On The Pareto Principle

[Peas in a Pod, Cracked Sales People, The Secret Sauce, Overcoming Average]

2025.04.27

XCVIII

Thesis: If you focus on compounding & constantly improving, you really can be 2x or 4x or even 10x better than average at some skill, rather than just a little better.

[Peas in a Pod]

One of the most powerful heuristics for understanding the world is the Pareto Principle:

More generally, a ‘small’ portion of the input cause a lot of the output. 

While it felt like forbidden, dark magic to me when I first heard of it, I now take the Pareto Principle for granted, as do a lot of people in the circles I frequent. It’s commonly cited as a reason to remove “busy work” that doesn’t actually have an impact on your business objective and only do the things that move the needle.

It’s really powerful because it helps us conceptualize reality in a way that’s not immediately obvious.

Taleb makes it very digestible by comparing height to net worth; rather than taking his words directly, I’ll rewrite the notion in my own:

We expect a lot of variables to be like height–in a room of 100 US males with an average height of 5’9” , even if you have a 7’ person in that room, he doesn’t make much more than 1.2% of the “total height” in the room.

A lot of variables are really like wealth, not like height. If you have 100 people in a room, and the total net worth is 136.7B, one of those people is likely Larry Page, who accounts for damn near all of the money in the room.*

The Pareto Principle accurately describes a lot of things other than the distribution of assets, like stock returns & book sales. Its accuracy also has a massive impact on how you should make decisions in different environments. 

One place that I think its impact is under appreciated is in the performance distribution of skills based roles.

In other words, there are a number of occupations for which the “best performer” has far more than his or her “fair” share of the impact on the outcome. 

This is more commonly known in engineering with the concept of the “10x engineer,” but I believe it also applies to sales, marketing, consulting, trades, writing, law, and really anything that is based on some set of sufficiently complex skills.

While the degree to which it applies varies, it’s critical to understand it, because it reframes your goal from simply trying to be better than anyone else to steadily compounding. That way, you’ll end up in your own league.

Business to business (B2B) sales is an easy place to look because the impact is very quantifiable.

*While the gap in net worth seems to be much more extreme than simply “the top 20% have 80% of the wealth,” if you keep reapplying the principle, you will get very extreme results (ie, the top 20% of the top 20% have 80% of 80% of all of the wealth).

[Cracked Sales People]

Sales is a role where an individual contributor can have an outsized impact on a team’s performance &, sometimes, an entire company’s P&L. 

Starting with a dramatic example, I once met a sales person who we’ll call Chad. Chad’s boss told me that Chad “carried the company.”

The firm’s revenue growth target was $10M. The sales team of 7 total was supposed to bring in $6M. Chad was selling bigger accounts, so his goal was around $2M, and the other 6 reps were supposed to bring in the other $4M together. Already, that’s an outsized amount of dependence on one person: 20% of the company’s revenue was supposed to come from one salesperson.

Somehow, Chad closed nearly $4M in business on his own, in one year, while the rest of the team ended up closer to $2M. One man accounted for nearly 40% of the firm’s revenue, 2x what they were expecting.

Of course, the story’s nuanced, because Chad was selling into this niche space for the last 15 years, had been with this particular company for 2 years, and was targeting bigger accounts.

Still, he defied all expectations, blew the quota out of the water, and, in the sale’s leader’s own words, “carried the company.”

Even controlling for some of those variables, having one rep on a team seriously outperform their peer isn’t uncommon in B2B sales. Some other examples:

• A 28 year old rep who regularly closes over $1M a year on a product for which most people have a $300K quota on

• A woman who closed $2.5M in business when the typical quota for her service is closer to $750K

• A dude who did so well that he bought a 4 unit apartment building on his commission, which prompted his firm to move from uncapped commission to capped commission

These people exist & they move the needle for their companies.

It’s nothing like a very tall person being 15% taller than an average person; it’s a very competent sales person doing 100% or 200% or even 300% better than their peers. In other words, the Pareto Principle certainly applies to B2B selling.

[The Secret Sauce]

In terms of sales teams, there’s strong evidence to suggest that the outperformance is actually caused by something the sales person is doing rather than being some random accident. 

Common factors like leadership, product or service, and market conditions all likely have an impact, but they can’t be the only thing. After all, you have people selling the same product on the same team under the same leaders in the same market doing way better than their peers.

Age and experience can’t be the only factor on rep to rep performance either. While these factors likely have a decent weight, it’s not so hard to provide counterexamples to the claim.

Also, since there is some strong consistency from year to year on which reps are performing better, it’s very unlikely to be truly random.

So, what is it?

There are, of course, some common threads. The best performers seem to be:

• Assertive

• Clear communicators

• Responsive

• Persistent but not Pushy

• Understanding of the product they’re selling 

None of these are really surprising or unique, though, and I don’t think that they’re the “secret sauce.”

All of the top performers have little things that work, but if they stopped working, they’d just as soon find something else that worked.

And if there is a key, it’s that: the top performers believe that their outperformance is at least partly in their own control & they are always trying to improve it.

What they are doing is a craft that they want to get better at. Their goal isn’t to slightly beat quota every year. They know that a 15% beat is just the tip of the iceberg & they are actively trying to do even better than that.

[Overcoming Average]

In a field where the Pareto Principle applies and performance is impacted by how you behave, the critical reframe is that it’s less about beating your peers and more about constantly getting better.

It’s really an optimistic view, because beating “the status quo” is not the goal, it’s a side effect.

If your goal is to become 15% better than what’s expected, you’ll get there and coast. Really, you should know that you’re just getting started.

You can compound just like interest over time. Maybe not infinitely, but enough to have reason to keep going.

Trying to be slightly better than normal becomes a trap. You get the dopamine hit of “winning” when really, there is so much more to be done.

The same applies to other fields where the Pareto Principle holds. I’d argue that it’s true for anything based on skills above some complexity threshold. Perhaps the difference is more pronounced in something like B2B sales or engineering, but it still exists elsewhere: think of the well done hand crafted table vs the hack job, or the toilet installation that works for 50 years vs the one that leaks after one year.

Either way, this is your call to remember that you’re your own competition and the sky is the limit.

Live Deeply,