leanself.org Jens R. Woinowski

In 1906, Vilfredo Pareto made an astonishing observation:

80% of the land belonged to 20% of the people

Since then, many similar observations have been made, for example about the sizes of cities in a country

The mathematical concept of a Pareto Distribution has been developed

Lean uses Pareto charts as input for decision making and continuous improvement

Pareto, Bell, Wealth, and Luck

Especially for wealth you might expect (or wish) a normal distribution:

Some very rich people

Some more comfortably wealthy

Then the bulk of average guys

Some who had bad luck

And finally the really poor

Starting with a population with normal distributed wealth, every member of the population can gain or lose money

Very simple:

Every simulation step, the current amount of each member’s money would be multiplied with a number between 90% and 110%

Following is the start of the simulation

Observe the flat line on the left and the Bell curve on the right

In each single step “LUCK” is randomly distributed over all members ...

... in real life, people with more fortune have better interest rates

There is no consumption of goods and fortune ...

... which usually hurts wealthy people less

There is no state collecting taxes ...

... but also no welfare for the poor

There is no inflation ...

... but the charts show no absolute numbers

There are no companies who make a profit from their work forces ...

... but also no secure salaries, only random interest rates at work

The number of simulation steps is very high ...

... but this may reflect the effects of inheritance

About the Author

Jens R. Woinowski is working as a quality and risk manager at a major IT company. In his job, he learned about the power of Lean. At home , he discovered that you can use it beyond business . He blogs regularly about the application of Lean to personal matters. © 2014 Jens R. Woinowski

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