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Pareto Principle

August 2, 2002

I’ve got to read more. Maybe you’ve heard of the Pareto Principle, but I hadn’t. I came across it in a book I was reviewing, and I was intrigued.

The Pareto Principle is the “20:80 Rule,” or the “80:20 Rule,” and it gets applied in a thousand different ways. The original observation by Vilfredo Pareto (1848-1923) was that 20% of the people in Italy owned 80% of the land.

Nowadays, we say that 20% of customers generate 80% of a store’s business; that 20% of advertising produces 80% of the results; 20% of customers produce 80% of the complaints, and so on.

It doesn’t really matter if it’s true. It’s close enough. Believers claim it ’s remarkably true in a great many fields and situations. I think the idea is correct — that effects are distributed unequally — but I’m skeptical about the ratio.

At this library, I might guess that 2% of library users cause 98% of the library’s problems. This would be the 2:98 Rule.

I’ve been fond of reminding staff that even if 99% of the public is pleasant and trustworthy, when we get 200-300 visitors a day then chances are good we’ll see a couple of unpleasant people every day. Fortunately, the ratio seems better, more like the 1:99 Rule.

Do 20% of cardholders account for 80% of circulation? This might be close. But what would be close enough to confirm the Pareto Principle? 25:75? 30:70?

I’ve read that Pareto’s original observation was 15:85. Fifteen percent owned 85% of Italy’s lands. I find this easier to believe; harder to say. “85:15” isn’t a good catch phrase.

I searched the literature. The principle is big in industrial engineering and quality control, and is discussed in political economy and law. There are Pareto Diagrams, the Pareto Optimum.

Studies suggest to banks that only 15% of their customers are truly profitable and so they should concentrate their resources on this small group.

As if the Pareto Principle had the weight of a law. I think the Pareto Principle, in the manner of Murphy’s Law, is most valuable as a reminder of how things tend to be. Some things are more important than others. Simple enough.

As a principle, though, I don’t think it ranks with, say, “Do unto others as you would have them do unto you.” (Which happens to be counter-Pareto.)

The Pareto Principle is often stated as “vital few and trivial many.” It sounds like Mr. Spock on Star Trek, but I like it better than “80:20” even though trivial is a dangerous word.

It’s one of those rules which, if applied, changes its applicability. Imagine if every bank concentrated only on the 15% of population that purportedly make up “profitable” customers? I think 85% would go out of business.

Imagine if a library concentrated its resources on the 20% of books that the rule says make up 80% of the circulation? It would be a pretty boring, and frankly unhelpful, library.

A library is the perfect counter-Pareto institution. The library writer Walt Crawford makes a wonderful argument that libraries should be exactly that — counter-Pareto. Libraries should attend carefully to that 80% of the collection that is not the most popular. Therein lies much of the library’s value — to its patrons and its community, and collectively to society as a whole.

Come to think of it, I should have known this principle. When I pull out a twenty, 80% of my friends appear.

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