The Natural Distribution Of Wealth
Before we delve into accelerating your wealth and/or finances, we will touch a little on the “natural” occurrences of why wealth is distributed the way it is as we mentioned on our first post. It all bases on Pareto’s principle also known as the 80/20 rule.
What is the 80/20 rule (Pareto’s Principle)?
Paretos’ Principle was originally referred to as his observation that the 20% of the population of Italy has produced 80% of the wealth of the said country. If you spend the time to understand this principle, you’ll notice that many things in life are not evenly distributed. For example, 80 of the profit are produced by 20% of a company’s employees. However, it does not necessarily state that everything is in the ratio of 80:20. It could be a 60:40 ratio, or 70:30, 99:1, etc. This is because the main idea behind this is that there is always a minority that produces or supersedes the output of the majority and the minority will likely be able to contribute more results than others.
The said principle has been named after the person who came up with the idea named Vilfredo Pareto. He was an Italian sociologist and economist. He tried testing the principle in various countries and various distribution situations. Through it, he was then able to confirm that the principle can be truly be a model that could be used in predicting, measuring, as well as managing all situations.
With knowing Pareto’s principle and the fact that the natural distribution of wealth is 20% (a minority amount of people) controlling, creating, or holding 80% of the world’s financial wealth, what should we be doing if we would like to get wealth for ourselves? I can guess, by understanding Pareto’s Principle, that you are more than likely currently a part of the 80%. So, in order to accelerate you wealth, what you need to be doing is finding out what the 20% of the population are doing, and do that!
In essence, you need to stop following what the herd of people are doing, and either go the opposite way or do something different. Think about it. Think about the most successful entrepreneurs, business people, investors, their mindsets are way different from what the majority the the people’s mindsets are. Steve Jobs said it in an Apple campaign that they ran, “Think Differently”. One of the most successful investors, Warren Buffet, built his wealth by following an investing methodology that was contrarian from how the majority of people invested.
We’ll expand on this a bit more because it is such an essential principle to understand and use in order to accelerate your wealth!