The Pareto principle, states that 80% of the effects come from 20% of the causes. This principle was named after an esteemed economist Vilfredo Pareto. He first noticed that 20% of his pea pods were responsible for 80% of his peas. He started applying his findings in other fields and found that many natural phenomena exhibit the 80/20 rule. Eventually, this principle was applied widely around the world, the Pareto principle is also known as the law of the vital few, principle of factor sparsity, or the champagne glass effect.
In economics, Pareto noticed that 80% of the land was owned by 20% of the population. When he went along to conduct this survey in other countries, he found that many followed this distribution. The unequal chart distribution was very apparent. Though this principle is frequently used in business and economics, when applied to other fields, this distribution has once again proven true in computing, sports, wealth distribution, personal finance, spending habits, and even infidelity in personal relationships.
How does the Pareto’s Principle apply to your business?
As we know it, the misconception that the success rates of partnerships are evenly distributed has been a myth perpetuated since the 1600’s when the first farmers tried brokering deals with east India company in the hopes of reaching new markets.
Many believed that the best-performers and worst-performers are situated at one of each end of the bell curve, often referred to as outliers. The rest of the average performers comprises 70% to 80% of the bell curve.
When in fact, the curve more often than not, follows the Pareto distribution. Where 20% of the top performers are enjoying 80% of the benefits while the rest are underperformers. However, most people find it hard to conceptualize this and since they believe that most things are normally distributed, they spend a lot of their time working and investing in failures.
The first step in solving anything is understanding the situation before applying the solution. Take for example marketing, if the distribution follows Pareto’s principle, the approach to tackle your projects should also change. Most people tend to thinly spread out their time rather than putting focus on the most important task to maximize their intended ROI.
Is the environment there though?
Imagine this: You are currently going to your neighborhood well to draw out water, and you know if there was a piping system, you could simply get water from the tap. Until there is a piping system, you will continue to get water from the well. It is the same for anything we do. We make do with what we have until a more efficient alternative pops up, then we change our ways.
Right now, the environment for partnerships isn’t as optimized as it should be. The business world is a warzone, heavily tilted towards those who can afford the game (lots of money), which puts smaller companies at a disadvantage. To tackle this issue, we will build a tool to help level the playing field and provide businesses the opportunity to steer their partnerships intelligently and efficiently.
What are we trying to do?
Metapair is like a Coronary angioplasty* procedure for B2B partnerships. Our technology works as a stent to free up the collapsed system and make the partnerships market a more distributed one. Since Pareto’s principle applies everywhere, this means that a large percentage of the money is only flowing upwards but barely trickling backward. Money is the lifeline of any business. If most of the wealth is owned by a few industry giants, then the rest is left to fight for what’s remaining of that piece of the pie. By leveraging innovations in RPA and AI and applying it to a marketplace of businesses, it no longer has to be a zero-sum game, everyone can enjoy the benefits
*A medical procedure in which a balloon is used to open a blockage in a coronary (heart) artery narrowed by atherosclerosis. This procedure improves blood flow to the heart. Most angioplasty procedures are done using stents: A small mesh tube called a stent is usually placed in the newly widened part of the artery. The stent holds up the artery and lowers the risk of the artery re-narrowing. Stents are made of metal mesh and look like small springs.
How do you know what your network is worth, and if it’s not worth much, what do you do?
It was during the 80’s; a decade famous for new wave and punk rock; a young and brilliant computer scientist (Robert Metcalfe) proposed a radical new way to value a network, but it wasn’t until a decade later with the birth of the internet (as we know it) did it really gain traction to help value everything from computers to social networks.
Metapair and Metcalfe’s Law
The world revolves around power laws and network effects. The more people they know, the more opportunities there are, but there’s more to a network than it’s sheer volume. Quality is important. Sure, it is advantageous if they have a good list of network, but the real value is from the quality of collaboration between two brands. To date, anyone who handles partnerships for their company has some form of reliance on their personal network to do partnerships. No matter how good their networks are, their partnerships are limited to just that list. Businesses typically make do with the connections they have, but what if we don’t need to make do. What if we can connect with any brand in the world? We can then use the extra time and money to build quality collaborations.
Anyone who has done lead generation knows that it is painful and extremely time-consuming. With the networking effect, we can quickly reach the right person in the company and reduce the time on this task significantly. As Kevin Kruse put it “it’s important to remember that there are only so many minutes in an hour, hours in a day, and days in a week. Pareto can help you to see this is a good thing; otherwise, you’d be a slave to a never-ending list of things to do.”
Providing a centralized network on our platform is not the only thing we do, we have quite a list of features that we are implementing to assist in making good partnership decisions. But that deserves an article on its own.
Request a feature with Metapair: Tell us what feature you find most useful that will help with your partnership work.