The Pareto Principle: worry not, it’s not as difficult as it may/may not sound. It’s a rather simple application on various aspects of life that has a lot of benefits, not a labyrinth that we have to struggle our way into understanding. More commonly known as the 80/20 Rule; the Pareto Principle is a prediction that 80% of effects come from 20% of causes.
Let’s go back in time- Italy, 1848, Vilfredo Federico Damaso Pareto is born and would go on to become an important philosopher and economist.
One day, Pareto makes a rather interesting observation; 20% of the pea plants in his garden generated 80% of the healthy pea pods. Now these peas in his garden set his mathematical brain in motion. This observation pushed to unravel the thoughts on uneven distribution and whether it was present in other areas of life.
On wealth, Pareto discovered that 80 percent of the land in Italy was owned by just 20 percent of the population. Pareto continued his analysis in other nations and a pattern began to emerge. For instance, after poring through the British income tax records, he noticed that approximately 30 percent of the population in Great Britain earned about 70 percent of the total income. He noticed that the trend was remarkably consistent; the majority of rewards always seems to accrue to a small percentage of people.
In the decades that followed, people have seen that the 80/20 Rule is more prevalent now than ever before. In the 1950s, three percent of Guatemalans owned 70 percent of the land in Guatemala. In 2013, 8.4 percent of the world population controlled 83.3 percent of the world’s wealth. In 2015, one search engine, Google, received 64 percent of search queries ( (U.S. Desktop Search Engine Rankings, 2015)
On a more personal note, you might be able to relate to some unintentional 80/20 habits.
- How many shoes or clothes do we own? And how often do we grab the same 20%?
- I have a couple of different mobile phone apps, but 80% of the time I’m using the 10 on my home screen.
The 80/20 rule is about identifying an entity’s best assets and using them efficiently to create maximum value.
So how then can we apply the Pareto Principle or use the 80/20 Rule to gain more in our lives or businesses?
- Complete the top 20% of your to-do list. This is effective prioritization, first doing the urgent to important tasks moves to achieving your goals.
- Are you a freelancer or an entrepreneur? It’s important to identify your best (and highest-paying) clients. Of course, you don’t want all your eggs in one basket. But too much diversification will quickly lead to burnout. Understand the 20% of your customers that make the bulk of your business.
- Do 20% of the experiences provide 80% of our happiness? For example, when reading books that were so good and you couldn’t put them down, look for the trend and use it to skim or skip future books to save time.
- With relationships- do 20% of your friends provide 80% of support, positive influence or enjoyment? Think about this and seek to spend more time with that 20% group.
- Financial success- the formula is quite easy, the money coming in must be higher than the expenses.
It is, however, important to note that the rule is often misinterpreted. Sometimes the misunderstanding is the result of a logical fallacy—namely, that if 20% of inputs are most important, then the other 80% must not be important. At other times, the confusion stems from the coincidental 100% sum. It is only but a precept, not a hard-and-fast mathematical law. In the rule, it is a coincidence that 80% and 20% equal 100%. Inputs and outputs simply represent different units, so the percentage of inputs and outputs does not need to equal 100%.