The Long tail is the concept that there are large number of customers who’s unique needs (in small quantities) are not addressed by the high-volume products. It is often represented as a the power law distribution curve. The idea goes further with internet technologies and other happenings, which lower costs for product development and/or distribution. Over time, the demand curve could shift away from the high-volume product, making the tail longer and fatter.
The Fat tail is a different concept where the probability of events away from the mean might be significant. Traumatic events (e.g. oil shock, political turmoil) could disrupt the well-behaved mathematical models of financial investments, incurring considerable more risks than estimated. The variance might not be finite. In some situations, achieving six-sigma might not provide the comfort of high quality or the feeling of being safe.
Copyright (c) 2008 by Waiming Mok