You've (Likely) Been Playing The Game of Life Wrong

Brief Summary:
This video explores why much of the world isn't as "normal" as we assume, focusing on the surprising ways that power laws—not just ordinary averages—govern everything from wealth and earthquakes to social networks and business success. Using vivid examples and simple games, it explains how critical tipping points lead to unpredictable, outsized outcomes, and why understanding whether you're in a "normal" or "power law"-dominated world changes how you should approach risk, strategy, and even life choices. "Most things barely move the needle, but a few rare events totally dwarf the rest—and that, I think, is the most important lesson."

---

1. The World Isn't Normal: Introduction to Power Laws

The video opens by reminding us that many things we measure—like human height, IQ, or even the size of apples—cluster around an average. This familiar pattern is known as the normal distribution. Extreme outliers are so rare they're nearly impossible.

"If you think about a normal distribution like height, there's a clearly defined average and extreme outliers basically never happen."

But, as the host explains, not everything in nature follows this pattern. Some aspects of life are shaped by power laws, meaning they don't have a typical scale or average, and big, rare events are much more common than you'd think.

"It's much more likely to have really big events than you would expect from a normal distribution, and they will totally skew the average."

---

2. Pareto and the Hidden Pattern in Wealth

We then travel back to the late 1800s and meet Vilfredo Pareto, an Italian engineer who noticed something strange in income records across Europe. While most people earned average incomes, a few earned vastly more—even 100 times more—which wouldn't happen if incomes followed a normal distribution.

To visualize this, Pareto plotted incomes on a log-log graph. Suddenly, a wild, scattered curve straightened into a neat line—revealing a power law:

"The number of people who earn an income greater than or equal to X is proportional to one over X to the power of 1.5."

This means every time you double the income, far fewer people achieve it—but the drop-off is only predictable on this special scale. The same pattern appeared in data from France, Italy, Prussia—you name it.

"This type of relationship is called a power law. When you move from the world of normal distributions to the world of power laws, things change dramatically."

---

3. Coin Games and Understanding Expectations

To illustrate the difference between normal and power laws, the video offers three casino coin games:

Game 1: Additive (Normal Distribution)

• Flip a coin 100 times; each heads wins $1.
• Expected payout: $50.

"If you play the game hundreds of times, the small variations either side of the average will cancel out and you can expect to turn a profit."

Game 2: Multiplicative (Log Normal Distribution)

• Start with $1; every heads, multiply winnings by 1.1; every tails, multiply by 0.9.
• At the end, big winners are possible, but the median payout is just 61 cents.

"Though either way, if you played the game hundreds of times, your payout would average out to $1."

Multiplicative effects lead to log normal distributions—you usually lose or break even, but there are rare, disproportionate wins.

"When random effects multiply, log normal distributions produce big inequalities... a mean with a big long tail."

Game 3: Infinite Expectation (Power Law—The St. Petersburg Paradox)

• Double the payout every coin you flip until first heads; game ends at first heads.
• Expected payout: Infinite!

"Theoretically, the total expected value of this game is infinite. This is known as the St. Petersburg paradox."

Here, huge outliers dominate everything. The more you play, the more monster wins inflate the average.

"If you keep measuring, occasionally you're gonna measure one of those extreme outliers and they will totally skew the average. Like standing in a room with Bill Gates, the average wealth is $100 billion because one outlier dominates."

---

4. Power Laws in Nature: Earthquakes, Fractals, and Critical States

The video shows that power laws appear repeatedly in nature, like in the distribution of earthquake magnitudes.

Small earthquakes are common; big ones are exponentially rarer—but their impact grows exponentially, so you end up with a power law.

"Small earthquakes are very common, but larger earthquakes become exponentially rarer... as earthquakes grow in magnitude, the energy grows exponentially."

The connection with fractals is next: self-similar patterns that repeat at all scales—think of tree branches, river systems, lightning bolts, or the veins in a leaf.

Power laws and fractals are deeply connected. Systems showing a power law usually have no intrinsic scale: big and small versions of the same pattern exist side-by-side.

"Whenever you find a power law, that indicates you're dealing with a system that has no intrinsic scale... a signature of a system in a critical state."

A key demonstration involves magnetism: as you heat a magnet, you reach a critical point where the tiny magnetic domains start switching randomly, and the system loses its order.

