribution, so the new x-axis cuts the normal at two points. Those points define the points of convergence for a new thinner normal distribution. I drew that normal in by hand, so it’s not at all accurate. The new normal is shown in light blue. The red rectangle represents the new distribution’s world, world n+1.

The new distribution is taller. This is one of the surprises. I know the areas under the two normal equal one, but how many times have you heard that without grasping all of that property’s consequences. Where you can see the new normal in the diagram, what you are looking at is the new learning that’s needed. Again, taking a Bayesian/TALC point of view.

Between the new x-axis and the old x-axis, we have lost corporate memory and financial value. The width of the new distribution is also thinner than the original distribution. This thinning results from corporate memory loss.

I also annotated some time considerations. This would be TALC related. The black swan happens at some very recent past, which we can consider as happening now. Using the black swan as an anchor for a timeline lets us see how a black swan affects our pasts, and our futures. Those memory losses happen in our tails.

The original x-axis represents, in the AI sense, the boundary between the implicit and explicit knowledge. I know that’s pushing it, but think about it as the line between what we assert and on what we run experiments.

I drew an Dirac distribution on the diagram, but it doesn’t happen at mean or where a normal would be. It is a weak signal. It happens prior to any TALC related Poisson games. Oddly enough, I’ve crossed paths with a Dirac when I asserted a conditional probability.

So here is a Dirac distribution, not normalized, just for the fun of seeing one. This from Wikipedia.

Please leave comments. Thanks.

December 7, 2015 at 12:49 am |

[…] is not affected by the black swans. Some other precursor distributions were affected, instead. See Fluctuating Tails I and Fluctuating Tails II for more on black […]