Heinz Berggruen’s journey is a testament to the extraordinary power of tails—the rare, outsized events that shape legacies and fortunes. A refugee from Nazi Germany in 1936, Berggruen resettled in the United States, studied literature at the University of California, Berkeley, and emerged as one of the most prolific art dealers of the late 20th century. By the year 2000, he had sold part of his staggering collection—Picassos, Braques, Klee, and Matisse—to the German government for over 100 million euros. The deal was so favorable that it was effectively considered a donation; the private market value of these masterpieces was well over $1 billion.
How could one individual amass such a trove of treasures in a field as notoriously subjective as art? The secret lies not in clairvoyance or perfect taste, but in the embrace of probabilities and the wisdom of volume. You might call it skill, or chalk it up to luck. Horizon Research offers a third, more pragmatic explanation relevant to investors: the great collectors operate like index funds. They buy broadly, accumulating portfolios rather than betting on single winners. Over time, a small fraction of their holdings becomes exceptional, transforming the entire collection’s value.
Berggruen could be wrong 99% of the time. Yet the 1% of masterpieces he held were enough to render him stupendously successful.
“I’ve been banging away at this thing for 30 years. I think the simple math is that some projects work and some don’t. There’s no reason to belabor either one. Just get on to the next.”
—Brad Pitt accepting a Screen Actors Guild Award
Heinz Berggruen and the Art of the Long Tail
Heinz Berggruen’s life trajectory defies conventional narratives of talent and foresight. Forced to flee Nazi Germany in 1936, Berggruen arrived in America as a refugee with little indication he would become a titan in the art world. His academic pursuit of literature at U.C. Berkeley, a discipline far removed from the commercial art market, suggested a more intellectual than entrepreneurial path. Early on, Berggruen showed no exceptional promise that would forecast the monumental success he would later achieve.
Yet, by the 1990s, Berggruen had quietly amassed one of the most significant private art collections in the world. His trove included masterpieces by Picasso, Braque, Klee, and Matisse—names that would come to define the canon of modern art. The sheer scale and quality of this collection were staggering, but what is more remarkable is how Berggruen achieved it. Unlike many collectors who pursue individual pieces with obsessive precision, Berggruen operated with a portfolio mindset. He acquired vast quantities of art, betting not on singular masterpieces but on the aggregate potential of a broad spectrum of works.
This approach reflects a profound understanding of the long tail phenomenon. In a field as subjective and unpredictable as art, the future cultural and monetary value of any given piece is impossible to forecast with certainty. What might appear insignificant today can emerge as a priceless treasure decades later. Berggruen’s strategy was to cast a wide net, knowing that most acquisitions would remain modest in value. However, the rare gems within his collection—those destined to be celebrated as iconic—would elevate the entire portfolio’s worth beyond imagination.
When Berggruen sold part of his collection to the German government in 2000 for over 100 million euros, the transaction was viewed as a bargain because the market value of those works was estimated to be over $1 billion. This massive discrepancy reveals the power of patience and volume in the long tail dynamic. It was not precision but breadth, coupled with time, that yielded such extraordinary returns. Berggruen’s success underscores a key lesson for investors and entrepreneurs alike: betting on a diverse set of opportunities and allowing enough time for rare winners to emerge can outperform attempts to predict individual outcomes.
The Long Tail of Success in Business and Investing
The long tail concept challenges the ingrained human intuition that success should be steady and incremental. In reality, outcomes in business and investing follow distributions where a small number of events, known as tail events, dominate the results, while the vast majority contribute little or nothing. This skewed distribution is pervasive across industries and asset classes, revealing the disproportionate influence of rare, outsized successes.
Understanding this distribution is crucial because it forces a recalibration of expectations. Most projects, startups, and investments will fail or underperform. The market is littered with failures, missteps, and missed opportunities. Yet, a few remarkable successes—often unexpected and unpredictable—generate the majority of wealth and have the greatest impact.
This reality conflicts with natural human biases. We are wired to seek patterns, consistency, and control. Failure is perceived as a sign of personal deficiency or flawed strategy. Consequently, we overreact to setbacks and become risk-averse, limiting our exposure to potential tail wins.
The long tail, however, demands a different mindset. It requires accepting that being wrong often is normal and expected. Success is not about perfection but about the magnitude and timing of the rare wins. The asymmetry in outcomes means that a single massive success can compensate for dozens of failures. This principle forms the foundation of diversification strategies and the patience emphasized by successful investors.
