Friday, January 6, 2012

The Displaced Plainsman Principle: 1% Accounts For 40%

Wikipedia explains the Pareto Principle:
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.
Some management folk use the principle as follows:
Expressed in a management context, 20% of a person's effort generates 80% of the person's results. The corollary to this is that 20% of one's results absorb 80% of one's resources or efforts. For the effective use of resources, the manager's challenge is to distinguish the right 20% from the trivial many. 
Many studies seem to indicate that the top 1% control about 40% of the wealth.  In April, NPR reported,
One percent of the U.S. population owns approximately 40 percent of the nation's wealth. That's a distribution that most Americans don't know about, Dan Ariely of Duke University discovered in a recent study. Respondents of all demographic categories mistook Sweden's even wealth distribution for that of the United States. Host Noah Adams speaks with Ariely about his study.
Yesterday, the New York Times reported,
The world’s congested mobile airwaves are being divided in a lopsided manner, with 1 percent of consumers generating half of all traffic. The top 10 percent of users, meanwhile, are consuming 90 percent of wireless bandwidth.
 I know that random correlations don't really mean much, but if peas can be used to describe human behavior, it seems that similarities in behavior can be used to create a principle that describes behavior.  I just want credit for enunciating the idea that the top 1% in any given situation will consume or hold at least 40% of the resources.

No comments: