The 1% are evil. Why? Because they own 35% of all the wealth. Twenty percent own about 82.7% of the wealth. How can this be fair?
Fair or not, what if I told you that there is nothing unusual about it? What if I told you that it follows nature’s pattern?
The Pareto Principle is named after an Italian economist, Vilfredo Pareto, who developed it circa 1896. Many know it as the 80/20 rule. He showed that approximately 80% of the land in Italy was owned by 20% of the people. Pareto also found that 20% of the peapods in his garden accounted for 80% of the production. In 1989, it was shown that 82.7% of the world GDP was owned by 20% of the population, according to Wikipedia.
In manufacturing, approximately 20% of the issues cause 80% of the downtime. Pareto fault charts are often used to focus on the 20% of issues causing downtime.
In business, it is common that 80% of the profit comes from 20% of the products sold. It’s also known that about 80% of business comes from 20% of the customers.
Microsoft estimated that 80% of its software crashes came from 20% of the bugs.
Zipf’s law is a variant of the 80/20 rule. Neither is a law but rather mathematical models that many natural occurrences loosely follow. The eponymous law in named after George Zipf, an American linguist. He studied languages and attempted to explain why words occurrences followed a power law. He was not the first to observe the pattern. From Wikipedia, Zipf’s Laws “states that given some corpus of natural language utterances, the frequency of any word is inversely proportional to its rank in the frequency table.” The word “the” is the most common word, followed by the words “of”, “and”, and “to”. As it turns out, approximately 18% of the words we utter or read make up approximately 80% of the words used. The top 10 most frequently used words make of 20% of the words we use, and that is about 0.002% of the total number of words. How can this be fair? Don’t words have equal rights, I ask “quizzaciously”? And, it is not just English; it’s almost all languages, and, per VSauce, it includes languages that we have not been able to decipher.
VSauce has a great video on Zipf’s Law. Here are some of the examples given in the video:
“The” makes up 6% of every word we say or write
20% of the carpet gets 80% of the wear
20% of patients use 80% of the resources
80% of the complaints a company receives come from 20% of the customers
The top 25 words make up approximately 1/3rd of what we say; the top 100, half.
Take the carpet wear example. Furniture tends to be placed where people don’t walk, thus, increasing its use and wear. It snowballs. The same logic can explain why the rich get rich. The more money you have, the easier it is to make money.
Another interesting statistic I came across is that 80% of the twitter follows of athletes follow 20% of the athletes.
The point is that the top 20%’ers and the top 1%’ers are nothing new. It was true a hundred years ago and it is true today. They follow a pattern that exists in nature. Like it or not, we may all be victims of nature. So, maybe we should give them a break and concentrate on the 20% of things that contribute to 80% of our own happiness and success. It has a snowball effect and can help us strive towards being a member of the top 20%, or even the 1%.