I'm no expert in economics, I'm not an academic, I'm not a great speller (or good at grammar), and I'm the last person that should be pointing others mistake in using popular expressions. But still, if I can teach you something useful, why not?
The biggest mistake that people make when referring to the 80/20 rule is that they think it sums up to be 100% and that is incorrect. What if I tell you about a 90/20 rule, would you think I'm incorrect? Mostly people would, but it is not.
Basically, the official 80/20 rule comes from a guy that did a study (a while ago) and realized that 80% of resources X were being consumed by 20% of the "consumers", so the opposite also is easy to understand: 20% of the resources were being used by 80% of the "consumers".
In other words, you are talking about 80% of A by 20% of B, where A and B are distinct entities.
Last Thursday I went to the Amazon Start-up Project, and Matt McIlwain, a Venture Capitalist from Madrona was talking that 99% of companies don't need (or should not) use VC money. He is correct. Most service companies (lawyers, consultants, cleaners, restaurants) and most mom-and-pop shop cannot return the multiples that VCs expect, and they are the majority of the US companies.
The mistake that McIlwain made was referring to it as the "99/1 rule" when he meant to say the "100/1" rule.
See, there are only two ways to interpret 99/1 and neither work:
- 99% of the companies consume 1% of the VC money;
- 99% of VC money is consumed by 1% of the companies;
What he should have said is that 100% of VC money is consumed by 1% of the companies, hence the "100/1 rule".
I'm the Co-founder & CTO of 
