In his book The Black Swan, Nassim Taleb develops two ideas, Mediocristan and Extremistan, to help explain his Black Swan Theory.
Mediocristan is where normal things happen, things that are expected, whose probabilities of occurring are easy to compute, and whose impact is not terribly huge. The bell curve and the normal distribution are emblems of Mediocristan. Low-impact changes have the highest probabilities of occurring, and huge, wide-impact changes have a very small probability of occurring.
Examples: Nature is full of things that follow a normal distribution. Height of humans is a simple example. If you take a few hundred people, and take their average height, there is no human whose height would significantly disrupt the average if added to the sample. Height/weight of people, or life expectancy, are from Mediocristan.
Properties: In Mediocristan, nothing is scalable, everything is constrained by boundary conditions, time, the limits of biological variation, the limits of hourly compensation, etc. Because of such constraints and the limits of our knowledge, random variation of attributes exists in Mediocristan, and can be usefully described by Gaussian probability models. In such “orderly” randomness models, probability distributions are such that no single instantiation of the value of an attribute can greatly affect the sum of all values in the distribution. Even the most extreme attribute values do not materially affect the mean value of a distribution, because the more extreme any value is, the more improbable it is that the extreme value will actually occur in nature.
Exstremistan is a different beast. In Extremistan, nothing can be predicted accurately and events that seemed unlikely or impossible occur frequently and have a huge impact.
Examples: In Extremistan, a single new observation can completely disrupt the aggregate. Imagine a room full of 30 random people. If you asked everyone their salary and calculated the average, the odds are the average would seem pretty reasonable. However, if you added Bill Gates to the room and then calculated the average salary, your average would jump up by a huge margin. One observation had a disproportionate effect on the average. This is Exstremistan. Things like book sales, whether a movie becomes a hit, or a viral video on the internet all have similar characteristics, and therefore reside in Extremistan.
Properties: A winner takes all competitions. As in: a small number of individuals or companies win everything. More inequality and less social justice are inevitable. Actions by individuals and small groups generate increasingly extreme results. As in: “eventually, one man might be able to declare war on the world and win.” Systemic events, both negative and positive, will occur at a high frequency, faster and with more extreme outcomes than ever before.
An interesting video for Nassim Taleb explaining his theory can be found here.