What Are The Odds – Pareto Rule Applied To Business

Here is the infographic about 80/20 Pareto Rule, the odds of success.

Source: Funders and Founders

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. 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.

From Wikipedia

The original observation was in connection with population and wealth. Pareto noticed that 80% of Italy’s land was owned by 20% of the population.He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.

 Pareto Rule

Universal rule applies to the odds of success: your odds of winning go up to 80%  when you achieve the 20% that give you the most result. That is great odds.

[Editor’s Note:  This article was written by Anna Vital and originally published at Funders And Founders. Copyright 2013.]

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