BANGS FOR BUCKS
The most iconic moment in Raiders Of The Lost Ark is the fight scene. Harrison Ford has defeated all opponents with his whip.
Suddenly the crowd parts and the biggest, baddest opponent of all stands there.
A giant of a man with a massive, razor sharp scimitar.
In his huge hands it seems as light as a feather.
He spins it, twirls it, flips it, he is obviously going to carve Harrison Ford up like a salami.
Ford’s whip is useless against it.
So Harrison Ford pulls out a gun and shoots the man dead.
Then he turns and walks away.
This is a broad illustration of The Pareto Principle in action.
At it’s most basic, the Pareto Principle is simply street smarts.
Don’t Work Hard, Work Smart.
Where will the smallest amount of resource make the biggest difference?
The Pareto Principle is often called “the 80/20 rule”.
Business-management consultant Joseph M. Juran first defined the
principle as “the vital few versus the trivial many”.
In marketing terms, 80% of your sales often come from 20% of your customers.
So it makes sense to target your high volume consumers.
One man may drink four pints a night, while four men each drink one pint a night.
We can sell as much beer by talking to that one man as we can by talking to those four men.
A mother may be buying food for a family of four, while a single woman will only be feeding herself.
It’s more efficient to spend our media money against one mother than against four single women.
The Pareto Principle applies in most areas of life.
For instance, Microsoft noted that by fixing the top 20% of reported bugs 80% of crashes and errors could be eliminated.
Retailers often find that 80% of the complaints come from 20% of their customers.
And medical professionals say that 20% of patients take up 80% of healthcare resources.
Elsewhere, law enforcement agencies report that 20% of criminals are responsible for 80% of crime.
Safety experts report the top 20% of hazards are responsible for 80% of injuries.
And companies often find that 20% of their sales force is responsible for 80% of the sales.
The numbers won’t always be exactly 80/20 of course.
But the principle applies.
A minority of cause will be responsible for the majority of effect.
The smart person targets this point.
In martial arts it’s known as the pressure point.
The opponent may be taller, stronger, with bigger muscles and more stamina.
But there is a point in the middle of the chest which, if struck with the knuckle of the middle finger, renders them useless.
Like a puppet with the strings cut.
This is the physical equivalent of the Pareto principle.
The pressure point becomes “the vital few” and all the opponent’s strength and power becomes “the trivial many”.
This is something much of Behavioural Economics is based on.
Where is the point at which the smallest effort will make the biggest difference?
Put simply: where do we get the biggest bang for our buck?