Pareto Principle (Power Law Distribution)
Formal Statement
"In many systems, roughly 80% of effects come from 20% of causes"
Mathematical Form
P(X > x) ∝ x^(-α), where α typically ≈ 1.16 for the classic 80/20 split Description
Originally observed in land ownership (80% of land owned by 20% of population), this pattern appears across many natural and social systems. It's a manifestation of power law distributions where outcomes are highly concentrated.
Biological Implication
Species abundance follows power laws - a few species are very common, most are rare. Resource usage, territory size, and reproductive success are similarly distributed. This emerges naturally from multiplicative processes where initial advantages compound.
Business Implication
Revenue, customers, products, and employees typically follow power law distributions. A small number of customers generate most revenue; a small number of features get most usage. This means averages are misleading and focus should be on the vital few. Managing the 'long tail' is fundamentally different from managing the dominant minority.