This chapter is presented as background information for a concept that will be utilized throughout the book. As such, other than explaining the rule, there will be little in the way of insightful implications drawn here. However, in my opinion, the concept represents a powerful set of observations that I will subsequently refer to many times.
If you have business experience, then you must have heard this famous rule on many occasions. It is used in many different ways, but conceptually represents the same loosely defined thought—20 percent of any group is responsible for 80 percent of the outcomes from that group. It started a while back after some consultants did work for multi-product companies and discovered, quite consistently, that 20 percent of the products were responsible for 80 percent of the profits for the company. It became known as the 80-20 Rule.
It has since been expanded to describe any group in which a minority is responsible for the majority of that group’s output. Neither the nature of the group itself, nor what the output is, is relevant. For example, 20 percent of the divisions are responsible for 80 percent of the profits (or sales) of the company; 20 percent of a work team is responsible for 80 percent of the output; 20 percent of the population is responsible for 80 percent of the taxes collected; 20 percent of the world owns 80 percent of the wealth; and so on, and so on. As I said, it represents more of a conceptual reality; the actual numbers and ratios are not the point.
I believe it is a rule that describes reality in practically all situations in life. You may use this rule to guide your thoughts, analyses, and conclusions whenever appropriate. You probably will not go wrong with starting with this rule as a basic assumption. However, this is not why I bring it to your attention—it would have been interesting, but not insightful with important consequences.
I redefined and expanded this rule for my own purposes, and it is this redefined rule that leads to meaningful and insightful implications, which I plan to share with you throughout the book. I am explaining the rule now to spare the reader from unnecessary digressions later on.
First, I narrowed the content of the rule to refer only to people’s understanding, wisdom, insightfulness, perceptiveness, judgment, foresight, discernment, acuteness, astuteness, ingenuity, and so on. In other words, all things related to brainpower and how insightfully it is used. Second, I expanded the rule to become iterative (e.g., take any group of people in any category, and the 80-20 Rule will continue to apply to the subgroups).
In other words, let’s take a profession, say, lawyers. The rule will say that 20 percent of the lawyers have the brainpower as I defined it, and the remaining 80 percent do not, or will be of average brainpower relative to the group selected. You may take the subgroup of the 20 percent above and apply the rule again. The selected subset of the 20 percent group can also be differentiated within themselves with the 80-20 Rule, and so on. However, just keep in mind that the rule may apply, but the measuring scale must change.
For example, let’s start with a random group of all students in the country. The measuring scale relative to how insightful they all are will include the full range of cognitive words:
Not Insightful / Poor Insight / Weak / Less than Average / Average / Somewhat Above Average / Above Average / High / Very High / Highest
This measuring scale will be appropriate and would adequately represent the distribution in the group. However, if you apply the iterative process and select only the 20 percent as a subgroup, then the measuring scale obviously changes to only the high-end portion of the scale. In fact, the scale will represent less of absolute terms, like in the widest group, and more of a “relative-to-each-other” scale. In other words, to apply the 80-20 Rule, you must have an appropriate scale to properly show how the group is separated along a continuum. It generally can reflect absolute terms or relative-to-each-other differentiation.
The final and the most profound observation I would like to leave you with regarding the categorization of people based on brainpower or insightfulness (understanding, wisdom, perceptiveness, judgment, foresight, discernment, acuteness, astuteness, ingenuity, etc.) is that the separation between the 20 percent and the 80 percent of any subgroup is not closely correlated to how successful one is, or what a great experience, background, or resume one brings. In other words, great success, long experience, impressive resume, etc. are not necessarily an indication of whether one falls in the 20 or the 80 group. As I said earlier in the book, one’s success is influenced by many factors, whereas my definition of brainpower reflects a singular talent and capability, which may, or may not, be correlated with the degree of one’s success—particularly not in business.
At first glance, the above observation may appear to contradict the main premise of the book—that insightfulness leads to career success. If my main premise is true, then how can I now suggest that great success may not correlate with whether one falls in the 20 or 80 percent group from an insightfulness standpoint? Note the subtlety of why this is not a contradiction: Insightfulness may and most likely does correlate with success, but success does not guarantee the presence of insightfulness because success may be driven by other factors. In math it is stated as: if A leads to B, it doesn’t follow that B also leads to A. A simple example: If every practicing lawyer (A) must receive a lawyer’s license (B), it doesn’t imply that everybody with a lawyer’s license (B) is a practicing lawyer (A).