Moreover, the long tail is a humbling reminder of the limits of forecasting. Predicting which ventures will succeed is often futile. Instead, creating conditions that allow exposure to many opportunities—while managing downside risks—is a more effective path to long-term success.
Walt Disney and the Power of One Hit
Walt Disney’s early career encapsulates the profound impact a single tail event can have on an enterprise’s destiny. Disney’s journey was not one of unbroken triumph; financial hardship, operational struggles, and repeated setbacks marked it. His initial animation studio failed, his early cartoons, though well-received by audiences, drained resources, and the company wrestled with onerous production costs.
By the mid-1930s, Disney had produced over 400 short cartoons, beloved by viewers yet financially unprofitable. The studio’s survival was precarious, and the sheer volume of output belied a lack of commercial success. This period was characterized by relentless labor and incremental artistic progress, with little payoff in business terms.
Everything changed with Snow White and the Seven Dwarfs. This feature-length animated film, unprecedented in its scope and ambition, achieved extraordinary commercial success. Earning $8 million in its first six months—a staggering amount at the time—Snow White effectively eliminated the company’s debts, rewarded its staff, and enabled capital investments, such as purchasing a cutting-edge studio facility in Burbank.
This singular success shifted Disney from a struggling studio to an entertainment powerhouse. Walt Disney himself transitioned from a niche animator to a household name and celebrity. The financial and cultural impact of Snow White dwarfed all prior efforts.
Disney’s story highlights a critical lesson in the long tail: enduring influence and profitability often spring from rare, exceptional events amid a sea of modest or failed attempts. The hundreds of hours of content Disney produced before Snow White laid the groundwork, but in business terms, it was this one tail event that changed everything.
This dynamic is mirrored across creative and entrepreneurial endeavors. Massive success is rarely a smooth curve; it is punctuated by extraordinary moments that redefine trajectories. Recognizing and embracing this reality can recalibrate how we approach risk, effort, and expectations in our pursuits.
Venture Capital: A Microcosm of Tail-Driven Returns
Venture capital is perhaps the clearest embodiment of the long tail phenomenon in the business world. Its very structure embraces extreme uncertainty, recognizing that most investments will fail, but that a minuscule fraction will generate outsized returns sufficient to offset the losses and generate overall profit. This is the essence of the venture capitalist’s gamble: backing many startups, accepting high failure rates, and hoping to catch the rare unicorn that changes everything.
Data from Correlation Ventures, analyzing over 21,000 venture financings between 2004 and 2014, paints a vivid picture of this reality. About 65% of these investments lost money outright—meaning more than half of VC bets never returned the capital invested. Meanwhile, only 2.5% of investments produced returns between 10x and 20x. A mere 1% exceeded a 20x return, and just 0.5%—roughly 100 companies out of the entire sample—delivered 50x or greater.
This distribution reveals the brutal truth: the majority of venture capital returns are driven by a handful of spectacular successes. The rest, while necessary to the ecosystem, are simply the cost of entry. This reality forces investors to build portfolios of bets rather than chase single “sure things.”
Moreover, venture capital’s embrace of tail risk is a deliberate strategy. Investors understand the necessity of taking large risks, absorbing failures, and patiently waiting years for the rare winners to mature. It is this acceptance of volatility and asymmetry that allows venture capital to back transformative innovation, creating new industries and reshaping economies.
Understanding this structure can help investors and entrepreneurs alike adjust their expectations and strategies, accepting failure as part of the journey and focusing on creating or identifying opportunities with outsized upside potential.
Public Markets: Tails Thrive Here Too
The allure of public markets often lies in their perceived stability and maturity compared to the high-risk world of startups. Yet, beneath the veneer of blue-chip stocks and diversified indexes, the long tail exerts a similarly powerful influence.
J.P. Morgan Asset Management’s analysis of the Russell 3000 Index—a broad measure encompassing roughly 3,000 U.S. public companies—since 1980 reveals an unsettling truth. Forty percent of these companies lost at least 70% of their value during that time and never recovered. This means that nearly half of the constituent companies underperformed catastrophically, erasing shareholder value.
However, despite this high failure rate, the Russell 3000 Index itself generated returns more than 73-fold over those four decades—a spectacular accomplishment. How is this possible?
The answer lies in the concentration of success. Approximately 7% of companies in the index outperformed the rest by at least two standard deviations, essentially driving the vast majority of the index’s gains. This small cohort of extraordinary performers outweighed the massive losses of the many.
