07 Mar The truth behind wealth inequality in business…
It was the late 1800’s and his name was Vilfredo
Pareto. One day while tending to his garden,
he made a tiny but significant discovery.
He noticed that out of all the pea pods in his garden
there there were a small percentage that produced
the large majority of his peas.
This discovery caused him to wonder if the same
unequal distribution were present in other
areas of life. The first area he observed was
wealth distribution. To his astonishment
he noticed that 80% of the land in Italy was owned
by only 20% of the population.
Just as he had noticed in his garden with the peas,
most of the resources were controlled by a small
minority. As he continued his study of the other
nations a distinct trend emerged. His study of
the income tax records of the British revealed
30% of the Brits brought home over 70%
of the income.
While the numbers in each category differentiated,
the trend remained consistent. The bulk of the spoils
of life went to a small number of players. Thus the
Pareto Principal was born or as it’s more commony
known today, the 80/20 rule.
It’s the idea that a small number of things account for
the large majority of results.
Over 50% of online purchases are made through
Remember Ask Jeeves? Remember Bing?
Well at one point they were just as prominent as
Google. However in 2019 90.4% of search queries on the
internet were made through Google.
It has been noted that 80-90% of the women in a social
setting, such as a college campus, will mate with
10-15% of the male population.
In the NBA the Boston Celtics (hate them) and
the Los Angeles Lakers (My Squad) have
won almost half of the championships in
Brazil, Germany, and Italy have won 13 of
the first 20 world cups while competing
with 77 teams.
What causes this to happen?
In business small differences in performance lead to huge
differences in wealth and reward distribution, when
repeated over time. You only have to be slightly better
than your competitors. But the key is in how
consistently you can repeat that edge.
If you and I compete for market share of a small town,
selling tires. And your marketing and copywriting skills
are a tad bit better than mine. In the beginning what
will happen is that you’ll bring home maybe $100
more than me per day.
That extra $100 then allows you to afford more advertising
than me, which makes your business more visible than
mine. Then a month from now you’ll be making $1,000
more than me. You now have enough money to spend
on advertising in addition in training courses
that’ll teach you how to improve your marketing
and copywriting skills even further. Or hire someone
who can do it for you.
Until a year from now you’re the only game in town.
While me and my family are lined up at the welfare
If we both enter a race and the grand prize is $10 million
dollars and you’re a fraction of a second faster than me.
Do you receive a fraction of a percent more money
No. You get the whole $10 million.
In conclusion it’s not necessary to be twice as good
as your competitors. All you have to do is be 1%
better than them daily, over time and they won’t
be able to catch up. The key is consistency.
In order to get and maintain your edge,
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