Applying the Power Law to Networking

Group of business people looking at their colleagues handshaking after striking grand deal

Networking is a skill that I often hear people talk of, but I rarely meet someone that enjoys it. And why would you? You go out, spend time with folks that you don’t know. Making small talk that you probably don’t really care about. Trying to build a relationship that, odds are, won’t end up helping you in your career.

And to go out to these events. Night after night. Month after month. Taking time away from fun and work and family and friends. It can take a toll on even the most ardent networkers.

Why Do We Need to Network? Where’s the ROI

Hopefully by now, you recognize that the best product doesn’t always win out. A topic we covered when addressing the importance of marketing to a growing business. Well, networking is simply a form of marketing geared towards promoting you and your business to new markets through the building of business relationships.

In the book Zero to One: Notes on Startups, or How to Build the Future, Peter Thiel, co-founder of PayPal, Palantir, and a highly successful venture capitalist writes, that “[i]f you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business – no matter how good the product.” I couldn’t agree with him, and the relationships you’ve been cultivating are a great place to start when you are looking to bring a product to market. If you wait until you have a product or business to start building your network, you’ll be scrambling to catch up when you need it (if you can catch up at all) or you’ll just be plain lucky (never a strategy I’m comfortable relying on).

Unfortunately, the sad reality is that no matter how many relationships you build, they won’t all be fruitful. You’ll meet some people that only pay lip-service to networking. Meaning, you’re their best friend while you’re sharing a drink, but after you leave the bar you’ll never hear from them again. Or you’ll meet folks that don’t see the bigger picture, and don’t fully understand how you could help them so they are reluctant to help you.

Consistently dealing with situations and people like that can make networking that much more troubling and burdensome. However, when I start feeling like that, I turn to another phenomenon that Mr. Thiel addresses in his book.

The Power Law Curve. Photo credits to the Power Law Wikipedia Page

Mr. Thiel talks at length about the idea of the Power Law. If you’re like me, this is probably something you haven’t thought much about since High School. Essentially, the Power Law is a relationship between two variables, where change is one is represented equally by an opposite change in the other. Wikipedia can provide a full run down if you really want one, but essentially what you end up with is a graph that looks similar to the one to the right (credit to the Wikipedia page that I stole it from). As you can see, as the value of one variable progresses, the value of the other gets smaller. As the value of X increases, the value of Y decreases.

If you look at this from a value-under-the-curve perspective, where X is a number of whatever (employees, products, companies, profit, or relationships), what it represents is that the one or two highest performers out-gain all the rest of its competitors. And they out-gain the others by a landslide.

Mr. Thiel talks about this in terms of companies vying for a specific market. Alphabet makes more off of Google, then the other search provides combined. Facebook makes more than other social media companies. If you look inward at your business, perhaps you have a specific distribution channel that outperforms the rest of your distribution channels combined.

The Power Law of Networking

Now, how does that relate to Networking? And why must you, as the owner of a growing business, continue to force yourself to do these things when so few pan out. Because while 99% of your connections won’t help you in the long run, that 1% will make up for everything else.

Keith Ferrazzi makes the case for investing in people in his classic book Never Eat Alone.  In the book, he talks to the successes that have come his way because of his dedication to the craft of networking from a very early age. Throughout the book he gives plenty of examples of his success that he contributes directly to various networking opportunities. He also openly talks to helping hundreds of people a year. Extrapolate that out over his career, and he’s helped multiple thousands of people.

Of those thousands, 99% of them were fruitless relationships that he made, and cultivated, so he could get to that 1%. However, leveraging that 1% to its full capacity allowed him to become the youngest CMO EVER for a Fortune 500 company, a successful CEO, a top forty business leader under 40 according to Crain magazine, and a Global Leader for tomorrow according to the World Economic Forum.

Pretty good use of that 1%.

So, the question is, what can 1% do for your business? And are you willing to do what you need to to cultivate that 1%? Even if it means heading back out to another networking event…

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