Pareto’s 80/20 Principle
Restored from the Empower Network archive (2011–2017), lightly edited to meet our current advertising standards. Views are the original author’s.
Conventional wisdom would say that when you want to accomplish something, the only thing to do is worker harder, which translates into working more.
But ever since an Italian economist challenged conventional thought with his theory, working smarter and therefore less equates to more productivity.
Let me explain…
Vilfredo Pareto was a wily and controversial economist turned sociologist who lived form 1848-1923. An engineer by trade, he started his varied career managing coal mines and later succeeded Leon Walras as the chair of political economy at the University of Lausanne in Switzerland.
His early work, Cours d’economie politique, included a then little-explored “law” of income distribution that would later bear his name: “Pareto’s Law” or the “Pareto Distribution,” in the last decade also popularly called the “80/20 Principle.”
He used a mathematical formula to demonstrate a terribly uneven but predictable distribution of wealth in society.
In essence, the formula stated…
80% of the wealth and income was produced and owned by 80% of the population.
He applied this formula to not only economics, but all facets of life. Pareto’s most personal application of the 80/20 principle was found in his own garden. He found that 80% of garden peas were produced by only 20% of the pea-pods.
So to summarize, 80% of the output results from 20% input. A few more ways to phrase it includes:
- 80% of results come from 20% of the effort and time
- 80% of company profits come from 20% of the products and customers
- 80% of a particular market is owned by 20% of the competitors
The list goes on forever and the ratio is sometimes skewed: 90/10, 95/5, and more recently found in the public conversation 99/1.
When you are evaluating your life and looking to recalibrate, think of Pareto and his 80/20 principle. You can examine all facets of your life with these two questions:
- 1. Which 20% of sources are causing 80% of my problems and unhappiness?
- 2. Which 20% of sources are causing 80% of my desired outcomes and happiness?
The idea is to find your inefficiencies in order to eliminate them and find your strengths so that you may multiply them. Analyze your life through Pareto’s eye’s and work smarter by eliminating all things that are not producing the outcomes you want.
This exercise can yeild awesome results if you take the time to work hard at elimination. For a more in-depth lesson, do yourself a favor and buy a copy of The 4 Hour Workweek from which this article was inspired. In the book, Tim Ferris details how the 80/20 principle has helped him make sense of the chaos in his life.