The rule of 1 percent, also called “Preferential Attachment”, describes the idea of using small improvements to scale progress over time. The power of compounding effects makes long-term investments possible, whether in finance, marketing, or personal self-development. It’s the result of compounding effects, a concept best known from interest and described by Warren Buffet as the strongest force in the universe. The Pareto Law is everywhere: investments, technology, time, efficiency, and risks. How the Pareto Principle applies in our lives 20% of bugs cause 80% of crashes (according to Microsoft in 2002).20% of the population transmits 80% of STDs.20% of health care patients use 80% of healthcare resources.80% of revenue comes from 20% of customers.20% of training exercises deliver 80% of the results.The term “Pareto Principle” was brought to the business world in 1940 by Joseph M Juran, a quality engineer who applied the principle to business and sparked the idea for the Six Sigma process. Instead it was more of a "social arrow" – very fat on the bottom where the mass of men live, and very thin at the top where sit the wealthy elite.” Benoit Mandelbrot in "Τhe Mystery of Cotton" Society was not a "social pyramid" with the proportion of rich to poor sloping gently from one class to the next. When he plotted the data on graph paper, with income on one axis, and number of people with that income on the other, he saw the same picture nearly everywhere in every era. What he found – or thought he found – was striking. He gathered reams of data on wealth and income through different centuries, through different countries: the tax records of Basel, Switzerland, from 1454 and from Augsburg, Germany, in 1471, 14 contemporary rental income from Paris personal income from Britain, Prussia, Saxony, Ireland, Italy, Peru. That’s also how he found the famous principle: “ The gulf between rich and poor has always been part of the human condition, but Pareto resolved to measure it. In fact, the Pareto Index is still used today to measure income equally.Īs Economist, Sociologist, Philosopher, Vilfredo was particularly interested in wealth distributions and how people came to power. He also drove the change of economics from a branch of philosophy to a data-driven field of research and mathematical equations. Pareto did more than “just” discover a phenomenon that’s still very relevant today. The Pareto Principle was invented by the Italian Vilfredo Federico Damaso Pareto (1848-1923) in 1906 and also called “80/20 rule”, meaning 80% of the outcome coming from 20% of the input.
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