Power laws have become a kind of popular science meme, but I don't think they are as common or powerful an explanatory tool as some would like I to believe. Or perhaps I've just been reading too much of Cosima Shalizi's blog.
The blog post is essentially restating the Pareto (80/20) principle, first espoused by management consultant Joseph Juran in 1941. In the blog post he calls it a power law -- the Pareto distribution is a a power law distribution -- but it's an observation that has been made before and is known by many.
VC fund returns aren't driven by 80/20 (although they may fit that description), but by the much smaller number of outliers.
Maybe VC returns follow 80/20 and maybe they don't. It isn't exactly a public dataset that we can readily get our hands on. The point I was trying to make in my original comment was that although power law distributions seem to be a popular topic of conversation for the past few years, they aren't exactly a new discovery. Given that wealth and income follow a Pareto distribution, perhaps it isn't that surprising that VC returns do too.
Pareto power laws can't be stepwise, the point I was trying to make is that 80/20 distribution can be, and they are related to but not necessarily the same as power laws.
it's possible that the prevalence of power laws in normal life have been overstated by people trying to drive home a point ("normal life" curves are definitely less slack than something like VC returns) but I still suspect that the majority of people underestimate them.