These two ideas were developed by Nassim Taleb in the book the black swan. In mediocristan this is where normal things happen, things that are expected, things which their probability can easily be computed. And whose impact is not terribly huge. It can be represented by the Gaussian probability
model (bell curve or normal distribution curve). Normal distribution in statistics is where small low impact changes have the highest probabilities of occurring and huge wide impact changes have very small probability of occurring. The most extreme attribute value does 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. Mediocristan therefore constitutes the normal, the expected, the small impact, the easy to predict and the mundane. We have a tendency to think that change occurs smoothly and incrementally. This is Mediocristan. On the other hand, In Extremistan, nothing can be predicted accurately and events that seemed unlikely or impossible occur frequently have a huge impact. a single new observation can completely disrupt the aggregate. This are the black swan events. The prevalent property here is, winner takes all that is a small number of individuals or companies win everything in markets.
Excerpt From: Nassim Nicholas Taleb. “The Black swan. The Impact of the Highly Improbable”