PRESENTED BY

DIOMEDE MISIGARO RICHARD

THE SIXTH LINK

The Sixth Link: The 80/20 Rule

• Introduction:

80/20 rule first introduced by Vilfredo Pareto.

Who is Vilfredo Pareto?

Italian Economist

See Link:

http://www.economictheories.org/2008/07/economist-vilfredo-pareto-principle.html

80/20 Rule

Pareto thinks that they are rules in Economics. His attention was more turned on economics after working for 2 decades as railway engineer.

Influenced by the mathematical beauty of Newtonian physics, he devoted all his life into turning economics into an exact science, describable by laws.

His tree volume publication “ Trattato” continues to be a source of inspiration and interpretation for economists and sociologists alike.

80/20

• Pareto is know also as the 80/20 man due to his empirical observations even if he never used the phrase 80/20 in his books.

-as a gardener: 80% of peas production, produced by 20% of peapods

-observer of economical inequalities:80% of Italy lands in the hands of 20% of the

populationThe Pareto vision has been turned into

Murphy’s Law of management

80/20 Rule

• -80% of profits are produced by only 20% of the employees.

• 80% of customer service problems are created by only 20% of consumers.

• 80% of decisions are made during 20 % of meeting time

• Some other conclusions on 80/20 80% percents of crimes produced by 20%

of criminals.

80/20 Rules

• Some others rules can be included in this category due to the fact that they are closed to 80/20.

- 80% percent of links to the Web point only to 15% of Webpages.

- 80% percent of citations go to only 38% of scientists.

- 80% of links in Hollywood connected to 30% of actors.

80/20 Rule

• Some think that the 80/20 rule can be applied to just about anything which can be seen as an overstatement. All systems following Pareto’s law are a bit special.

• What sets them apart is a property that plays a key role in understanding complex networks as well.

80/20 Rule

• Pareto did not use the phrase 80/20. it is later economists working on Pareto’s observations that came up with it.

• Pareto rather at the end of 19 th century noticed that few quantities in nature and the economy defy the omnipresent bell curve and instead follows a power law implying that most money is earned by few very wealthy individuals while the majority of the population earn rather small amounts.

80/20 Rule

• Pareto implies that roughly 80% of money is earned by only 20% of the population , an inequality that is still with us hundred years after Pareto discovery.

• Power law are at the heart of some of the most stunning conceptual advances in the second half of the twentieth century emerging in fields like chaos, fractals and phase transitions.

80/20 Rule

• Spotting them in the networks signaled unsuspected links to other natural phenomena and placed networks at the forefront of our understanding of complex systems in general. The fact that the networks behind the web(and many other complex systems ) all obey a power law allowed us to paraphrase Pareto and claim for the first time that perhaps there was laws behind complex networks.

80/20 Rules and Power law

• Emerging from disorder to order.

• What it is behind the high degree of similarity between such disparate systems.

• What do power laws have to do with it?

• Renormalization and scale invariance.

• Nature vision: chaos is departing in favor of order.

80/20 Rules and Power law

• The theory of phase transitions told us loud and clear that the road from disorder to order is maintained by the powerful forces of self organization and is paved by power laws. Power laws are not just another way of characterizing a system’s behavior. They are the patent signatures of self-organization in complex systems.

80/20 Rules and Power law

• Observing water going from liquid to gas magma freezing into rock, a metal becoming a magnet, or a ceramic turning into a superconductor, the same laws apply generating the mysterious power laws.

• When passing from disorder to order complex systems divest themselves of their unique features

80/20 Rules and Power law

• And display a universal behavior that has similar characteristics in a wide range of systems.

• Power laws are the signature of systems in transition from chaos to order.

• With the understanding of critical phenomena after physicists uncovered the mechanisms governing phase transitions rigorous theories now allow us to calculate

80/20 Rules and Power law

• With high precision all quantities characterizing systems giving birth to order.

IMPORTANT LINKS

• http://en.wikipedia.org/wiki/Scale-free_network.

• http://en.wikipedia.org/wiki/Vilfredo_Pareto Power law visit http://en.wikipedia.org/wiki/Power_law