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1-Page Summary of The 80/20 Principle

Overview

Business owners can use the central concept of these key points to improve their businesses. They can, for example, analyze their current product range and focus all sales efforts on the most profitable 20 percent of products. Many people in today’s world have hectic schedules that make it hard to complete tasks or juggle several different things at once. Similarly, companies find themselves inundated with complexity as they try to serve several markets with immense multitudes of different products while juggling them like a clown at a circus.

The world is becoming more chaotic and complex. Therefore, it’s important to know what’s truly essential in order to succeed at work and in life. The 80/20 principle can help you do that by showing you how not doing the most work but doing less can be beneficial for your company and increase your happiness with others.

Big Idea #1: Most of the results come from a small part of the work.

Have you ever noticed that the most work gets done at the last minute? Perhaps it’s because people are under stress, and they’re more productive when they feel like time is running out.

Although the author says that this is true, similar imbalances can be seen in other situations.

For instance, many companies have found that 20 percent of their products account for 80 percent of profits.

Similarly, 20 percent of motorists cause 80 percent of accidents. This is because most people drive carefully and a small minority causes the majority of accidents. In other words, 80 percent of work results are produced by 20 percent of the work effort.

The Pareto principle states that 80% of the effects come from 20% of the causes. Because not every cause has an equal impact on results, some causes have a greater effect than others. Even among those with a great effect, only 20% are responsible for most of the total outcome.

It should be noted, however, that the 80/20 principle is a simplification. In reality, it varies and could be 70/30 or 99.9/0.01

Obviously, not every situation will have an 80/20 split. For example, a 1997 study showed that only four movies (1.3%) accounted for 80% of ticket sales. This means that the principle holds true in many cases and can be valuable to know about when considering situations like this one.

Big Idea #2: It might not come naturally to people, but thinking with the 80/20 principle is a good idea. We tend to think everything should be balanced and fair.

We expect the world to be fair.

In truth, balance is not the norm in our world. Instead, we live in a state of imbalance.

For example, take the following: Sir Isaac Pitman discovered that less than one percent of words in the English language make up over 80 percent of what we say.

In business, imbalances can occur due to feedback loops. If you have multiple goldfish of approximately equal size living in the same pond, they will still grow into very differently sized fish.

People believe that some people are better off than others because of their natural talents. However, it’s not always the case and sometimes this is seen as unfair. For example, a small percentage of people own most of the wealth in society. That isn’t fair for those who don’t have much money or resources to live on.

People feel that work and rewards are not balanced in a 1:1 ratio.

But the Pareto Principle shows that not all work is equally rewarded.

Big Idea #3: The 80/20 principle can help you get better results in your work.

By now, you’re probably thinking that the Pareto principle is only applicable to business and scientific endeavors. It doesn’t apply to your everyday life.