The Pareto Principal:
The 80-20 Rule
The Pareto Principal, commonly referred to as the 80-20 rule, was introduced in 1906
by Vilfredo Pareto. Pareto was an Italian economist who documented that 20% of the
people owned 80% of the property and wealth in society. The concept was later generalized to state:
80% of consequences stem from 20% of causes.
If some items or events are arranged in order of value, 80% of the total value will
come from only 20% of the items. Obviously, it’s not exact, sometimes it’s a little more and sometimes it’s a little less. But, 80% of the time you will probably find the pareto principal holds true:
80% of your grocery bill is spent on 20% of the most expensive items
80% of your laundry is done on 20% of your clothes
80% of production is in 20% of a production line
80% of sick leave is taken by 20% of employees
80% of TV time is with 20% of your favorite programs
80% of problems are caused by 20% of the people
80% of results come from the efforts of 20% of the people
80% of repeat sales come from 20% of customers
80% of our personal results come from 20% of our efforts
The pareto principal also holds a piece of the puzzle to financial success:
Those in the top 20% earn 16 times more than the bottom 20%.
The top 4% (top 20% of top 20%) earn 54 times!
They don’t worry about:
Where their next paycheck will come from
A home business offers the leverage that takes advantage of the Pareto Principal.
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