"Fire those 20% of customers .......

"Fire those 20% of customers who take up 

the majority  of one's time and cause the most trouble".

 The Pareto principle (also known as the 80-20 rule, the law of the vital few, and the principle of factor sparsity  states that, for many events, roughly 80% of the effects come from 20% of the causes. Business management thinker Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo  Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population; he developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas.^. It is a common rule of thumb in business; e.g., "80% of your sales come from 20% of your clients." Mathematically, where something is shared among a sufficiently large set of participants, there must be a number k between 50 and 100 such that "k% is taken by (100 − k)% of the participants". The number k may vary from 50 (in the case of equal distribution, i.e. 100% of the population have equal shares) to nearly 100 (when a tiny number of participants account for almost all of the resource). There is nothing special about the number 80% mathematically, but many real systems have k somewhere around this region of intermediate imbalance in distribution.

The Pareto principle is only tangentially related to Pareto efficiency, which was also introduced by the same economist. Pareto developed both concepts in the context of the distribution of income and wealth among the population.

The original observation was in connection with income and wealth. Pareto noticed that 80% of Italy's wealth was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.

Because of the scale-invariant nature of the power law relationship, the relationship applies also to subsets of the income range. Even if we take the ten wealthiest individuals in the world, we see that the top three (Warren Buffett, Carlos Slim Helú, and Bill Gates) own as much as the next seven put together.

A chart that gave the inequality a very visible and comprehensible form, the so-called 'champagne glass' effect, was contained in the 1992 United Nations Development Program Report, which showed the distribution of global income to be very uneven, with the richest 20% of the world's population controlling 82.7% of the world's income.

Distribution of world GDP, 1989
Quintile of population	Income
Richest 20%	82.70%
Second 20%	11.75%
Third 20%	2.30%
Fourth 20%	1.85%
Poorest 20%	1.40%

Widening Economic Inequality

The Pareto principle has also been used to attribute the widening economic inequality in the United States to 'skill-biased technical change' – i.e. income growth accrues to those with the education and skills required to take advantage of new technology and globalisation. However, Paul Krugman in The New York Times dismissed this "80-20 fallacy" as being cited "not because it's true, but because it's comforting." He asserts that the benefits of economic growth over the last 30 years have largely been concentrated in the top 1%, rather than the top 20%, though his assertion in no way negates the 80-20 principle.

In software

In computer science and engineering control theory such as for electromechanical energy converters, the Pareto principle can be applied to optimization efforts. For example, Microsoft noted that by fixing the top 20% of the most reported bugs, 80% of the errors and crashes would be eliminated.

In computer graphics the Pareto principle is used for ray-tracing: 20% of rays intersect 80% of geometry.

Other applications

The Pareto principle has many applications in quality control It is the basis for the Pareto chart, one of the key tools used in total quality control and six sigma. The Pareto principle serves as a baseline for ABC-analysis and XYZ-analysis, widely used in logistics and procurement for the purpose of optimizing stock of goods, as well as costs of keeping and replenishing that stock.

The Pareto principle was a prominent part of the 2007 bestseller The 4-Hour Workweek by Tim Ferriss. Ferriss recommended focusing one's attention on those 20% that contribute to 80% of the income. More notably, he also recommends firing those 20% of customers who take up the majority of one's time and cause the most trouble.

In human developmental biology the principle is reflected in the gestation period where the embryonic period constitutes 20% of the whole, with the foetal development taking up the rest of the time.

In health care in the United States, it has been found that 20% of patients use 80% of health care resources.

Several criminology studies have found that 80% of crimes are committed by 20% of criminals.

 In the financial services industry, this concept is known as profit risk, where 20% or fewer of a company's customers are generating positive income while 80% or more are costing the company money.