Pareto and the 80/20 Rule

  • Pareto and the 80/20 Rule

    Pareto and the 80/20 Rule

    Vilfredo Pareto (1848-1923) was a famous Italian economist who, amongst other things, derived some interesting relationships between income levels and the number of people who received more than that income.  Anecdotal evidence credits Pareto with the original recognition that 80% of the wealth is owned by 20% of the people – the original 80/20 rule.  His rule originally referred to 80% of the land in Italy being owned by 20% of the population, but he also observed that 20% of the peapods in his garden contained 80% of the peas.

    The rule has now been extended into all sorts of areas (that often have little supporting evidence behind them).  The one I like: that 80% of rules-of-thumb only apply 20% of the time.

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