The Ten Percent Rule sees its application in various fields and in fact is tweaked based on where it finds its use. It has been used as a thumb rule from sports to investments. Originally the rule came into existence based on empirical observations when it was seen that out of an action, objects or elements infused, only 10% would reach a pre-desired state and of these, only a further 10% would reach the ultimate desired state. Think of it as a reformed form of a principle similar to the 80/20 principle. It is a conservative but safe approach to investment and particularly applies to new forms of investment instruments or practices.
Let us try an understand it with the help of hypothetical example. Let us say that you invent a new form of investment instrument which tries to price speculation or emotions. As per the 10 Percent Rule, out of your target investors, only 10% would ever come to know about this and understand it and of these only 10% will actually invest in the instrument. This in other words means that only 1% of you all probable customers will actually invest. This rule does not state that this will happen every time, but the chances are that more often than not, this rule will apply to any new action infused into the world i.e. the success stories we talk about are the 1% which succeed after 99 previous failed attempts. Arguably a theory with a lot of limitations, but interesting nonetheless....
No comments:
Post a Comment