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3 sats \ 5 replies \ @tomlaies OP 5 Feb 2024 \ parent \ on: 10% of alcoholics buy 75% of beverage companies alcohol - long tail isn't real! econ
Tell that to startups trying to eat the crumbs after big competitors ate the cake. Like Spotifys small musicians ambitions, Amazons unprofitable consumer devision, ducking investopedia etc
gripes about economics is the lie of the long tail
I still don't understand what you're referring to. Is it the misleading way mean averages are used as though they're representative: i.e. "The return on investment of going to college is high". If so, I've just never heard that referred as a "long tail". It seems like you mean something else though.
Economists often use median values, rather than mean, precisely because they understand the skewness of these distributions.
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It's not the same as the 80/20 rule. The 80/20 rule refers to the amount of effort and reward for this effort.
The long term refers to the amount of money and customers sorted by popularity. The idea is that for Spotify there might be a lot of money in streaming Taylor Swift but there might also be more money in streaming thousands of musicians that each get few hundred listens per month. With this idea a lot of startups get pitched to cover niches, get funding, and even big companies sell this idea to shareholders.
I think long tail is almost always a myth. There is no f*cking money in serving many small consumers. Spotify didn't push their earnings with small musicians and podcasts, alcohol vendors don't make money with the bottom 50% of their customers. It's a myth, don't waste your time with building such a startup.
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The 80/20 rule refers to the amount of effort and reward
That's just one example of the 80/20 rule. It is a general rule about how quantities tend to be distributed (specifically, it is a colloquial term referring to Pareto distributions). It applies to many situations (like the ones you're mentioning) and it seems like you are simply unaware of the fact that economists are well aware of this phenomenon.
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If they were they wouldn't fund so many startups around this.
Btw, I think you still haven't understood the difference. The 80/20 rule is true and works, while long tail doesn't. https://www.investopedia.com/terms/l/long-tail.asp
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selling low volumes of hard-to-find items to many customers
That is not what alcohol companies are doing. Alcohol is not hard to find. Thanks for the link, though. I do get what you're talking about now.
You may be right about this being a generally poor business strategy. It's not economists who are funding startups, though.
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