July 26, 2023
Pareto: The Man, the Principle, and the Pea Plants
by Bill Canady in PGOS Influencers | 0 Comments
Pareto: The Man, the Principle, and the Pea Plants
written by Bill Canady | PGOS Influencers
July 26, 2023
If this guy handed you his CV, you would find it very hard to believe. Vilfredo Federico Damaso Pareto was born on July 15, 1848, in Paris, the son of a noble but revolutionary Genoese family which had fled to Paris to escape royalist authorities in Italy. In fact, Vilfredo Federico wasn’t even the name he was born with. His radical parents, thrilled by the German democratic revolutions of 1848, named him Wilfried Fritz and didn’t change it to the more Italian Vilfredo Federico until they moved back to Italy in 1858. There, young Wilfried—I mean Vilfredo—got a great undergrad education, including at the brand-new Instituto Technico Leardi. He soon graduated and earned a doctorate in engineering from the Polytechnic University of Turin (at the time called the Technical School for Engineers). His engineering dissertation was titled The Fundamental Principles of Equilibrium in Solid Bodies, which he later applied not just to physics and engineering problems involving solid bodies but to both economics and sociology.
The fact is that Pareto could never squeeze the contents of his mind and imagination into any single pigeonhole. He worked as a highly paid engineer in a variety of industries until, when he was in his mid-forties, he took everything he had learned as an engineer and poured it into economics and business management, which he taught at the University of Florence before moving on to become chairman of the Political Economy Department at the University of Lausanne in Switzerland.
Now, even a polymath genius needs a little downtime. For Pareto, it was gardening, and he was especially fond of his pea plants. Very relaxing! Except that he could never quite turn off the analytical side of his brain. As he got his hands dirty, he found himself calculating. The numbers in his head told him that just 20 percent of the pea plants in his garden produced 80 percent of his viable pea pods.
Okay. Great gardening tip!
But then he looked up from his garden and out into the rest of the world. Through carefully tuned observation, he discovered that the 80/20 ratio was not confined to the universe of pea plants but was pretty much a property of the whole universe, both natural and human made. Like a mad hatter who had just devised a way to fashion a single hat to fit everyone, he applied his observation of peas to what he dubbed “uneven distribution” in a vast array of fields. From pea plants he turned to the distribution of wealth in Italy and discovered that 80 percent of the nation’s land was owned by just 20 percent of Italy’s population. Turning to industrial production, he worked out a formula demonstrating that 80 percent of industrial output came from just 20 percent of industrial companies.
From here, he applied the 80/20 Rule to just about everything that could be quantified, which, when you think about it, is just about everything. And if there was one thing this civil engineer, economist, sociologist, political scientist, philosopher, and gardener knew, it was everything. And he concluded that it was all governed by 80/20.
Today, people call it the Pareto Principle, the 80/20 Rule, or (sometimes) the Law of the Vital Few and the Trivial Many. Whatever you call it, 80/20 tells us that a minority of actions, causes, or inputs produces the majority of results, outputs, or rewards—in anything you do.
Want a shock? Try applying 80/20 to how you work. Measured by the Pareto Principle, 80 percent of what you accomplish in your job comes from 20 percent of the time you spend working at it. In other words, 80 percent of what you do is—well—trivial.
It’s not just you. It’s all of us. So, try not to take it personally. And don’t try to escape it, either. Use it. The 80/20 Principle applies to work, markets, customers, products—every aspect of business. Don’t be discouraged. Don’t be intimidated. Master 80/20 as you would any other tool of your trade. Use it to understand your business and then to optimize the performance of your business. Let Vilfredo Pareto show you the way to your competitive edge.
