get more wonderful as the evening goes along. They are very generous in urging you to sample their wares. Another thing about beer distributors is that they tend to be family businesses – often owned by the same family since Prohibition ended, with four, five, even six generations in the business. On the last evening, our keynote speaker was managerial genius Jack Welch, who’d just stepped down after 20 years as CEO of General Electric where he’d raised the value of the company by 4000%. Welch likes an “all Q&A” format. I called on members of the audience. The beer distributors had great questions. Jack had great answers. Everything was going well... until we came to Welch’s application of the Pareto principle to employees. Jack told the beer distributors that they should do annual performance reviews on their entire workforce and analyze that workforce on a 20/70/10 basis. Jack said that 20% of their workforce will be good, 70% of their workforce will be average, and 10% of their workforce will be bad. He said, “Every year you should reward the top 20%, retrain the middle 70%, and fire the bottom 10%.” The room went quiet. It took me a moment to realize what was wrong. Then I said, “Jack, what if the bottom 10% of your workforce is your brother-in-law?” The beer distributors broke up. Jack started to laugh too. Everything got back on track and we had a fabulous night. Of course, The Transition that we’re undergoing in our economy doesn’t have
much to do with your brother-in-law. Except to show that the Pareto principle is not a cause for universal despair. The digital transformation of our economy will mean a reapportionment of rewards – no doubt in a Paretian distribution. This doesn’t mean that you have an 80% chance of being a loser in The Transition. But it does mean that you have to re-think 80% of what you’re doing as a businessperson and investor. The Pareto principle is actually a message of opportunity. Gather 10 people into a room. (Myself, I’d pick a barroom – but room of your choice.) You are much better at something than eight of them. Even if you’re just better at drinking... Marry into one of the beer distributor families. But, statistically, the likelihood is high that you have some skill or technical ability that eight people don’t. Now use it . Failing that, make yourself better informed than 80% of people. That isn’t hard. Recently National Geographic and The Council on Foreign Relations conducted a poll of 1,203 young adults with college educations – 66% estimated the U.S. population to be between 750 million and 2 billion, 75% said English was the most common native language in the world, 75% couldn’t find Israel on a map, and 70% didn’t know which branch of government has the Constitutional power to declare war. And your brother-in-law? Maybe he makes a killer pesto genovese . P.J.O’R.
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American Consequences 11
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