Pareto's Law- and Poverty

The Pareto principle (also known as the 80–20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.^[1][2]
Business-management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population; he developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas.^[2]
It is a common rule of thumb in business; e.g., "80% of your sales come from 20% of your clients". Mathematically, where something is shared among a sufficiently large set of participants, there must be a number k between 50 and 100 such that " 'k'% is taken by (100 − k)% of the participants". The number k may vary from 50 (in the case of equal distribution, i.e. 100% of the population have equal shares) to nearly 100 (when a tiny number of participants account for almost all of the resource). There is nothing special about the number 80% mathematically, but many real systems have k somewhere around this region of intermediate imbalance in distribution.^[3]
The Pareto principle is only tangentially related to Pareto efficiency, which was also introduced by the same economist. Pareto developed both concepts in the context of the distribution of income and wealth among the population.-  http://en.wikipedia.org/wiki/Pareto_principle

The key for you as a business owner or manager is to understand how to utilize this principle to your organization's best advantage.  The idea of Pareto is that there is a "natural" distribution of effectiveness, impact, resources, etc that is always in play.  On the face this looks like it should tell us to just chill out because there is only so much to go around.  But this it is not the truth.

President Kennedy is credited with saying that "a rising tide lifts all boats."   His point was that if you raise the sea level      all the boats on the ocean benefit and some that have run aground will be set asea, to navigate again.

So while Pareto's law is true it is also relative.  For example 80% of the people in poverty in the United States have air conditioning in their homes and a smart phone, 50% have cars.  So Pareto's law is true here, but the tide is higher than in Asia and Africa where the people in poverty live on a dollar a day. The Pareto's distribution is still true but the "grade" is different.   But if we can raise the sea level, we can change what we call poverty and by this last definition, eliminate it.  It begins with each person knowing what their life's work is and then seeking the "works" that God has prepared for them to do; (Eph 2:10) to find and live the "plans" He has for them to prosper them and not harm them-  (Jer 29:11,12).  And by employing the Core Purpose that God has given us, by FINDING it (a free tool is coming to help you.), you raise the TIDE for every one and re-define what we now call poverty.

But back to business .....So how does understanding Pareto help you with your business?  Let's take people.  20% of the people create 80% of the improvement. So if you focus, through a strong Selection Process,  on continuously improving the Competence, Character and Chemistry of the people you select for your company, and who you promote within your company.Visit our consulting blog at Becoming Great! to learn more