Below is a graph of human performance. The top end of the long vertical line on the left represents 100% percent performance, the absolute best performer in the profession. The other end of the line, which stretches far to the right off the chart, represents the lowest human performance (1%).The rest of the population lies somewhere on the line between those two points.
Expertise / Outliers
In every profession or trade, there are very few experts who perform vastly better than the average. The best performers are 100 to 1000 times better than average performers. Pareto charts reveal this previously masked truth. A few outliers, a few experts, outperform the population by crazy, unimaginable degrees.
• Less than 0.001% rank in the top percentile on performance.
• Only 0.28% of the population rank above 50% on performance.
• Less than 7% of the population rank above 10% on performance.
In the tax industry …
• 367,000 population
• Only 367 out of 367,000 perform in the top 1%.
• Only 10,276 out of 367,000 perform better than 50% on performance.
• Only 25,690 our of 367,000 perform better than 10% on performance.
Since the Big 5 and Global 5000 have a bigger appetite for top talent that 25,690, you will have a hard time trying to find someone in the top 90% to be your tax adviser. Basically all the talent performing above 10% (35,709) are employed by Big 5 accounting firms and the Global 5000. The remainder (332,000) fall into the small to medium sized local & regional tax & accounting firms. These are the people available to advise you on tax.
The Ellis Solution
Ellis CPA is a top performing firm. We are a premium tax strategy firm with a national reputation and various areas of expertise. Tax strategist • though leader • leading tax into the 21st century • elliscpa.us • qwktax.com • bizztrategy.com
To get the absolute best tax result possible, your business tax returns belong in the Ellis tax family of thought leaders, leading the business tax industry into the 21st century. In a decade, the CPA tax industry, as we know it today, will be extinct. There are a lot of things pushing things that way, but competence is one of them. Wide ranging competence is one of our hallmarks.
From our home in the cloud, we create competitive advantage out of thin air through our tax & other work: tax strategy & replacing human error with professional, technical & technological proficiency. Every dollar saved drops straight to the bottom line as another dollar of cash, working capital, profits and competitive advantage.
Our founder & CEO ranks in the top percentile on this chart. But more important, or systems make it possible for everyone on our staff to perform at the highest levels. Our CEO also scored at the top of the scale on exponential experience and intellect. He’s a genius level Mensan. That combination of intellect, aptitude & expertise are the primary determinants in proficiency, competence & performance. Our principal was trained in the Big 5 and in Fortune 500 C suites. He has genuine expertise in tax.
A study in Business Insider was intriguing. “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.” (Business Insider)
Noticeably intelligent people have observed over the years that extreme performance exists in the long tail on the left margin of Pareto charts of every profession and every measurable phenomena on earth, such as best sellers and hit records. The 80/20 rule, which scratches the surface of this phenomenon, says, “80% of the land in Italy is owned by 20% of the people.” In the course of my reading, I discovered Pareto Charts were showing some startling things about outliers. Outliers represent a tiny portion of the population but they occupy the the top half of the performance scale. In fact, a mere handful occupy the top 80% of the performance scale. They outperform the rest of the population by unimaginable degrees, from 100 to 1000 times.
Steve Jobs Was Right
Years ago, I was attracted to a quote by Steve Jobs about software developers. It stuck in my mind, so when the evidence started piling up, I remembered it. Eventually it bloomed into several quotes.
“An outstanding programmer is 25 times better than an average programmer.” (Steve Jobs).
“Now, in software, and it used to be the case in hardware, the difference between the average software developer and the best is 50:1; Maybe even 100:1. (Steve Jobs from the lost interview.)
“The difference between’ a superb programmer and an average programmer is 25:1.” (Steve Jobs)
“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.” – (Think Like Steve Jobs, p92)
Nassim Nicholas Taleb
You can find a decent discussion of this phenomena in Taleb’s book, Black Swan. At location 5280 in Black Swan, Nassim Taleb briefly discusses extreme outliers in a Pareto Chart.
Derek Thompson’s book, Hit Makers. “One fifth of the movies took four fifths of the box office. In book publishing, 90 percent of revenues come from about 10 percent of books. In digital markets, it’s even more extreme: 60 percent of all app store revenue comes from just 0.005 percent of companies. For hit makers, the vast majority of bets are failures. The difference between a great year and a terrible year in publishing might come down to a tiny minority of deals.”
Vilfredo Federico Damaso Pareto
Vilfredo Federico Damaso Pareto was an Italian engineer, sociologist, economist, political scientist, and philosopher. He made several important contributions to economics, particularly in the study of income distribution and in the analysis of individuals’ choices. But he missed the big picture.
“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, 80:20 Sales & Marketing.)
Also, take a look at the Pareto curves on pages 85 & 89 of Peter Thiel’s ‘Zero To One.’ Substitute ‘performance’ on the X axis (or left margin) & ‘total population’ on the Y axis across the bottom. “This Pareto principle has been extended to mean that 80 percent of sales often comes from 20 percent of products.”
Average tax talent performs at 5% of the best talent. The top tax talent, which is generally not available to closely held businesses, outperforms the average tax practitioner by 20 to 500 times. The unavoidable conclusion is, There aren’t enough elite tax professional to supply the Global 2000. You know that doesn’t bode well for every other business.
This is how tax professionals rank on performance.
More About Ellis
• 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
• Graduated #1 every time
I love this quote: “I think the finance (tax?) field is being overrun with dull and repetitive business people, who are doing the minimum possible to get by, with apathy, and complacence, and generally achieving mediocrity.” Oren Klaff