This phenomenon applies across sectors, including industries traditionally considered stable or conservative. Over half of all public technology and telecommunications companies lost most of their value and never recovered. Even in public utilities—a traditionally safer domain—more than one in ten companies experienced similar failures.
This data challenges the conventional wisdom that public markets provide a refuge from risk. Rather, they embody a scaled-up version of the venture capital dynamic, where a few winners propel the whole market forward amid widespread underperformance and decline.
For investors, this underscores the importance of identifying or holding stakes in those rare companies capable of exceptional growth and endurance, while accepting that many holdings will disappoint.
The Rise and Fall of Carolco: A Case Study in Tail Risk
Carolco Pictures serves as a quintessential example of the long tail’s double-edged sword within public markets. Emerging as a dominant film studio in the 1980s and early 1990s, Carolco produced some of the era’s most iconic blockbuster movies: the first three Rambo films, Terminator 2: Judgment Day, Basic Instinct, and Total Recall.
The company’s rise was meteoric. After going public in 1987, Carolco generated approximately half a billion dollars in revenue by 1991 and commanded a market capitalization of $400 million—a considerable sum at the time, particularly for a studio specializing in high-budget action films.
Yet, Carolco’s trajectory was ultimately unsustainable. A series of expensive flops and declining box office success eroded its financial foundation. By the mid-1990s, the company’s fortunes reversed so drastically that it filed for bankruptcy in 1996, its stock value collapsing to zero.
Carolco’s story is far from unique. It exemplifies the volatility and tail risk inherent in industries reliant on hits. Film studios, tech startups, and numerous other companies operate in hit-driven markets, where success is concentrated in rare blockbusters or breakthrough innovations.
What makes Carolco’s downfall a valuable lesson is its commonality. Nearly 40% of public companies experience similar catastrophic declines over time, illustrating that failure is not an outlier but part of the standard distribution of corporate lifespans and success.
Yet, despite these frequent failures, the broader market continues to deliver outstanding aggregate returns. The small subset of enduring or breakout companies balances out the losses, reinforcing the vital role tails play in wealth creation.
This case study highlights that investors and entrepreneurs must approach markets and industries with a recognition of the volatility embedded in the long tail, preparing for failures while seeking the elusive outliers that generate disproportionate value.
Tail Events Within Tail Events: The Microcosm of Amazon and Apple
Even within the colossal successes of companies like Amazon and Apple, the power of the long tail persists on an even more granular level. These corporate giants don’t succeed because every product or initiative hits the mark; rather, their monumental returns stem from a handful of extraordinary innovations embedded within vast portfolios of projects, many of which never gain traction.
Take Amazon, for example. In 2018, Amazon was responsible for roughly 6% of the total returns of the S&P 500 Index—an astonishing contribution from a single company. However, this dominant performance was not uniformly spread across its entire business. The lion’s share of this success came from two major tail events: Amazon Prime and Amazon Web Services (AWS). Prime revolutionized e-commerce by fostering customer loyalty through subscription benefits, while AWS transformed cloud computing, creating a multi-billion-dollar enterprise almost from scratch.
Behind these massive tail wins were numerous experimental ventures, such as the ill-fated Fire Phone. The Fire Phone, despite being a highly publicized failure, exemplifies Amazon’s strategic acceptance of failure as part of its innovation pipeline. Jeff Bezos famously dismissed the Fire Phone flop as a “tiny little blip” compared to the bigger bets Amazon was making. This culture of experimentation and tolerance for failure enables the company to hunt for those rare, transformational tail events continually.
Similarly, Apple’s outsized impact on market returns has been overwhelmingly driven by the iPhone. This product not only redefined the company but also reshaped entire industries and consumer behaviors worldwide. Apple’s success wasn’t the result of a uniform set of hit products but a singular tail event that dwarfed the contributions of its other offerings.
This layered talent structure extends to the talent that powers these companies. Hiring at companies like Google, Facebook, and Apple is notoriously selective, with acceptance rates hovering around 0.1% to 2%. These employees themselves represent a tail of human capital—extraordinarily rare individuals working on projects that have the potential to become the next tail event. The entire ecosystem—from products to people—is shaped by the dynamics of the long tail, where a few outsized contributors drive the vast majority of value.
