The real reason I started blogging was because the newspapers and magazines I read rarely print my opinion.  The latest best example is the following letter that I tried posting on Newsweek’s web site.  I tried for four days. 

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I had just finished reading Andy Grove’s “How to Make an American Job” in Businessweek’s July 5 edition when latest edition of Newsweek arrived.  He is the former CEO and chairman of Intel.  Rana Foroohar writes her article “How to Build Again” in Newsweek.  My background in is management of a variety of manufacturing concerns.  What is her background?

Mr. Grove points out that Foxconn, the giant electronics subcontractor in China, employs over 800,000 people.  Most of those people are earning one-fifth the pay that Americans require.  Back in the 1950s 1960s and 1970s those 800,000 jobs would be in the United States.  Innovation is wonderful but who will manufacture and assemble the next 3-D television or the next iPhone?  Unless there is more job creation in the United States for the millions of Americans that are continuing to be laid off our children and grandchildren are in for some very unhappy lives.

About 30 years ago a mathematician working at my employer told me about Pareto’s Law or principle and how it worked.  I had recalled learning about the theory in college but never had an opportunity to apply its use. 

The theory was devised by Vilfredo Pareto.  In 1906, the Italian economist created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. The Pareto law, in its generalized form, states that 80 % of the objectives – or more generally the effects – are achieved with 20 % of the means – or more.  In other words, not always in the exact 80/20 ratio, this phenomenon seems to occur in many venues.

If you apply the principle to the distribution of wealth in the United States you reach the conclusion that about 20% of the population does own 80% of the wealth.  Although it is not precise, G. William Domhoff’s research about America’s wealth distribution seems to hold up fairly well.

Back at the factory I worked in 30 years ago the sales of our 110 unit product line did break down to 80% of the revenue coming from 20% if the items we offered.  It was almost exactly in that ratio.  I was astonished how closely the numbers were aligned.

I am willing to bet that 80% of the revenue in any super market is derived from 20% of the stocked items plus or minus 3%.