For ages we have been trying to make sense of why when people put forth equal amounts of effort, disparate results are obtained. The simple answer is that it all depends on the person putting in the effort. Different people are talented in different ways. This applies to most everything in human endeavor. Scientists will tell you that it pertains to everything in nature as well.

Savvy business managers apply the Pareto Principle when confronted with a problem to solve. It basically states that 20% of the causes lead to 80% of the effects. A good way to think about it is that big problems are caused mainly by a small number of root causes that you can address in a focused manner. An entrepreneur trying to scale his or her business can use this thinking to direct limited resources efficiently. Let’s say you want to double the size of your business in a market that is expanding rapidly. A way to do this would be to look at your current sales channels. Upon analysis you will most likely see the Pareto Principle at work. Chances are roughly 80% of your sales come from roughly 20% of your channels. A strategy you could follow would be to find out the underlying reasons for the outsized traction in your best channels, and then try get more channels to perform like them. They may have a better sales rep servicing them, they may be exposed to more favorable economic environments, they may be better fitted or focused on your product offering than the others. There are multiple reasons why they bring you the most results. Your job is to find these reasons and use this knowledge to put most of your effort into getting more similar channels.

Another known explanation for hierarchical outcome distributions is commonly known as Price’s Law. It poses that in a group of people working on a task, 50% of the results will come from the square root of the number of people working on the task. Following this thinking, if you have 10 entrepreneurs competing in a given market, about 3 of them will in aggregate control roughly 50% of the market. Interesting things happen if you add more competitors and the results conform to Price’s Law. In the same market with now 1,000 entrepreneurs, about 32 of them will control half of the market. The proportion of the population controlling half the market goes from 32% (almost a third) to 3%. If you have 1,000,000 entrepreneurs, one-tenth of 1% will control 50% of the market, according to Price’s Law.

As an entrepreneur, how does this help you, and what should you conclude, accepting the statistical preponderance of these “rules”, that roughly explain outcomes that concentrate results in such skewed distributions, and are evident in nature and in all areas of general human endeavor? (I encourage you to do your own research.) My answer would be: if you want to dominate an outsized portion of your market, choose it wisely. Unless you have breakthrough technology that can disrupt a large developed market, smaller undeveloped markets present better odds.

On a more individual scale, even if you don’t want to build an empire, and what you want to do is create the absolute best possibilities for you in your pursuits, outsized success is all about your capacity to be a sizably more formidable contender in terms of focus and competency than everybody else. The sweet spot for achievement lies where what-you-are-most-competent-at dovetails with your talents. Think hard and you will find it.

Our View from the Top – August 20, 2019