Your Investing: The Tail Effect in Behavior
The long tail phenomenon isn’t just about companies and products; it profoundly shapes investor behavior and outcomes. Navigating the markets successfully isn’t about making perfect decisions every day; it’s about how you act during the rare, volatile periods when the entire market is gripped by fear or euphoria.
Napoleon’s definition of military genius—“the man who can do the average thing when all those around him are going crazy”—is a fitting metaphor for investment acumen. The ability to remain calm, rational, and steady amid market chaos distinguishes successful investors from the herd.
Consider three hypothetical investors saving $1 every month from 1900 to 2019:
- Sue invests consistently every month, regardless of economic conditions.
- Jim avoids investing during recessions, keeping his money in cash, and returns to investing when the recession ends.
- Tom delays investing until six months after a recession ends and sells his stocks six months after a recession begins.
The results are revealing: Sue, who maintained consistent contributions, ends up with approximately $435,551. Jim, who timed the market by avoiding recessions, accumulates about $257,386, while Tom trails with $234,476.
These differences highlight a counterintuitive truth: avoiding the market during downturns, often driven by fear or an attempt to time the cycle, can severely damage long-term returns. The few months of crisis, though painful, represent tail events that disproportionately influence lifetime wealth accumulation.
This example underscores the importance of behavioral discipline and long-term perspective. Success is less about the daily or monthly decisions and more about how you handle the infrequent but seismic market shocks. Embracing the long tail means accepting that volatility and uncertainty are inherent to investing, and learning to maintain composure during these volatile moments is essential.
The Moments That Matter Most
Among the myriad days, months, and years that constitute an investment journey, only a tiny fraction truly determine long-term success. These moments—often periods of financial panic, market crashes, or euphoric bubbles—hold outsized sway over portfolio outcomes.
The global financial crisis of 2008-2009 exemplifies such a tail moment. During this period, markets plunged precipitously, fear gripped investors worldwide, and many sold their holdings at the worst possible times. Those who capitulated missed the subsequent historic recovery, significantly diminishing their lifetime returns.
In contrast, investors who maintained their positions, bought into weakness, or remained patient reaped enormous rewards in the years that followed. The returns from a handful of months during and immediately after the crisis outweighed gains or losses from entire preceding decades.
This dynamic can be likened to the job of a pilot: hours of routine flight punctuated by critical moments that demand exceptional skill, calm, and judgment. Similarly, investors spend most of their careers in “cruise control,” but their behavior ultimately determines their success during these rare, high-stakes periods.
Understanding that the moments of terror and triumph drive the majority of outcomes empowers investors to prioritize psychological resilience and disciplined decision-making. It also serves as a caution against overemphasizing short-term performance and market noise, which pale in comparison to the influence of these tail events.
Mastering investing is not about being brilliant every day but about doing the average, rational thing when chaos erupts around you. That is where true financial genius lies.
The Normalcy of Failure: Amazon, Netflix, and Comedy
Success, especially when driven by tail events, carries with it an inherent trail of failures—often numerous and spectacular. Understanding this is vital to managing expectations in business and investing. Leaders at pioneering companies like Amazon and Netflix openly acknowledge that setbacks are not just inevitable but necessary components of sustained innovation and growth.
Jeff Bezos, Amazon’s founder, exemplifies this mindset. After the Fire Phone—an ambitious attempt to crack the smartphone market—flopped disastrously, many would have expected apologies or strategic retreats. Instead, Bezos framed this failure as a small sacrifice on the road to far greater successes. He famously remarked that the Fire Phone was a “tiny little blip” compared to the bigger bets Amazon was making. This attitude signals a deliberate strategy: embrace and learn from failures, maintain relentless experimentation, and focus on those rare wins that generate exponential value.
Netflix operates under a similar philosophy. CEO Reed Hastings has publicly encouraged a higher “cancel rate” for content, recognizing that risk-taking requires accepting that many projects will not succeed. The company continually pushes creative boundaries, investing in diverse, often unconventional content, fully aware that only a subset will resonate with audiences and become hits like Orange is the New Black or Stranger Things. This calculated tolerance for failure enables Netflix to discover its true successes and maintain its industry-leading position.
This pattern isn’t limited to corporate giants. In the arts, comedians like Chris Rock undergo long, iterative processes of trial and error. Before delivering flawless performances on big stages or streaming platforms, comedians test hundreds of jokes in small clubs, many of which don’t land. Rock himself has described this grind: performing 40 or 50 shows in intimate venues to sift through material, discarding much of it, and refining what works. The polished, hilarious comedian audiences adore is the result of countless near-misses.
