Michael Mauboussin - Pattern Recognition and Public Markets (EP.370)
Capital Allocators – Inside the Institutional Investment Industry
Power Laws in Wealth Creation
The top 2% of companies created 90% of total wealth, amounting to $50 trillion out of $55 trillion. In venture capital deals, 60% fail to earn back the invested dollar. There's a right skew in returns, with a small number of deals pulling up the returns for the entire asset class. The power law of compounding is evident in both venture capital and public markets, where the same phenomenon occurs. Power laws in wealth creation are not exclusive to the US but are also observed on a global scale in developed markets.
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