Pareto principle - Notes

Pareto principle

The Pareto principle (also known as the 80–20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.

In business

The distribution is claimed to appear in several different aspects relevant to entrepreneurs and business managers. For example:

• 80% of your profits come from 20% of your customers
• 80% of your complaints come from 20% of your customers
• 80% of your profits come from 20% of the time you spend
• 80% of your sales come from 20% of your products
• 80% of your sales are made by 20% of your sales staff

In software

In computer science and engineering control theory such as for electromechanical energy converters, the Pareto principle can be applied to optimization efforts. For example, Microsoft noted that by fixing the top 20% most reported bugs, 80% of the errors and crashes would be eliminated.