The Pareto Principle – 80/20 Rule

The Pareto Principle states that 80% of outcomes come from 20% of causes. For example, 80% of supermarket revenue may come from 20% of the product lines. The idea is attributed to Italian Vilfredo Pareto, who in 1906 observed that 80% of the land in Italy was owned by 20% of the population.

The ubiquitous nature of 80/20 “Power Laws” (as they are known) even spreads to our personal lives. Try looking at likes on your Facebook posts (if you have an account). You should notice that close to 80% of your likes come from around 20% of your friends, or 80% of your mobile SMS messages come from 20% of your phone contacts.
There is nothing intrinsically special about these relative proportions; it just happens that they describe the relationships across many dimensions, including accurately predicting bets.

Let’s define effort to include time, analysis and resource applied to make your betting selections. Based on the Pareto Power Law, our chart suggests that with 20% effort you could match the accuracy of 80% of bettors.

At this level of effort, you’re harvesting the low hanging fruit of prediction, probably by accessing widely available information online like league tables and mainstream media reports. The effort involved in using these tools is (comparatively) minimal, and therefore most bettors will use it.



So what can you do to edge along the Pareto curve into the Effective Betting Zone (shaded in figure 1) and pull ahead of the 80% of bettors making minimal effort? Understanding margins should be part of the process of educating yourself about the fundamental principles of betting – along with understanding expected value, different bet types and market movement – and then move on to more advanced concepts, which as the curve demonstrates, require more effort.

We are dealing with generalities of betting here, without specifying a sport for example, which is an important point. Attempting to be among the most accurate bettors for popular leagues like the EPL, NFL or NBA will require enormous effort as you will be competing with the best minds and sophisticated technology (changing the Power Law). And in the real world of betting this includes the bookmakers whose money you are trying to win (and visa-versa).

Part of this article is taken from Pinnaclesports.