Vilfredo Federico Damaso Pareto was born in Italy i848. He would go on to become an important philosopher and economist.Legend has it that one day he noticed that 20% of the pea plants in his garden generated 80% of the healthy pea pods.
This observation caused him to think about uneven distribution. He thought about wealth and discovered that 80% of the land in Italy was owned by just 20% of the population. He investigated different industries and found that 80% of production typically came from just 20% of the companies. The generalization became:
80% of results will come from just 20% of the action.
Pareto's 80/20 Rule
This "universal truth" about the imbalance of inputs and outputs is what became known as the Pareto principle, or the 80/20 rule. While it doesn't always come to be an exact 80/20 ratio, this imbalance is often seen in various business cases:20% of the sales reps generate 80% of total sales.
• 20% of customers account for 80% of
• 20% of the most reported software bugs cause 80% of software crashes.
• 20% of patients account for 80% of healthcare spending (and 5% of patients account for a full 50% of all expenditures!)