Recognizing failure as normal—and even necessary—removes the stigma from setbacks. It reframes failure not as a final judgment but as part of the creative and business process that ultimately surfaces true successes.
Warren Buffett’s Invisible Failures
When people think of Warren Buffett, they envision a paragon of investing brilliance, celebrated for decades of consistent wealth creation. Yet, Buffett’s storied career is far from a flawless trajectory of perfect picks. Behind his monumental successes lies a landscape filled with less glamorous investments and outright failures that rarely make headlines.
Buffett himself has revealed that over his lifetime, he has owned somewhere between 400 and 500 stocks. However, he attributes most of his wealth accumulation to just 10 of those investments—stocks that delivered extraordinary returns far surpassing the others.
Charlie Munger, Buffett’s longtime partner, underscored this reality by noting that if you removed just a few of Berkshire Hathaway’s top performers, the company’s long-term track record would be fairly average. This highlights a core principle of the long tail in investing: a tiny fraction of investments drive the majority of profits.
Buffett’s story serves as a powerful reminder that even the best investors are not immune to mistakes or mediocre results. The spotlight often falls on successes, overshadowing the many dud picks that are an inevitable part of the investing journey.
For individual investors, this means that experiencing losses or underperforming picks is not a sign of incompetence but a normal aspect of the asymmetric payoff structure. What matters is the magnitude of gains when correct decisions are made and the discipline to avoid catastrophic losses.
Embracing the Tail Reality
The long tail phenomenon demands a fundamental shift in how we define and measure success, particularly in investing and entrepreneurship. It compels acceptance of a new normal: failure is frequent, success is rare, and even the best performers are right only some of the time.
If you’re a skilled stock picker, expect to be right about half the time. If you lead a business, understand that roughly half of your product launches or strategic initiatives will not achieve their goals. For investors, most years will be mediocre or even disappointing, punctuated by occasional windfalls.
Peter Lynch, one of the most successful investors in history, candidly put it this way: “If you’re terrific in this business, you’re right six times out of 10.” This realistic benchmark contrasts sharply with the unrealistic expectation of consistent winning that many strive for.
Unlike professions that demand near-perfect execution, such as pilots, surgeons, and chefs, business and investing reward asymmetric risk-taking. The goal is not perfection but to generate outsized wins that outweigh multiple smaller losses.
Embracing this reality cultivates resilience and patience. It reduces the psychological burden of setbacks, allowing entrepreneurs and investors to persevere through inevitable failures with the understanding that a few tail events will ultimately define their success.
The Longest Tail: Your Existence
Extending beyond markets and careers, the concept of the long tail can be contemplated on a cosmic scale. Consider that our galaxy is estimated to contain 100 billion planets, yet Earth is the only known planet to harbor intelligent life. The probability of your existence—your unique consciousness reading these words—is unfathomably small.
This is the ultimate tail event: the near-impossible confluence of circumstances that has led to your birth, your survival, and your current moment. The intricate dance of biology, environment, and chance, spanning billions of years, culminates in this single point of awareness.
Recognizing this profound improbability instills humility and perspective. It reminds us that complexity and randomness underlie all outcomes, including our successes and failures. Your presence here is a testament to navigating the longest, most improbable tail imaginable.
This perspective also offers solace and encouragement. Suppose your existence is itself an extraordinary tail event. In that case, the inevitable setbacks and failures you encounter in life and work are natural parts of a complex distribution of outcomes, not signs of personal inadequacy.
The long tail is a universal principle that affects every aspect of existence, from galaxies to individual careers. Accepting it empowers a mindset rooted in patience, resilience, and gratitude for the rare wins that punctuate the journey.
Conclusion
Embracing the reality that tails drive everything reshapes how we approach business, investing, and life itself. It teaches us that failure is not only inevitable but essential—a natural backdrop against which rare, transformative successes emerge. By recognizing the power of these outlier moments, we cultivate patience to endure setbacks, resilience to keep moving forward, and wisdom to focus on the few opportunities with the potential to redefine outcomes. Whether assembling an art collection, building a startup, or navigating the stock market, the long tail reminds us that greatness rarely comes from consistency alone but from daring to participate in the asymmetric dance of risk and reward. In understanding this, we find not just a strategy for wealth or success, but a deeper appreciation for the improbable journey that makes achievement possible—and for the extraordinary rarity of our very existence.