Forget the 80/20 Rule

In the late 1800s, economist and avid gardener Vilfredo Pareto established that 80% of the land in Italy was owned by 20% of the population. While gardening he later observed that 20% of the pea pods in his garden yielded 80% of the peas that were harvested. And thus was born a theory that has stood the test of time and scrutiny. The Pareto Principle or the 80:20 Rule has proven its validity in a number of other areas:

  • 80% of sales come from 20% of your customers (definitely true in our case)
  • 20% of your products account for 80% of your sales
  • A small percentage of the population generate the largest health care costs
  • Earnings come from 20% of your investments
  • 80% of this blog’s traffic is to 20% of the postings (actually 33 pages of 180, or 18.3%)

We’ve learned to categorize and sort our defects, problems, expenses by this 80/20 rule so that we can focus or limited resources, attention, brain power on the ‘vital few’.

But in my experience you can’t let this thinking allow you to forget about the tail. Often the greatest opportunities or insights are found are out there in the mix.