Q2. Does the rule of 80:20 always follow?

80:20 Rule:

It is reported that 80% of the wealth in the world is controlled by 20% of the people.
In a company, 80% of work is done by 20% of the employee.
In your own project, you will complete 80% of work in 20% of total time dedicated.

…and the list continues.

It is widely believed that the rule of 80:20 always holds true. Are there any exceptions to this rule?

If YES, what?

If NO, can this rule be exploited for social welfare and yet create personal fortune. Consider the following:

Assumptions:

1. My assumption that the population of the group is 10 people. The same question can be seen for any country/group/society in the world, if you like to.
2. I am talking about the economic value and wealth and not the actual $10 bills or the absolute value of money.

For example:
Consider a population of 10 people and total wealth of economic value of $1000.00.

Before:
According to the rule, 8 out of 10 people will control $200 and the remaining 2 people will control $800.

After:
If the two wealthy people start working for social benefit thereby providing the 8 people in the population, a control of wealth of economic value of $100.00 each. Wealth for 8 people = $800.00
According to the rule, this $800 is 20% of total wealth. Therefore the 2 people in the population get a control wealth of economic value of $3200.00

Not only have the economy expanded, everyone in the population gets benefited.

Do you think this idea would work?

If you think the above idea work, please share a few ideas about how can the wealthy 20% provide access the remaining 80% with an access to greater wealth?

Answers:

By Tim Clapham:

If you’re willing to accept some deviation, I would say that the rule does apply. I come from a sales background, and in all the times I have performed the analysis, I saw results anywhere 70:30 to 85:15. Ie., 85% of revenue came from 15% of the SKUs, 75 percent of sales came from 25% of salespeople, etc.

Now on your example, I think we already see this in practice. The key is in how marginal a benefit are you willing to accept for the less wealthy. If the wealthy start working for some social benefit, you can bet that, at the end of the day, they are going to realize 80% of the total benefit. Just look at current examples of philanthropic giving, and in the final analysis I will wager that the wealthy donors still wind up with the lion’s share of economic benefit.

By David Hamill:

The 80/20 rule is a fact of life. You can either fight against it, or go with the flow. It’s a lot easier if you go with the flow!

Try to be in the 20% that gets 80% of the good things in life (however you want to define them).

Of course, 80 and 20 are only rough figures; it’s the principle that’s important.

By Sal Sofia:

Definitely, 80% of the time.

By Costin Sorin Ionescu:

Something is really flawed in your reasoning and interpretation of 80/20 rule (Pareto)

You said that:
In your own project, you will complete 80% of work in 20% of total time dedicated.

I am afraid is a wrong interpretation of the rule. The correct one is that 20 percent of the work consume 80 percent of your time and resources (and that 20% is made of the 1st 10 percent and the last 10 percent).

I know Pareto’s Law sounds very simple but interpretation is not as simple as it sounds.

Pareto’s law refer to a given situation (that is past) where 20% issues cause 80% results (those could be negative or positive).

And the scope is to concentrate on those vital 20% but without leaving aside the useful 80%.

In the case of the 1000 $ and 10 ppl there was something that I was unable to put my finger on.  I think I nailed down.

You have 2 ppl controling 800$ and 8 ppl controlling 200$. The real question is who provided the 1000$: the 2 group, the 8 group or all of them?

Because in your final situation you state that 2 are providing the wealth for the other 8 (and for them o/c) and you finish with a figure of 3200$ for the 2 group and 800$ for the 8 group. (that gives 4000$).

Once again I think that the real question is: Who provide this money? and the 2nd question: How is the money provided (mechanism)? Not welfare I hope

By James Penman:

It often can be a general statistical guideline, but a very poor rule.

By Ketul Shah:

This is a very interesting rule and many times we find it correct as well.

But this as well as all such rules, are not always true. many times you may find it incorrect as well.

By Larry J Manson:

“Rules” by definition often tend to limit behaviour to fall within the rules.

Please understand “Man cannot fly”. And then along came the Wright Brothers and their competitors and “Man can fly”/

Still the 80-20 paradigm is often applicable.

What do you think?