The New 1% Rule
There's a new rule out for how things get done, and it has all the potential of the 80/20 rule to wreak havoc in corporations where it is applied.
It's an emerging rule of thumb that suggests that if you get a group of 100 people online then one will create content, 10 will "interact" with it (commenting or offering improvements) and the other 89 will just view it.
This is not a rule in the sense of equations written and tested against large populations, but in the case of Wikipedia, Digg, and other free use social networks, 1% of the people will do most of the work, 10% will edit it, and the rest will just be passive viewers.
I've covered the problems with trying to use rules of human productivity to change your business results. I wrote this article at Hireability about passive candidates, but the intro is a good start.
In 1906, an economist named Pareto observed that 80 percent of Italy’s wealth was owned by 20 percent of its population. Behavioral scientists followed this line of reasoning over the years, and to their surprise found that in many areas of human endeavors, 20% of a group performed close to 80% of the work. The figures are not exactly 80/20 – but common enough that the 80/20 rule, or Pareto principle, thus came into existence as a law.
The 80/20 rule, as was later found, is a mathematical oddity that applies to all kinds of natural systems, not just human groups. Easily understood and accepted by those without a mathematics background, this rule has become the perfect justification for just about every occasion. Layoffs? Just following the 80/20 rule. Compensation plans weighted towards top producers? 80/20 rule. Bending the rules for certain clients? 80/20 rule! Managers have learned that the 80/20 rule can be used to justify and explain every occurrence in the corporate world – even if the basics of the mathematics are not understood, the idea of 80/20 is powerful enough to justify all kinds of decision making.
Business terms like the Pareto principle are dangerous because they are easily misunderstood and thus easily misapplied. Pervasive and all-explaining, they never quite explain why every method leads to the same 80/20 results. After all, if the Pareto were taken literally, you could fire 80% of your workforce and still maintain 80% of your most profitable revenue. No one has managed to do that yet.
This is the biggest problem we face with social networks. We're excellent at defining them, but no one has learned how to create them. The dynamics that create the 80/20 rule and the 1% rule are not subject to tampering. But we try.
The rule is also not applicable everywhere. It's what happens at Digg and Wikipedia, (and apparently Yahoo Groups) but that doesn't mean it translates to blogging or LinkedIn or website creation. There is also the question of numbers - how many people have to be involved before the 1% rule kicks in? Is it 100? 1000? 10,00,000?
Lots of people have weighed in on this. Church of the Consumer, Buzz Machine, even the Businessweek Blogs.
There's just one problem - and Jason Calacanis is going to find this out when trying to buy that 1%. If you alter the make-up of a social network, you alter the results. Yes, he is going to get a few people to switch to Netscape to push stories. He will claim that he is satisfied with the results. But he will not be able to copy the success of the Digg model at Netscape without organically growing his user base.
My biggest concern is this - the number is not 1%. It's approximately 1%. In the case of Wikipedia, its' 1.8% creates 72% of the content. It varies in other groups. If we're not careful, we'll start to assume 1% is a hard and fast rule - and then we'll start to build business models around paying 1% of a group to do all of the work.
Managers will quote and misuses the 1% rule just as they now misuse the Pareto principle, the Tipping Point, and the LaGrangian Point.
