The Ellis Law Of Human Performance
In very profession, the population distributes itself in this manner: less than half a percent of the population rank above 50% performance. 99,5% rank below 50% performance. Charted on a Pareto graph, most of the population resides in the very long tail stretching off to the right.
This is my Law Idiscovered it. I was the first to propose it.
Top Notch Talent is Scarcer Than Diamonds
“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.
Genuine talent is scarce, very scarce.
Top notch talent is scarcer than diamonds. There was only one Babe Ruth, There was only one Wayne Gretzky. There was only one Peyton Manning. It is no different with tax professionals. In every profession, you can count the genuinely top notch on one hand. Here’s the Pareto Chart.
735,399 PTINs have been issued to tax preparers by the IRS. Let’s assume 367,699 (half) actively prepare tax returns. According to the chart above, only 1,836 out of 367,699 rank above 50% performance. These are the outliers. There aren’t enough of them to go around. At one apiece, even the Global 2000 does t get one apiece. That poses a dilemma for 27 million US privately owned businesses. Let’s face it, unless you’re damned lucky, your preparer probably ranks below 5% on performance. On the total scheme of things, that’s like Donald Duck doing your tax work. (I know. I know. Your guy is really great. I hear that every day of the week.)
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 so much worse) than the rest of the profession, it’s difficult to understand and hard to believe.
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 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 thousands 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 to LBO my employer
- 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.
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