![]() This is because the area of a square is equal to the length of its sides to the power of 2, which means, for instance, that increasing the length by a factor of 3 increases the area by a factor of 9 (i.e. Simply put, a power law is a type of functional relationship between two quantities, where a linear change in one quantity leads to an exponential change in the other quantity, meaning that one quantity varies in proportion with the power of another.Ī simple example of a power law is the relationship between the length of the sides of a square and its area. The Pareto principle is based on the concept of power laws. Scientific basis for the Pareto principle A study that analyzed circulation patterns in libraries found that around 20% of a library’s books account for 80% of its circulation.A study on software engineering found that roughly 20% of the modules cause 80% of the operational faults.A study that analyzed shopping patterns at convenience stores found that approximately 20% of the customers account for 80% of the stores’ sales.The best-known example of the Pareto principle is attributed to Vilfredo Pareto, the Italian economist after which this principle is named, who observed that 80% of the wealth in Italy is owned by 20% of the population.įurthermore, there are many other situations where the Pareto principle applies. ![]() Things to keep in mind while implementing the Pareto principle.Scientific basis for the Pareto principle.As such, in the following article you will learn more about the Pareto principle, see examples of how it applies in various situations, and understand how you can use it yourself, as effectively as possible. For instance, ‘outcomes’ can refer to anything from financial profit, to customer complaints, to acquisition of knowledge, while ’causes’ can refer to anything from financial investments, to software features, to time spent working on certain tasks.Īs such, the Pareto principle has been found to apply in a wide range of situations, and it has predictive value both when it comes to individuals, as well as when it comes to large groups.īecause this principle is so effective, and because it’s relatively easy to implement, it’s highly beneficial to understand how it works. The ‘outcomes’ and ’causes’ that the Pareto principle refers to are varied in nature, and depend on the situation at hand. For example, the Pareto principle could mean that, when it comes to movies, 20% of the films that are being shown in cinemas are responsible for 80% of the ticket sales. The Pareto principle (also known as the 80/20 rule) is the adage that in many situations, 80% of outcomes are derived from 20% of causes. ![]()
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