We often think of myths as ancient Greek folktales of Gods and warriors, or in a business seetting, platitudes like 'the customer is always right' (they aren't) and 'the check is in the mail (it isn't).
I built a personal philosophy in my early days using Pareto's Principle, otherwise known as 'the 80/20 rule', believing that it had a place in every fabric of the universe and would, one day, be a key part of the 'meaning of it all'.
Today however, that which was once seen and known is more and more a myth... technology has unwound Pareto, that which I once thought was the very fabric of being.
20% of buyers produce 80% of the profits
20% of staff produce 80% of the results
..and so forth.
Not so fast.
As much as the 80/20 rule has become a standard researchers at the MIT suggest that technology has diminished its influence. The book The Long Tail: Why the Future of Business is Selling Less of More by Chris Anderson suggests this as well. In fact, the book can be found on Amazon.com, where lesser-known titles are now producing 40% of Amazon.com’s revenue.
The long tail at Amazon has been described thusly: “Amazon sold more books today that didn’t sell at all yesterday than Amazon sold today of all the books that did sell yesterday.”
Read that twice. (The long tail refers to the infinite outlier in a standard bell curve.)
In a new MIT report, “Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales”, researchers discovered that when comparing catalog to online sales in womens clothing, the 80/20 was only applying to mail order catalog sales. The 80/20 was moot online.
Of course, Pareto still has influence in the natural world: 20% of the trees will still grow 80% of the apples, and you'll still spend 80% of your time with 20% of your friends, but when it comes to the Laws of Choice, it’s changing the way we do business.
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