Imagine a forest. And two plants growing side by side. How do they grow?
Every day there is a competition: one will try to get more sun, soil and nutrients than the other. If a plant can grow a little faster than the other, it could also rise more, catch more light and nutrients. This additional energy allows the plant to grow and grow even more. This pattern loops until the stronger prevails over the other.
The winning plant will have a huge advantage: better capacity to spread seeds and reproduce, increasing its presence in future generations. This process is repeated again and again until the species dominates the entire forest.
Scientists refer to this effect as accumulative advantage. A small advantage that in relatively short time becomes a huge margin.
In the Amazon rainforest, for example, there are about 400 billion plants categorized into 16,000 species. Half of these are classified on 227 species, called hyperdominants. (Data: RAINFOR Consortium, 2013)
That is, 1.5% of the species take up 50% of the nutrients.
The same happens between you and the people you meet, and between your Company and your Customers.
The Inequality principle
Pareto was an Italian economist who, studying the wealth distribution, came to show in late ‘800 that few people possess most of the wealth. This principle, known as the 80/20 principle (statistical figures fluctuate between 95/5 and 65/35 depending on the examined cases), was largely adopted by economists, worldwide.
However, even in sports, it can be said that 20% of the teams have won 80% of the trophies. In detail the Italian soccer championship sees 3 teams (18% of the winners) owning about 65% of the titles. The second 20% hold 20% of the titles and the third 20% hold 10% of the titles.
Why is it happening? There comes the accumulating advantage principle.
In Life as in Business
This also happens in our lives and in our business. Like plants, men also compete for the same resources. Entrepreneurs for Invoices, ie Customers. Politicians for the votes, namely the people. Athletes for the victories. The media for the hourly attention.
The reality is that the winners enjoy satisfying rewards.
Imagine a marathon championship. The difference between the first and the second can be, in the end, only 1 point. And that stems from the few seconds difference accumulated in the different races. In the end, only one will take the gold cup. The same as only one will win the project with a certain client, and only one will have the right to go to the cinema to see a certain movie. Or get that job.
Moral: You just need to be better than your competitors to get – almost – any cake.
It’s not all that way, but simply every area in real life is affected by limited resources; being it voluntary or unintentional there is competition to get them.
In these situations, being a bit better than your competitors brings you greater rewards, because whoever wins, takes the cup, the sun, the nourishment, takes everything. The advantage of being a bit better, does not lead to a little more gain, but the whole prize. The winner gets 100, the loosers take 0.
If a company has a better product, more people can potentially buy it. The turnover increases and the company invests. It acquires better and better staff. The company grows. Dominant.
The margin between acceptable and satisfactory is both huge and tiny at the same time. Huge in terms of results; very small in terms of differences.
And to be on top, to have your prize, you just have to be a little better than your competition.
Over time, those who are slightly better get the prizes. Whoever is not, ends up with nothing else.
As Matthew said [13:12]:
For all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.
Think about it.
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