Insights

Steve Jobs Was Right

By Robert Ellis

The Definitive Study of Human Performance

“Top performers are not twice as good as average performers. It’s more like 100 times better. Everything that matters in business isn’t linear, it’s exponential. 80/ 20 is about Power Laws –powers of 10. You should always think in multiples of 10.” (Perry Marshall, author 80:20 Sales & Marketing.)

There are 1.4 million accountants employed in the United States. 735,399 PTINs have been issued to tax practitioners by the IRS. Let’s assume 367,699 (half) actively prepare tax returns.

There three kinds of tax practitioners.

The Big 4 & everyone else. But it doesn’t matter which you select, you are going to end up with lower performing practitioners. Three kinds of tax practitioners: They’re all necessary, but it’s the strategist that makes things happen..

  • Tax knowledge = book learning/googling.
  • Tax prep = experienced form filler outer.
  • Tax strategy = Intellect + knowledge + experience. Mixing & matching entities, countries, states, code, sections, court cases, regs, rev-procs, etc. Looking for tax loopholes.

Knowledge vs. Experience.

Google commoditized knowledge when they put it all on your phone. You can google up anything. College professors actually recommend google for tax research. Your college degree is worthless. But your experience knowledge isn’t. Today experience is everything. That’s always been the case, but we didn’t realize it until goggle came along.  I probably have the best experience in the tax industry.

The combination of performance issues and increasing tax complexity led to the GAO’s 2016 report that ‘Private business pay more tax at higher rates than tax planed Global businesses.’ You need better talent, but it’s not available.

Ellis is Your solution

We are top performers. Our principal is a tax strategist. He’s also a genius level IQ with more than four decades pertinent experience. He scored in the top percentile on tax aptitude, He was trained in the Big 5. His years in Fortune 500 C suites taught him what avoid. He has genuine expertise in tax.

The Ellis Law Of Human Performance

In every profession, the population distributes itself in the same manner, following the same curve as discussed above

Less than half a percent [<0.005] of the population rank above 50% performance.
0.5% rank above >50% performance
99.5% rank below <50% performance.
Most performance talent is in the top half a percent.

Draw your own conclusions.

Years ago, I was attracted to a quote by Steve Jobs that “an outstanding programmer is 25 times better than an average programmer.” That stuck in my mind, so when the evidence started piling up, I remembered it.

The first discovery I made was the 80/20 rule, which is widely known. The 80/20 rule says things like ‘80% of the land in Italy is owned by 20% of the people.’ Years later I discovered Pareto Charts which chart mechanically just the opposite of the traditional bell curve. Pareto Charts were showing some startling things about outliers. Then I discovered the 46/4 rule which is arrived at by applying the 80/20 rule to itself. The 64/4 says things like 4% of the population produce 64% of the results. If you apply the 64/4 rule to itself, and keep doing that, you eventually end up with a Pareto chart that charts the outliers and looks like the chart above.

Kudos to Steve Jobs. As far as I know, he was the first to recognize the extremes in human performance. He made several comments like these. “The difference between a superb programmer and an average programmer is 25:1.” Or… “I found that there were these incredibly great people at doing certain things, and that you couldn’t replace one of these people with fifty average people.” – (Think Like Steve Jobs, p91) “I was convinced the best people can achieve exponentially more than the merely competent or capable.” – (p92)

What Jobs recognized and what is just beginning to be fully understood is ‘the outlier phenomena’. In every population, there are a few people that over-perform by by extremes that nobody imagined, & another extreme few that under-perform the population the same way. In this case apptoximately a half-percent of the population of 6,912, or 35 people perform above 50%. Only 5 or 6 perform above 10%. These are the Barry Bonds & Wayne Gretzky’s of the world.

Peter Theil’s Pareto curves on pages 85 & 89 of Zero To One also bear witness to something magical. Just substitute ‘performance’ on the C axis on left margin & ‘total population’ on the Y axis across the bottom.

From Business Insider: “A new study provides evidence that individual performance doesn’t fit on a bell curve (with its stable average and limited variance), but follows a distribution in which the average is unstable, the variance is infinite and the prevalence of outliers is much higher … There was consistently a sizable number of outliers, ‘elite performers,’ in each profession that accounted for the lion’s share of output while a majority of workers performed below the mathematical average.”

The Theory

The outlier phenomena runs through every profession and every activity mankind pursues. It is a big deal. This is the Quantum Physics of performance. If this doesn’t make you uneasy, then you don’t understand it. The outliers are so much better (or worse) than the rest of the profession, it’s difficult to understand and hard to believe.

The theory is that the measure of every human activity will track identically when charted, including the outlier phenomena. That seems to be the opinion of Jobs, Marshall, Thiel, & Business Insider, and I can think of no legitimate reason to consider otherwise. This particular chart charts the actual home run performance of big league baseball players. No other profession has kept such meticulous records for more than a century. But it will work equally well for any performance from plumbers to physicians.

There’s Only One Me

There is only one me. And there are millions of you.Ellis is a firm of high intellect people led by a genius with top level intellectual firepower. These are the attributes that make him a top percentile performer.

Graduated #1 every time
Genius intellect
4+ decades high level experience
Big 5 auditor
Fortune 500 C suite
Attempted LBO
Power politics – ran for Congress
Private practice, clients in 46 states
Deep domain expertise tax strategy
Top percentile tax aptitude
You can check my background here. This is probably the only opportunity you will ever get to work with an elite professional. There’s only one of me and there’s a lot of you.

Statistics

Attorneys. 29,688.
Certified Public Accountants‎: ‎211,526‎
Enrolled Retirement Plan Agents‎: ‎738‎
Enrolled Actuaries‎: ‎357‎
Enrolled Agents‎: ‎53,077‎
Actual number of returns filed – 1,152,000
60% get professional help – 691,000
Number of returns prepared by average successful preparer – 100
Number of Individuals with Current Preparer Tax Identification Numbers (PTINs) 710,553.
Number of active preparers: 691,000/100=6,912
Of 6,912 preparers … only 30 rank above 50% performance (top dot)
Of 6,912 preparers … only 744 rank above 10.8% performance (bottom left dot)
Of 6,912 preparers … 3,456, 50%, half, rank below 1% performance (bottom right dot)

A quote: “I think the finance (tax?) field is being overrun with dull and repetitive businesspeople, who are doing the minimum possible to get by, with apathy, and complacence, and generally achieving mediocrity.” Oren Klaff