The World is “Pareto”, Not “Bell Curve”

By Shlomo Maital

                           Pareto

  bell curve

Bell Curve

 

  Writing in the GIBS (Gordon Institute of Business Science) magazine Acumen,  entrepreneur and leader Adrian Gore * makes an important point. 

   “Most things are incredibly skewed in their distribution and follow the Pareto principle, the 80/20 rule”. 

    We’ve been led to believe that human beings are distributed according to a bell curve, or Normal distribution.  True, height is a bell curve.  But nothing else is.  (IQ is a bell curve, only because that is how it is defined and measured).  Nearly everything else is skewed – a “Pareto” distribution.    60% of Twitter messages come from just 2% of users. 20% of the world’s nations won 75% of the gold medals at the London Olympics.

   In business, 80% of revenue and profits come from 20% of products and services. 

   In health care, the sickest 20% generate 79% of health care costs.  And within this 20%, the sickest 20% generate 60% of total costs. 

    What this means, says Gore, is this:  To shift a bell curve is very very difficult. You have to shift the whole thing.  But to shift a ‘long tail’, in a Pareto world, “a shift of the tail drags the average with it and modifies the system.”  And you can shift the tail with just a few remarkable creative individuals. 

    This poses a huge challenge.  To maintain social cohesion, fairness and justice, societies must treat everyone equally and must try to offer everyone equal opportunities.  At the same time, society must try hard to identify truly gifted individuals and give them free scope to deploy their talents and pull us all toward that wonderful ‘long tail’.   Gore notes that if Steve Jobs were South African and launched Apple in South Africa, he alone would have increased South Africa’s GDP by 20 per cent.   And here is the key point:   By trying very hard to give everyone equal opportunities, many gifted people whose gifts would otherwise remain unknown and undiscovered, will emerge to change the world. 

    It takes an average of 250 tons of mined ore to produce one carat of finished diamond !    If we are willing to process so much ore for just one diamond, surely we can also find ways to discover the diamond minds among our disadvantaged children.  I wonder how many such undiscovered gifted minds exist, among the South African miners who mine the ore to discover the diamonds – and how much more valuable those minds are than the diamonds they seek. 

     * GIBS is Africa’s leading business school, located in Johannesburg.  Acumen is its periodical.   Adrian Gore is CEO of Discovery Holdings, which owns Discovery Health, a healthcare provider for 2.5 million South Africans. He pioneered the Vitality program, which rewards people for maintaining good health.

 

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