One of the pleasures of writing material for this site is that I get to research subjects that are new to me. The mental models
section falls into this category. I have gained many new insights from
this research and the area that I have found most instructive can be
broadly categorized as chance, probability and statistics.
For a non-statistically trained lay person such as myself, this has introduced a whole new dimension to my understanding of life and has added more tools to my balanced toolkit.
In layman's terms - what exactly is the fat tail fractal factor?
We are all familiar with the 80/20 rule [also know as the Pareto Principal] which basically means that as a general observation 80% of your results come from 20% of your efforts. So the take away with this is to focus your time, energy and resources on that productive 20% to maximise your results.
What you may not know, and I certainly didn't, is that that the 80/20 rule can be applied to itself - that's what the fractal factor means.
So 20% of your 20% best efforts [i.e. 4%] will deliver 64% of your best results. This is illustrated in the second line of the graphic above.
And the 80/20 rule can be applied to this 4% so 20% of that 4% [i.e. 0.8%] will deliver 51.2% of your best results. This illustrated in the third line of the graphic above.
So in very simple terms this means that:
1% of your efforts and resources can deliver 50% of your results!
The challenge lies in finding that key subset of your productive 20%.
In this article I want to share some insights I gained from learning how to apply the fat tail fractal factor and find that elusive 1%. But first, an anecdote:
My first experience of the fat tail fractal factor
Early in my career as a salesman I worked for the marketing services division of the credit reporting agency Dun & Bradstreet. My sales target was £10,000 per month and over the first 6 months I consistently managed to achieve target.
My
average order value was about £1,000 and this involved a huge amount of
cold-calling and about 1,000 miles of driving every week to achieve the
10 orders to make my sales target.
I realised that there had to be a more efficient way of working as there was no way I could maintain that workload over the long term, so I decided to aim for one order worth £10,000 per month.
Although I had never heard of the 80/20 rule, that is exactly what I applied. I thought carefully about the type of client that had a big enough requirement to order in that quantity. I figured out that this had to be a client who had a requirement for added value services, so in addition to selling the raw data I decided to sell the additional services required to fulfill a direct mail or telesales campaign.
The following month I smashed my target with an order for £10,000 and then repeated that success the following month.
As I basked in the warm glow of this early success it occurred to me that the only difference between a £10,000 order and a £100,000 order was an extra zero. So all I had to do was figure out what type of client could place an order of that size.
Further analysis revealed that if I could create a bespoke lead generation service for one of the major financial services companies who employed thousands of salesmen trying to sell pension schemes to small business owners then I could achieve this. Whilst I was obviously unaware of it at the time I was then applying the fat tail fractal factor.
Fast forward another two months and I had approached the regional director of one of these financial services companies and secured an order for £100,000. This covered most of my annual sales target, and I then repeated this process on a smaller scale with a couple of other clients and I closed that financial year on sales of £250,000.
The effect of that first big sale was totally disproportionate to the effort I expended on winning it:
[1] The Power Law
A power law describes a relationship between two things in which a change in one thing can lead to a large change in the other, regardless of the initial quantities.
Statistically it also describes a range of variations from the mean that can be very large.
[2] The Fat Tail
The fat tail is the 80% of result that comes from the 20% of effort.
Statistically, there is a relatively high probability of extreme outcomes in the fat tail.
Clearly the fat tail is where all the serious action is, and the fat tail fractal factor describes the scenario where the effort applied to the critical 1% will yield a massive return that is totally disproportionate to effort invested.
As you focus on the top 20%, you know that somewhere in amongst that group is a subset - which may be just one or two individuals - who will deliver over 50% of your results.
Here are 5 practical tips that I have used, and continue to use, to find that critical 1%:
[1] Focus on Quality Not Quantity
[2] Attract Luck - Be The Best At What You Do
[3] Hunt with a rifle not a shotgun
[4] Accept the Failure Rate
[5] Play The Long Game
The fat tail fractal factor is not just about business and money. This is applies to relationships, hobbies, and areas of special interest to you.
If you can master the dynamics of making this happen you can take a quantum leap in your personal effectiveness, in any area of life that really matters to you, and make a big difference in the lives of others.
Further Reading:
The Pareto Principle - the 80/20 Rule
Why Understanding Ergodicity Is Critical To Your Long Term Survival
How Positive Asymmetry Can Transform Your Life
How To Benefit From The Unseen Margins
Next Article: Dunbar's Number
Return from the "Fat Tail Fractal Factor"
to: Walking The Talk
Or to: Mental Models
LATEST ARTICLES
Situational Communication - Different Strokes For Different Folks
Situational communication is about taking account of 3 often ignored factors about the other person. You are a situational communicator when you recognise that effective communication is not an event…
How To Influence Without Authority - 6 Key Tips
The secret to how to influence without authority is that you get what you really want by giving other people what they really want. We live in an interconnected world and knowing how to influence with…
Change Questions To Change Your Outcomes
Asking The Right Questions Is Critical For A Successful Change. Every time we initiate a significant change - whether in our personal life or in an organisation - we will most likely over-estimate our…
Group Culture - The Invisible Software That Rules Your Life
Group culture is: "How we do things round here". We like to see ourselves as free agents making our own choices and living authentically but the reality is that The Matrix has many layers and we are u…
Why Getting From A to B Is Not Aways A Straight Line
In circumstances of significant change, the progress from A to B will not be in a straight line. We run our lives largely on auto-pilot. In most circumstances your experience of getting from A to B is…
The Art Of Persuasion Planning For Success - Here's How To Do It!
