I don’t know about you, but I love it when I come across a handy yet straightforward thinking tool (aka mental model) that applies across a broad spectrum of situations. The 80/20 Principle falls into this category.
What is the 80/20 Principle?
“The 80/20 Principle asserts that a minority of causes, inputs, or effort usually lead to a majority of the results, outputs, or rewards” by Richard Koch author of The 80/20 Principle.
The 80/20 Principle evolved from the work of three brilliant individuals …
The Pareto Principle – Systematic and Predicable Lack of Balance
The underlying pattern of the 80/20 Principle was first discovered by Italian economist Vilfredo Pareto in 1897.
Pareto was studying the patterns of wealth and income in nineteenth-century England and discovered three significant insights:
First, a majority of the wealth went to a minority of the people.
Second, the distribution of wealth was predictably unbalanced. In some cases, it was 80/20, 50/5 or 65/10. The critical point is not the percentages but that you could reliably predict that there would be an imbalance.
Third, he found this same pattern wherever he looked. Looking through wealth and income data from other periods and countries he noticed the same repeating imbalance.
Zipf’s Principle of Least Effort
Building on the work of Pareto, Harvard professor of philology, George K Zipf discovered the “Principle of Least Effort.”
The Principle of Least Effort states …
“That resources (people, goods, time, skills, or anything else that is productive) tended to arrange themselves so as to minimize work, so that approximately 20-30 percent of any resource accounted for 70—80 percent of the activity related to that resource.” – From The 80/20 Principle by Richard Koch
Zipf’s principle shows that the 80/20 Principles applies to areas well beyond wealth and income.
If you look around you will notice this pattern everywhere.
For example, you use a small number of pens a majority of the time, there are only a few hours each day where you are the most productive, and a small percentage of your team is delivering a large portion of the results.
Juran’s Rule of the Vital Few
And finally, we have Joseph Moses Juran, a Russian born U.S. engineer, and the man behind the quality revolution of 1950-90.
“His great idea was to use the 80/20 Principle, together with other statistical methods, to root out quality faults and improve the reliability and value of industrial consumer goods.” – From The 80/20 Principle by Richard Koch
At first, there was little interest in Juran’s theories in the West. However, in 1953 he found a very receptive audience in Japan.
He applied his quality improvements methods with several Japanese companies, and it wasn’t until the Japanese threat to the U.S. industry, after 1970, when his ideas were taken seriously.
A great example of this is the work by IBM.
“In 1963, IBM discovered that about 80 percent of a computer’s time is spent executing about 20 percent of the operating code. The company immediately rewrote its operating software to make the most-used 20 percent very accessible and user-friendly, thus making IBM computers more efficient and faster than competitors’ machines for the majority of applications.” – From The 80/20 Principle by Richard Koch
Why is the 80/20 Principle so Important?
“The reason that the 80/20 Principle is so valuable is that it is counter-intuitive. We tend to expect that all causes will have roughly the same significance. That all customers are equally valuable. That every bit of business, every product, and every dollar of revenue is as good as any other. That all employees in a particular category have roughly equivalent value. That each day or week or year we spend and the same significance. That all our friends have roughly equal value to us. That all inquiries or phone calls should be treated in the same way. That one university is as good as another. That all problems have a large number of causes, so that it is not worth isolating a few key causes. That all opportunities are of roughly equal value, so we treat them all equally.” – From The 80/20 Principle by Richard Koch
Our natural assumption is to believe that 50 percent of causes or inputs will account for 50 percent of results or outputs.
When you dive deeper and actually measure the input against the output, the most likely result will be a pattern of imbalance. The imbalance may be 65/35, 70/30, 80/20, or even 99/1. The point is that there will be an imbalance.
“Most of the time, we do not realize the extent to which some resources, but only a small minority, are super-productive – what Joseph Juran called the ‘vital few’ – while the majority – the ’trivial many’ – exhibit little productivity or else actually have negative value. If we do realize the difference between the vital few and the trivial many in all aspects of our lives and if we did something about it, we could multiply anything that we valued.” – From The 80/20 Principle by Richard Koch
How to Apply the 80/20 Principle
Here are three simple ways that you can start using today to take advantage of the 80/20 principles in work and life:
1) Find the 20 percent that is giving you the 80 percent.
A small portion of your effort is making a huge impact. Identify the small subset of skills, people, and activities that are giving you the highest return.
2) Double down on the 20 percent that feeds your 80 percent.
Once you’ve identified the inputs that have the highest return, move more of your resources to these areas. Invest more time, energy, and money to these high-value activities.
3) Stop investing in low-value activities.
The biggest challenge is to let go of the 80 percent that is only proving a 20 percent return. Elimination of these low-value areas is essential for your long-term success and sanity.
The bottom line is that the 80/20 Principle shows us that we need to challenge our current mental maps. We need to stop assuming that all effort is created equal.
Once we realize that 80 percent of our results come from 20 percent of our actions, we can use this knowledge to increase happiness, productivity, and success in all areas of our life.
Where have you seen the 80/20 Principle in action? Where can you apply it to your life? Post your comments below, and I will be sure to respond.
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