The Pareto Rule Explained
The Pareto Principle also is commonly known as the “80-20 rule.” This principle was first brought to the world by Italian economist Vilfredo Pareto in 1896. The so-called Pareto Rule remains a primary principle even in today’s global economy and contemporary life.
Original Pareto Rule Proposition
Authoring his first published paper while at the University of Lausanne, Pareto pointed out that around 80 percent of Italian property was owned by 20 percent of the Italian population. Pareto apparently didn’t envision his observation would become such a popular principle with the world’s businesses.
Pareto’s original proposition concerned the percentages of populations and distribution of wealth. Ironically, the Pareto Rule had its origins in a vegetable garden – yes, a vegetable garden. The inspiration for Pareto to create his theorem: He noticed that only 20 percent of the peapods he planted in his garden grew 80 percent of the peas.
Pareto’s original proposition concerned the percentages of populations and distribution of wealth. Ironically, the Pareto Rule had its origins in a vegetable garden – yes, a vegetable garden. The inspiration for Pareto to create his theorem: He noticed that only 20 percent of the peapods he planted in his garden grew 80 percent of the peas.
Proving the Pareto Rule
Statistics display time after time that the Pareto Rule is much more than an isolated theory. It has become an “economic fact.” This rule applies, not only to business, but to other areas of life. For example, consider the following rules of thumb.
- 80 percent of an organization’s sales and profits are generated by 20 percent of its customers.
- 80 percent of a business’s sales and revenue are attributable to 20 percent of its products.
- 80 percent of a volunteer committee is completed by 20 percent of its members.
- 80 percent of a charity’s money raising is generated by 20 percent of the fundraisers.
The Pareto Principle and Computer Science
This principle also impacts software engineering and outstanding software performance. A good example: Microsoft. The global organization found that, by developing patches for the most significant 20 percent of bugs in new software, they could eliminate around 80 percent of the user-reported errors.
Also, when engineers write new software, “20 percent of the code has 80 percent of the errors. . . .” There are numerous additional examples of the Pareto findings in the health and safety arena and other areas.
Also, when engineers write new software, “20 percent of the code has 80 percent of the errors. . . .” There are numerous additional examples of the Pareto findings in the health and safety arena and other areas.
Healthcare and Criminology
In the US, studies show that 20 percent of all patients use 80 percent of healthcare services and medical resources. Criminology is not slighted either. Multiple research efforts display that 80 percent of all reported crimes are perpetrated by around 20 percent of known criminals.
This Principle Continues to be Proven in Everyday Life
Should you poll a random sample of people without targeting any demographic group, you’ll find that at least 80 percent of them remember witnessing the Pareto Rule in various situations in their everyday lives. If they serve as volunteers for any cause, even Little League, people have no doubt witnessed this principle in action. The small minority of people involved, approximately 20 percent, will complete around 80 percent of the work.
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