This is part 1 of a 3-part series on how to achieve more with less using the 80/20 principle.
“Conventional wisdom is not to put all of your eggs in one basket. 80/20 wisdom is to choose a basket carefully, load all your eggs into it, and then watch it like a hawk.” – Richard Koch, The 80/20 Principle
Today I am going to share with you the power of applying the 80/20 principle in your life. Even though I initially used it in my work, I later realized its presence in all aspects of our life (from relationships to personal goals) and the power of applying this principle.
So, what is the 80/20 Principle?
Imagine you are the CEO of a company and you have a salesforce. In a world where everything is equal, you will assume that everyone contributes to your sales proportionately — i.e. 20% of the employees contribute to 20% of the sales, 50% contribute to 50% of the sales, and 80% of the employees contribute to 80% of the sales.
But what if instead of a 1-1 relationship, you find out that 80% of your sales are actually contributed by 20% of your staff?
What the 80-20 Principle is About
This is what the 80/20 rule is about — 80% of the effects in a situation come from 20% of the causes. This phenomenon was first discovered by Vilfredo Pareto, an Italian Economist who found that 20% of the people in Italy controls 80% of the wealth and land. He first observed the principle when gardening and noticing that 20% of his peapods in his garden yielded 80% of the total harvested peas.
The 80/20 is also known as “The Pareto Principle” or “The Law of the Vital Few” — referring to the vital few factors that contribute to the majority of the outcome.
Examples of 80/20 in Action
Here are just some of many situations where the 80/20 rule can be observed:
- Population: 80% of the population in England (25.8 million out of 32.3 million) comes from 20% of its cities (53 out of 263 cities).
- Resource Consumption: 70% of the world’s energy, 75% of its metals, and 85% of its timber are consumed by 20% of the world’s countries (which have far fewer than 20 percent of the world’s population).
- Natural Resources: 80% of Earth’s mineral wealth is produced by far less than 20% of the Earth’s surface
- Wealth: 85% of the total global assets is owned by 10% of adults.
- Crimes: A large percentage of crimes tends to be committed by repeat offenders, which make up a small proportion of the overall population — actually even criminals. In Sweden, 26% of the total violent crime offenders were re-convicted three or more times, which resulted in 1% of the population being responsible for 63% of violent crimes. In the UK, 36% of crimes in 2009 were committed by criminals who just completed a previous sentence within the past year. More than half of these were by criminals with at least 25 previous convictions or cautions.
- Books: 80% of the value in a book can be gleaned from 20% of its content.
- Clothes: Most of the times you wear the same few clothes in your wardrobe.
- Divorces: A large proportion of divorces tend to be by a small proportion of married individuals. It’s also why a significantly higher proportion of second and third marriages fail compared to first marriages.
- Consumption: In every industry, a small selection of brands dominate the world’s consumption, e.g., Coca Cola / Pepsi for soda, MS Windows for operating systems, Samsung and iPhone for mobile phones. (I share more in The Market Leader Effect.)
- Daily Life: When you eat out, you usually dine at the same restaurants (20% out of all possible choices).
- Smoking: 100% of cigarette consumption is by nearly 20% of the world’s population (are you one of them?).
- Business: 80% of sales tend to come from 20% of customers (your loyal customers who love your work and purchase regularly). 80% of complaints tend to come from 20% of customers.
- Relationships: 80% of the value you get from relationships is from 20% of the people you know (your close friends, family, partner).
- Goal achievement: 80% of the results in your goal will be from 20% of your actions (meaning a few vital tasks will contribute to the biggest results in your goal).
…. and so on.
Applying 80/20 Principle in Our Life
The 80/20 rule tells us that a large proportion of effects is due to a small portion of causes.
- 20% of causes lead to 80% of results. These are what I call the 20% high-value tasks. High-value because they lead to high-impact results.
- On the other hand, 80% of causes lead to 20% of results. These are what I call the 80% low-value tasks.
It doesn’t have to be a literal 80-20 ratio — for example, 70% of the effects can be contributed by 15% of the causes, or 60% of effects can be contributed by 30% of the causes. The percentages of effects and causes don’t have to add up to 100% either — 80% refers to the effect while 20% refers to the cause, meaning they are not of the same denominator. It just happened that Pareto’s observation was 80-20 (rather than 70-20 or 60-10).
The point of the 80/20 rule is to know that (a) the relationship between cause and effect is often not 1:1, and (b) some causes have more weight than others.
The 80/20 rule has 2 implications for us:
Fact #1: Understanding that Less is More
Firstly, not everything is equal. No matter what you do, there are always a few vital tasks that matter. You want to focus on the vital few, the 20% high-value tasks, rather than spread yourself thin across everything. This is also known as “Less is More” where doing less will net you more results. This is the same as being effective rather than efficient, something that I talk about in my time management posts.
Applying “Less is More” means asking yourself:
- How can I remove the tasks that do not create as much value?
- How can I focus my energy on activities that make me happier and more fulfilled?
Our society today has a “More with More” mindset. We are told that we need to do more to be more. If we’re not doing more we are losers. So we straddle across multiple responsibilities, have our hands constantly full, and have to-do lists so long that they extend to the next 3 months.
But the more we do, the more exhausted we are. As we try to keep up with never-ending needs and responsibilities, our health wanes, our social life suffers, and all the extra money we earn goes into paying for more expenses and loans. For all the time we spend doing more and more, we sure do not seem to be getting more in return.
What if we don’t achieve “More with More”? What if we really achieve “More with Less”? Where we make more progress by focusing on the vital few? By channeling all our energy to the things that matter — not by trying to chase every shiny thing?
The 80/20 rule is about how to get more out of your life. When you scale back on the things that aren’t important, you get more time for the things that are. When you cut away tasks that drain you, you have more energy and time for the things that matter.
In the end, the goal of the 80/20 is to achieve more with less, so that we can make the most out of our time on earth. To focus on what gives us the most meaning, so that we can achieve the greatest fulfillment and happiness.
In the next part, I share the 6 common misconceptions people have about the 80/20 principle. Read Part 2 here: 6 Common Misconceptions of The 80/20 Rule
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