We are all familiar with the Pareto Principal: the 80/20 rule, first articulated by Italian mathematician Vilfredo Pareto in 1906. Pareto saw this unequal distribution in all sorts of unexpected places, after first noticing that 20% of the pea pods in his garden produce 80% of the peas. (what is it about peas and scientific insight?) At the time, he was studying the distribution of wealth in Italy, and noticed that 80% of the land was owned by 20% of the people. Further study confirmed the ratio of roughly 80/20 held firm across just about everything he looked at.
In the years since, the ratio holds, and has become a point of ‘first principal’ in every field of endeavour from science to sport, nature, and our personal lives.
Why is it so?
The reason is simple when you think about it.
‘Accumulative advantage’ and the 1 percent rule.
We all understand that a dominating force in our lives is that the winner takes all. Nobody remembers who came second! To win, you only must be fractionally better, 1 percent, than the next best, but you get to take all the advantages. You win once, collect the advantages, which facilitates winning again tomorrow, and again taking all the advantages, and moving away just a little more from those that come in second. Over repeated cycles, the accumulated advantage of being just a fraction better means you take the lion’s share of the rewards.
The rich get richer!
As a kid I was a reasonable tennis player. The club at which I played held regular ‘social’ tournaments broken down into age groups. In my age group, there was a bloke who was marginally better than me, based on results. He beat me almost every time, it was always close, always hard to pick which of us was the better player while playing, but the results spoke for themselves. 1 percent (maybe in this case, 2 percent) made the difference, and I was the forgotten runner up almost every time. Since 2000, there has been 77 grand slam tournaments played, 2020 had only one, the US Open for the obvious reason. Of those tournaments, 3 players have dominated the men’s singles: Federer, Nadal, and Djokovic. Between them they have won 60 times. A spread of 77.9%, and hardly anyone could name more than 1 of the other winners over those years. Within those numbers, if you just look at the French Open, played 15 times since 2005, when Nadal won for the first time, he has won 13 times.
In a memo dated October 2, 2002, then Microsoft CEO Steve Ballmer wrote to staff ”
“About 20 percent of the bugs causes 80 percent of all errors, and–this is stunning to me–1 percent of bugs caused half of all errors.”
Both are just more of the examples of accumulated advantage, the tiny ‘1 percenters’ that add up to a dominating number.
It is this tiny 1 % advantage that drives the 80/20 rule, the accumulated advantage that goes to those who have a tiny advantage, in a winner takes all environment.
In my work with clients, I use the Pareto principal as a core of the investigation into the sources of ‘baggage’ all businesses accumulate that can be eliminated. Then go a step further and encourage them to ‘Pareto the Pareto’. In other words, take Steve Ballmer’s insight, when you have identified the 20% that cause the 80%, go looking for the 1% that cause the 50%.
