The Mathematical Reason Most People Never Make It
Did you know that of the 30,000,000 businesses in the USA, only about 5000 account for 50% of the economic output? Did you know that astrophysicists have determined that the square root of all the stars in the galaxy produce half the light? Did you know that on Spotify that, of the 11,000,000 artists represented, 50% of all the streams come from only about 3300 artists? What’s the mathematical phenomenon which says the square root of a number accounts for about 50% of output?
Please tune in this week as Wayne reveals Price’s Law and how it applies to all the above as well as river systems, sales teams and wealth distribution. Is this a simple exercise in mathematics? NO! You can apply Price’s Law to analysis of your own BD efforts, people management and project performance. What are your thoughts? Too egg-headed, or is this postulate something you can use in becoming a better contractor? Share your thoughts with us at wrivers@performanceconstruction.com.
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WAYNE RIVERS: Hi everyone. This is Wayne Rivers at Performance Construction Advisors where We Build Better Contractors.
This week I want to talk about the mathematical reason most people never make it.
This is challenging. I'm not the most mathematical person in the world. This is a challenging one and it comes from Kagura Gichuru, his Substack writing January of 2026.
Okay, three key facts. Number one, of the 30 million businesses in the US, about 5,000, the square root of 30 million, produce 50% of the economic output. Think about that for a sec. In astrophysics, the square root of half the number of stars in the galaxy produce half the light. No, that's not right. I said that wrong. The square root of the number of stars in the galaxy produce half the light. On Spotify, of the 11 million artists, 50% of all the streams come from about 3,300 artists, which is the square root. This is something called prices law.
Prices law, you think about, okay, light from the heavens at night, if you're in a dark place, you think of it as a bell curve. Big stars produce more light than small stars, et cetera, et cetera. It's not a bell curve. Price's law says that the square root of a number equals 50%. So in other words, half the light in the heavens comes from the square root of the number of stars. And he says you can apply this to any number of things, river systems. So the square root of the number of river systems in the world create 50% of the water flowing into the oceans. Sales teams. The square root of the number of salespeople that you have produce 50% of your sales, maybe more. Wealth distribution, it applies to wealth distribution. It applies to business. If you have a hundred employees, what's the square root of 100? That's 10. 10 of your employees are producing 50% of the economic value. If you have 10,000 employees, it's 100. 50% of the number ... Sorry. The square root of the number of employees you have produce 50% of the output.
Now this violates our sense of egalitarian instinct. I like to think all of our people contribute X to our performance, but according to Price's law, the square root of the number of employees you have in our case around 25, that's five. Five people produce 50% of our economic value. How can that be? Is that true? I don't want to think about it that way. Now, if I came to your company or you came to mine and we were truly objective, we might be able to see that clearer. I can't see that clearly in my company, but I trust that Price's law has some validity.
Gichuru writes that real competence is rarer than we think it is. Results come from four things: skill, consistency, opportunity, and a little bit of luck. He said, "Most people have one to two of their ingredients. They're lucky and there's an opportunity." Almost no people have all four of those ingredients applied consistently over time. So skill, consistently, opportunity and some luck. Square root people, as he refers to them, have all four of those characteristics and they're trending in the same direction. Does that make sense? That's why they can add so much value to a team, to a company, to whatever.
So you have dozens of skills. We all do. We have dozens of skills, but the square root of that number of skills, whatever it happens to be, drives half of your value in the marketplace. Well, what are the things that I do over time that add value to PCA? Well, I think I've narrowed it down through strategic coach and some other training, writing, speaking, selling, hiring and strategic planning. Five things. Those are five things I'm good at. And that adds value to PCA way more than if I tried to dive down into planning Boot Camp sessions or setting peer group agendas. Those five things that I do add pretty much all of the value that I'm capable of adding to PCA.
Dan Sullivan talked about unique ability. And you've heard me talk about Dan Sullivan and his genius many times. If you can find a way to identify your top value skills in your organization... And it doesn't matter if you're the CEO or a project manager or a laborer in the field, if you can find a way to double down on your square root in skills, you're going to be more valuable. Your career is going to advance. You are going to be happier. Doing the things you love to do and also by the way, add value will make you a happier person in your work life and in your home life.
So analyze, if you're thinking about this concept, Price's law, how does it apply to your construction company? Can you analyze your people and their unique abilities? What if you've got people working outside their unique abilities? I've defined what my five unique abilities are as they add value to PCA, but what if you've got a super talented estimator that is having to do some sort of administrative function that takes him or her out of that defined unique ability? What if you've got a project manager that's having to deal with HR issues that they're not comfortable with? Is there a way to free that person so that they can be back in their unique ability efforts? So think about your people and their unique abilities and how to get more of unique ability and less of all the other stuff.
Second thing, what about your project? If it's true that the square root of ends... Let's say in the course of year, you work on, I don't know, 40 projects. Okay. Square root of 40 is whatever it is, that's 50% of your economic value came from that tiny subset of projects. All right? What were their size? What was the type of project? What kind of margins? What projects create the least friction between you and your customers? Which projects are the most frictionless so that you can get them done more effectively, happier, and more efficiently?
And then finally, a place where I think this makes perfect sense. Analyze your business development funnel. What's your BD team look like? Who's actually producing? What of your proposals hit the spot? Which of your proposals fall flat? Look at those things and if you can find your square root of N and you can take the two or three ingredients that really produce good business development results, maybe it's your presentation skills, but the team is on site with the owner, if that's your go to, that's your strength, that's your team's unique ability, do more of it and eliminate all the extraneous stuff that you can.
So I'd like to hear what you think. We have a great many engineers among our members, so let's hear what you think you're more mathematical than me. Is Price's law legit or is this some kind of crazy Substack article that I found that doesn't make any sense whatsoever? Email me wivers@performanceconstruction.com. This is Wayne Rivers at PCA where We Build Better Contractors.
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