To be successful in the art of persuasion you must ensure that certain things happen. To be successful in the art of persuasion you must establish a framework of what has to happen to get you to that…
The Art Of Persuasion Advanced Communication Skills - Gaining Buyin
Create The Environment Where They Want To Buyin to Your Proposal In order to build the win-win you have to uncover what it is that the other person really wants or needs, and to do that you have to as…
The Art Of Persuasion The One Fundamental Principle - Create A Win-Win
The art of persuasion is based on the simple idea that you get what you want by enabling the other party to get what they want. Being a nice friendly person with good inter-personal skills may be a go…
Communication Persuasion And Change - Key Skills To Survive & Succeed
It's not the strongest that survive, nor the most intelligent, but those who are most responsive to change, the most persuasive, and the best communicators. We are living in an age of unprecedented ch…
The Eisenhower Box - What Is Important Is Seldom Urgent
What Is Important Is Seldom Urgent And What Is Urgent Is Seldom Important. The Eisenhower Box is a time management and decision-making model devised by President Dwight Eisenhower to help him prioriti…
Zen Enlightenment [Satori] - The Stink Of Zen
Lost In Our Delusions About Enlightenment. There is something in human nature - a desire to glamorise, sanctify, objectify and idolise – that elevates people who have offered deep insights to the huma…
5 Zen Mindsets For Mastery - In Any Area Of Your Life
The Wisdom Of A Person Who Masters In Any Art Is Reflected In Their Every Attitude. The state and quality of your mind has a very large bearing on the quality of your performance in any area of life t…
Dealing With The Toxicity Of Online Dating - 6 Key Tips From A Clinical Psychologist
Toxicity Is The Price Tag Of Accessibility. In the early days of online dating, users were vetted and had to go through a registration process and agree to comply with a code of conduct designed to en…
Why Understanding Ergodicity Is Critical To Your Long Term Survival
How Not To Be Fooled By Randomness. Ergodicity is an ugly word from the world of mathematics. It is an umbrella term for two sets of conditions of probability and outcome. These two conditions form th…
Dealing With Imposter Syndrome - Ego Is The Enemy
How You Frame A Situation Has A Profound Impact On How You Respond To It Emotionally. Imposter syndrome is a psycho-emotional experience of a fear of being found out as incompetent despite ongoing evi…
The Challenges Of The Road Less Traveled
Issues You'll Face When Playing The Long Game. The challenges of the road less traveled is loosely based around the phrase popularised by M.Scott Peck with his book "The Road Less Traveled". This arti…
How To Benefit From the Unseen Margins - 5 Key Tips For Success
These Unseen Margins Can Have A Very Dramatic Impact On Your Life. To understand how to benefit from the unseen margins we need to start by understanding what they are and where we find them. In this…
The Art Of Thinking Clearly - How To Do More Than Just Survive And Reproduce
3 Key Tips The art of thinking clearly starts with the sobering realisation that our brains are designed to achieve two things: Survival and Reproduction! 98% of our thinking is unconscious, automatic…
Algorithms to Live By - 5 Useful Rules Of Thumb
5 Useful Heuristics From Algorithms To Live By The thesis of the book "Algorithms to Live By" is that algorithms developed for computers can be used by people in everyday life in a wide range of situa…
Finding Signal In The Noise - How To Avoid The Noise Bottleneck
The Art Of Being Wise Is The Art Of Knowing What To Overlook. We are blessed and cursed to live in the digital age. We have access to more information than we can possibly handle yet we struggle to fi…
The Checklist Manifesto - Your Personal Safety Net
A Checklist Is A Safety Net That Encourages Better Results And Prevents Avoidable Mistakes. The volume and complexity of what we know has exceeded our individual ability to deliver its benefits correc…
How Not To Be Stupid - 4 Key Tips
How To Avoid The 7 Causes Of Everyday Stupidity. We are all capable of everyday stupidity as we undertake routine tasks in our business and working lives and also in our personal lives. This is not ab…
Beginners Mind And The Voice Of Experience
Only The Experts Survived Evolution.
"In the beginner's mind there are many possibilities, but in the expert's there are few." These are the famous words of Shunryu Suzuki in "Zen Mind, Beginner's Min…
The Art Of Being Alone Is A Skill
Let's Make Today A Good Day. You may not have chosen the condition of being alone, and it may have been imposed upon you by circumstances beyond your control, but your response to the situation is wit…
Intuition & Anxiety - Are There Angels Or Devils Calling Here?
How To Tell The Difference Between Intuition and Anxiety. How do you know whether the voice of your intuition is real or just the product of your inner anxiety? We all struggle with these inner voices…
Like A Prayer - Life Is A Mystery
It Isn't The Process Of Prayer That’s The Problem, It’s The Way It’s Framed. Regardless of what we feel about Madonna or her song the topic of prayer often arouses strong reactions. Usually, it is som…
Fear Of Missing Out - "I'll Have What She's Having!"
We Follow The Herd - We Mimic Other People's Choices. Fear of missing out - or FOMO as it is popularly referred to - is the feeling that everyone else in your peer group is having much more fun than y…
Free - Self Improvement Resources
Exercising Balance and Discernment. I have just updated these self improvement resources with a number of additional sources of material that are practical and can help you change your life. Check it…
Your Higher Self - Your Hardwired Portal To The Universe
This Is The You That Is Beyond Your Thinking Mind. This is the big you, the transcendent you, the you that is often referred to as your higher consciousness or higher self. This is the you that acts a…
The Power Of Gratitude - It's Good For You!
Gratitude And Attitude Are Not Challenges, They Are Choices. The power of gratitude quite simply is that it is good for you! Many of us were raised by parents who instilled in us the social niceties o…