The 80/20 rule (Pareto principle)

• This law is also called the law of the vital few, and the principle of factor sparsity.It states that “for many events, roughly 80% of the effects come from 20% of the causes”. It is a common rule of thumb in business and economics.

Examples of the 80/20 rule (Pareto principle):

• 80% of your profits come from 20% of your customers
• 80% of your complaints come from 20% of your customers
• 80% of your profits come from 20% of the time you spend
• 80% of your sales come from 20% of your products
• 80% of your sales are made by 20% of your sales staff
• 80% of your sales come from 20% of your clients
• 80% of land in the country is owned by 20% of the population.
• 80% of the wealth in the country is owned by 20% of the population.
• Microsoft noted that by fixing the top 20% of the most reported bugs, 80% of the errors and crashes would be eliminated.
• In health care in the United States, it has been found that 20% of patients use 80% of healthcare resources.
• Several criminology studies have found that 80% of crimes are committed by 20% of criminals.
• Even if we take the ten wealthiest individuals in the world, we see that the top three (Warren Buffett, Carlos Slim Helú, and Bill Gates) own as much as the next seven put together.
• Using this principle, many businesses have improved their profitability by focusing on the most effective areas and eliminating, ignoring, automating, delegating or re-training the rest, as appropriate.

Explanation:

• It means that 80 percent of the value you will receive will come from 20 percent of your activities. So a lot of things and activities what you do is probably not as useful or even necessary to do as you may think.  You can just drop those activities or greatly reduce the time you spend on such things.  If you do that you will have more time and energy to spend on those things that really brings your value, happiness, fulfillment and so on.

Locate Yourself:

You’re in your 80 percent if the following statements are true.

• You’re working on tasks other people want you to, but you have no investment in them.
• You’re frequently working on tasks labeled “urgent.”
• You’re spending time on tasks you are not usually good at doing.
• Activities are taking a lot longer than you expected.
• You find yourself complaining all the time.

You’re in your 20 percent if the following statements are true.

• You’re engaged in activities that advance your overall purpose in life;
• You’re doing things you have always wanted to do or that make you feel good about yourself.
• You’re working on tasks you don’t like, but you’re doing them knowing they relate to the bigger picture.
• You’re hiring people to do the tasks you are not good at or don’t like doing.
• You’re smiling.

How to be in 20% category? Or How to Apply Pareto’s Principle in Everyday Life:

Activities For All:

• List all activities which are not contributing to 80 % of your goal. If possible abandon such activities or they are very much necessary, decrease time spent on them.
• List all activities which are contributing to 80 % or more of your goal, increase the time spent on them. Spontaneity is joyous but if possible plan such activities.
• Find your core genius and passion. Concentrate on them and not on material possessions.
• Ask yourself, “What do I really want to do with my life and my time? What 20 percent of my work should I be focusing on?”
• Don’t waste time in reading non-useful newspapers, books, magazines and watching such programs on TV etc.
• Make yourself aware of new technological innovations. Use the latest technology. You can save a lot of time.
• Twenty percent of your friends, colleagues, staff, customers, and patients probably give you 80 percent of the support and satisfaction you need. They are your true advocates and supporters. Take good care of them. Likewise, you can probably name several friends and family members who would be there for you under any circumstances. Try not to put them on the back burner.

Activities For Parents:

• Find core genius in your child. Find what he or she likes.
• Arrange their activities along with their core genius and you will notice the difference.

Activities For Teachers:

• Find core genius in your student. Find what he or she likes. Arrange their activities along with their core genius.

Activities For Educationalist:

• Avoid exams on the subjects like history, geography and non-essential languages which are not useful in everyday life.
• Instead of exams give interesting projects on these subjects.
• Instead of teaching, have student’s involved discussions and worksheet. These subjects unnecessarily increase the burden on students.
• I have not included civics in this list because this is the most important subject. It should be compulsory for all branches of education. It gives is the idea of our duties to our society and our rights.

Activities For Businessmen:

• In a business sense, finding the 80/20 ratios is crucial for maximizing performance.
• Find the products or services that generate the most income (the 20 percent) and drop the rest (the 80 percent) that only provide marginal benefits.
• Spend your time working on the parts of the business that you can improve significantly with your core skills and leave the tasks that are outside your best 20 percent to other people. Work hardest on elements that work hardest for you.
• Reward the best employees well, cull the worst. Drop the bad clients and focus on upselling and improving service to the best clients.
• If you want to make your passion as a business, learn to get output from your passion. Learn at least 80 % of activities in this business. Study all legal issues and loop holes associated with this business.
• As you grow in your business or area of speciality, remember your ethics and values. Let them guide your decision making, and you’re bound to end up focusing on your 20 percent.

Don’t Let Fear Stop You:

• The biggest factor that stops most people from chasing their dreams and working towards their real goals is fear. Fear of the lack of security, the reduced income and of the unknown future keeps people locked into routines that are not satisfying. That path leads to sadness, depression, poor health, low income and ultimately an early death. Who wants that!
• Don’t let fear be the reason for not achieving your goals. Stop, reassess your real passions, remove the money equation long enough so you can think without worrying about finances, and make plans to move towards your 80/20 lifestyle activities. Maximize what you are good at. Find the activities that produce the most results for you and your business and put your energy where the big rewards are.