"Right at the phase transition, you get fractal behavior and that pops out as a power law."

---

5. Self-Organized Criticality & Forest Fires

To explore how critical states can organize themselves, the video simulates forest fires.

• Most of the time, fires are tiny.
• Occasionally, a massive, devastating fire occurs—even from an ordinary lightning strike.

"The large fires are nothing more than magnified versions of the small ones, and even worse, they're inevitable."

This is called self-organized criticality. Unlike magnets (which need precise tuning to reach a critical point), forests naturally drift toward this state.

"Some fires are essential to make the megafires less likely. They let most small fires burn and only intervene when necessary... it could take years to return the forest to its natural state after centuries of fire suppression."

---

6. Predicting Earthquakes & The Universality of Critical Systems

Power laws govern earthquakes, too. Stresses in Earth's crust build up until a small rupture can kick off a catastrophic event.

"Sometimes those random movements can trigger a powerful chain reaction."

Attempts to model these events led to simulations like the sandpile model—drop grains of sand until avalanches of all sizes occur. In these systems, individual grains or actions seem insignificant, but occasionally a single event triggers a massive cascade.

"You can actually see it tune itself to the critical state... It has to build up."

But when people pointed out that real sand doesn't always behave like the model, Per Bak (the physicist behind the idea) famously replied:

"Self-organized criticality only applies to the systems it applies to."

In other words, not all physical systems follow the same rules, but the class of systems that do are everywhere.

Now comes a crucial point: at the critical point, almost none of the physical details about the system matter—just the broad, large-scale behavior. This property is known as universality.

"There's just a universal behavior that is irrespective of what physical system you're talking about."

Many vastly different systems—magnets, fluids, forests, sandpiles, even disease spread—fall into these universality classes. Understand one, and you gain insight into them all.

---

7. Power Laws in Business and Human Systems

Surprisingly, these ideas apply just as well to human creations.

• Venture capital: Most investments fail, but a tiny few explode in value, carrying the overall returns.

"The top 6% generated 60% of the firm's overall profit."

• Book publishing: Most titles flop, but one Harry Potter can change everything.
• Online platforms: The top 6% of Netflix shows capture half of all viewing. On YouTube, 4% of videos get 93% of all views.

"The entire game is defined by the rare runaway hits."

But not all businesses operate this way—restaurants and airlines must succeed more consistently, with little room for huge outlier wins.

The big lesson?

"If you are in a world where random additive variations cancel out over time, you get a normal distribution. In this case, consistency is important. But if you are in a world that's governed by a power law… it becomes more important to be persistent than consistent."

---

8. Where Do Power Laws Come From? Network Effects & Snowballing

Multiplicative processes (where gains multiply rather than add) can explain some power law effects, but something more is often needed. For instance, researcher Albert-László Barabási discovered the internet's connections also followed a power law. So why didn't most sites just have an "average" number of links?

"As new sites were added to the internet, they were more likely to link to well-known pages… a power law emerged."

This "rich get richer" effect, where popularity snowballs over time, is another pathway to power laws.

"If you're playing a game dominated by a power law, then you better do the work as much as early as possible so you benefit from the snowball effect."

---

9. Life Advice: Which Game Are You Playing?

The video concludes by challenging us to recognize what "game" we're playing—normal or power law?

"If you choose to pursue areas governed by the normal distribution, you can pretty much guarantee average results. But if you select pursuits ruled by power laws, the goal isn't to avoid risk, it's to make repeated intelligent bets. Most will fail, but you only need one wild success to pay for all the rest."

A personal story about reaching out (and landing a life-changing opportunity) underscores the lesson:

"One idea could transform your entire life."

---

10. Bonus: Free Simulations and New Tabletop Game

As a fun bonus, Veritasium shares that all their simulation tools from the video are free to use, and they've just launched a new tabletop game, Elements of Truth, full of questions to challenge your friends.

"No matter where you are in the world, you can get your very own copy."

---

Final Thoughts

This video makes a powerful case for rethinking how we understand risk, rewards, and even success. While most of us expect the world to behave "normally," power laws dominate many crucial areas. Learning to spot which realm you're operating in—and acting accordingly—just might change your life. As the video says:

"Most things barely move the needle, but a few rare events totally dwarf the rest—that is the most important lesson."