Understanding Pareto's Principle

14th January 2020 | Reading time: 7 min
By Rakesh Singh

Understanding the pareto principle
Source : pexels


hat we are about to see is that in a given process or system some people matters more than others. Why someone's message spreads much quickly than others? Why some taglines of companies get stucks to our mind? Why some books become a national bestseller while others don't? These are such little phenomenon that an average person can hardly notice in his ordinary life . This principle is also known as '80/20 Rule' which economists often talk about.

The principle states that : 80 percent of the work is done by 20 percent of the participants. A tiny percentage of population do the majority of the work.

Back in 1800s, nobody was aware about such phenomenon until a man named Vilfred Pareto was fussing about it in his garden while looking at some peapods. He made a small but interesting discovery. While taking a walk in his garden, Pareto noticed that tiny number of peapods produced majority of the peas. Fortunately, he was a mathematical fellow. Now the peas in his garden had set his brain in motion. He worked as an economist and like every other economists his notebooks were filled with mathematical equations. He thought what if this unequal distribution was present in other areas of life?

As he was studying wealth in Italy he stumbled upon the distribution of wealth in Italy. He discovered a fact that approximately 80 percent of the land in Italy was owned by just 20 percent of the people. Similar to what he found in his garden. Most of the resources were controlled by the minority of the players. As Pareto continued his research, this pattern began to emerge more clearly. For example, after scanning the British income tax records, he found that about 30 percent of the population in Great Britain held 70 percent of the total income. Through his research, Pareto came to know that numbers were never quite the same but the pattern or trend were remarkably consistent.

Once he revealed his research for the public, people started seeing it everywhere. And now his rule is more prevalent than ever before. For instance, in 1950s, 3 percent of Guatemalans owned 70 percent of the land. In 2013, 8.4 percent of the world population controlled approximatly 83.3 percent of the wealth. In 2015, an extremely popular search engine Google accounted for 64 percent of the total search queries.

But why does this happens anyway? Why a handful of people enjoy most of the rewards. To answer the question, take a look on the nature.

The Amazon rainforest is one of the most diverse ecosystem on our planet. Scientists have claims that around 16,000 different tree species in the Amazon. Researchers have discovered that there are nearly 227 'hyperdominant' tree species exists which contribute in making up the half of the rainforest.

Just about 1.4 percent of tree species account for 50 percent of the trees in Amazon Rainforest.

Wondering why?

Imagine two little plants growing side by side. And if one grows a bit faster than other, it gets taller and taller and starts capturing the resources, like sunlight and soil, dominates the other. Eventually this additional energy allows to flourish even more. This pattern continues and the stronger plant crowds the other out. As a result, the winning plant has a better ability spread seeds and reproduce which gives a big impact for the next generation. The entire overall process continues for generations takes control over maximum region in the forest.

Many scientists calls this effect as a 'accumulative advantage'. What begins as a small improvement gets bigger over time. Only a slight edge in change creates all the effects.

Tagged : PsychologyBetter Habits

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