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THE 80/20 RULE IS MERELY A ‘NORTH STAR’

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Sir,

An Italian philosopher and economist of the 19th century, Vilfredo Pareto, is said to have observed that 80 per cent of the healthy pea pods from his garden came from just 20 per cent of the pea plants. This discovery was so interesting to the man that he set out to discover if such uneven distribution could be observed elsewhere in life. That’s how boring the 1800s were, people were assigning homework to themselves! While investigating uneven distribution, Pareto discovered, to his astonishment, that 80 per cent of the land in Italy was owned by 20 per cent of the population.

Distribution

He also noted that the distribution in the manufacturing industry exactly resembled that of his garden peas. He found that 80 per cent of production was accounted for by 20 per cent of the factories. He is supposed to have then concluded that 80 per cent of results are produced by 20 per cent of the causes. This is the famed 80/20 rule, sometimes called the Pareto Principle.  Real life is not so neat that it follows distributions so round and perfect, and in real life the numbers do not necessarily add up to 100 as the Pareto Principle would lead you to believe.

Examples

I have two quick examples: Rosie Dunford observed that 20 per cent of the Forbes rich list owned 56.72 per cent of the total wealth; and 20 per cent of the world economies accounted for 91.62 per cent of global GDP; easier to give credence right? The two decimal places make it so believable. The 80/20 rule is merely a ‘North Star’. It guides us in the general direction to acknowledge that many phenomena in life are not distributed evenly – some often contribute more than others.

In a perfect world, every employee would be as valuable as the next, but life isn’t that fair. Some people will produce at a higher level than others maybe because of intelligence or education or experience or some sort of combination thereof. Business owners may benefit from identifying their most productive members of staff (the 20 per cent) and rewarding them commensurately while laying off unproductive members (the 80 per cent). It could make business sense to take this approach because essentially you would be reducing costs by 80 per cent (the unproductive majority) at the cost of losing 20 per cent of output. Fair trade, but, you know, unemployment is so bad here that you shouldn’t take this too seriously; let emaSwati keep their jobs, thanks.

Principle

We can consider this principle in allocating time, resources and effort. If only a minority of our time, resources and effort produce the majority of your intended outcomes then we’re being wasteful aren’t we? We’re wasting some of our time by spending it with people we don’t like; we’re wasting resources when we continue to lend to those bad actors that have no shred of honour and neglect to reimburse us; and our effort would go a much longer way if we just up-skilled.

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