The Pareto Principle (Or 80/20 Rule)

One habit that high achievers have is the ability to focus on the tasks that will give them the greatest benefits. By being able to do the right tasks, you will avoid wasting time on things that don’t matter. As common sense as that may seem, the majority of us are not consciously aware of this. The Pareto Principle, more popularly known as the 80/20 rule, will make you more conscious about how you should spend your time.

The Pareto Principle

Italian economist Vilfredo Pareto discovered that 80 percent of the wealth of his time was generated by 20 percent of the people. Pareto noticed that approximately 80 percent of land in Italy was owned by 20 percent of the population. In what later became known as the Pareto Principle (80/20 rule), he recognized something profound: it is the little things that account for the majority of results. The rule states that 20 percent of the effort will account for 80 percent of the results. The 80/20 ratio is just to signify the idea, but it not uncommon to be skewed towards 90/10 or 95/5. In other words, 90% of the results come from 10% of the actions or 95% of the results come from 5% of the actions.


Key Outcomes with the 80/20 Rule

1. Improve Focus and Productivity

I used be an affiliate manager and part of my role was to ensure that affiliates would generate revenue for the company. They were essentially extended sales people for the company. While I had to work with dozens of affiliates, I knew that I couldn’t treat every affiliate with the same priority. I didn’t have enough time, resources and energy to work with every affiliate with the same focus. One day after analyzing revenue numbers of affiliate sales, it turned out that the 80/20 rule was in play too. In fact, it was more like 95/5: 5% of all affiliates would generate 95% of the company’s affiliate sales. Guess with which affiliates I spent most of my time with? Yes, the 5 percent.

2. Leverage Your Strengths

The 80/20 rule permeates every part of your life. It also goes back to the idea that you should always focus on your strengths instead of trying to cover up your weaknesses. The Pareto Principle is another way of looking at this. By focusing on your strengths (20%) you are able to generate your important results (80%). Anything that does not fall in your important 20% or strengths, you should look into having someone else do.

Example: The 80/20 Rule for Bloggers

For example, let’s say you are a blogger. How can you apply the Pareto Principle to blogging?  For most bloggers, writing is their cornerstone skill that will generate most of their desired results and having awesome content is the foundation of a good blog. When you apply the idea of 80/20 to blogging, it is all about the content of a blog. Anything else besides writing awesome content is considered the 80% that will only give you that 20%. Things like setting up your blog, maintaining the blog graphics, moderating comments, etc. Writing content is the 20% that will give you 80% of your desired results, whether that is more comments, traffic or exposure. You can easily outsource those 80% processes so that you can focus on your 20% activities.

The Law of the Vital Few

To effectively use the Pareto Principle you have to have the ability to identify the the little things that give you the most results. You need to perform an honest analysis of your projects and tasks. This can be harder than you think it is. Especially if you are someone who is overwhelmed with information and things to do. But don’t worry, we’re here to help you out!

How to recognize the vital 20 percent

• You enjoy what you are doing.
• Segment what brings you the most revenue, happiness, or desired result.
• You are delegating things you know others can do better or cheaper.
• You have the long-term vision in mind so you are willing to do things that are not as pleasant but you know that the long-term will benefit.
• You have a better quality of life

Can you identify your 20% activities? Yes? Now you know what you really should be focusing on and how you should spend your time.

How to eliminate the non-essential 80 percent

Another way to better manage your time is by cutting out the 80%, so you remove all things that bring you minimal results. Here are some tips for identifying the 80% activities that you want to eliminate as much as possible:

• You are doing something that will bring you no value, but you just do it because someone told you to do it.
• Doing something against your will or you don’t want to do it.
• Doing something you are not good at.
• Always racing against the clock on getting certain things done (short-term vision).
• If you think what you are doing is “busywork”.

You can eliminate the 80% by having someone else do it. We’ve written an awesome article on personal outsourcing that you can use to outsource your 80% activities.

Now that you are able to see how the 80/20 rule works, you want to start applying it right away to your own life.

Use the 80/20 principle in your personal life

You can apply the 80/20 rule to your own life and you totally should. Everyone wants to be happy but not everyone follows the same path towards happiness and fulfillment. The easiest way to start implementing Pareto’s Principle is by asking yourself these two questions:

• Which 20% of the causes give me 80% of my unhappiness?
• Which 20% of the causes give me 80% of my happiness?

Try to answer these questions if you can. It is not as easy as it may seem.

Before you can answer these questions, you have to take a look at your inventory of activities through the filter of the Pareto rule. The easiest way to start is by breaking it down by the major areas of responsibilities in your life. For most people that’s health, wealth, and relationships.

If you’ve read our systems thinking article, you can look at your happiness as a system where health, wealth, and relationships as parts within the system. They are all interconnected and influence each other, but what is important is to figure out within the system what the 20% is that will give you 80% of your happiness (or the 20% that causes 80% of your unhappiness). Let’s see how that applies to health, wealth, and relationships within your life.

What is Vital For Your Health?

While everyone wants to live healthy not everyone places the same importance on it. Most people want to lose an extra couple kilos or pounds, but this area of responsibility goes further than that. You could break it down into exercise, nutrition and lifestyle. Each of them will contribute to your overall happiness and for every activity you can look for the shortcut (the 20% that gives you 80% of your results). Ask yourself, what are the small things that will give me the most benefit? For health, Tim Ferriss has dedicated a hole book on how to use the 80/20 rule for your health called the Four Hour Body. We highly recommend this book if you want to apply the 80/20 rule to your health. Here are some of our pointers:

• Exercise at least 3 times a week.
• Do mental exercises to keep your brain sharp (reading or solving problems).
• Cut out all fast food and go for as much raw and organic food as possible.

What is Vital For Your Wealth?

The Top 20 of the Population

Originally Pareto found that most of a country’s wealth was owned by 20 percent of the people, and this is still true today. Building up your wealth can be analyzed the same way whether that is for your personal life or business. You have money coming in (revenue, paychecks, dividends, residual income) and money going out (expenses).

How can you apply the 80/20 rule for wealth?

Business Management

If you are a business owner, you want to start crunching numbers now. Identify your top revenue sources. I have no doubt that you will find that only a few sources (or customers) will generate most of your revenue.

Create Personal Wealth

You can also look at wealth building differently. In simple terms, building wealth can be broken into three parts (courtesy of Rich Dad, Poor Dad):

• Increase income
• Decrease expenses
• Put the difference in diverse appreciating assets (like stocks, bonds, real estate, commodities, etc).

To maximize your wealth building process you can apply the 80/20 rule to each part. What is the 20% that can gives you 80% of your income? Focus on that and see how you can expand it. What is the 20% that is 80% of your expenses that you can cut back on? What are the 20% of your appreciating assets that give you 80% of your gains? For all of three, focus on the 20%.

Since for most people most of their income comes from their job, you want to be sure you’re working a job you enjoy. The old adage of “love what you do” applies here very much. It is unfortunate to see that most people aren’t completely happy with their jobs, and seeing that these people don’t realize that it’s their job that is causing 80% of their unhappiness. Enjoy what you do for a living. You will spend most of your life working and it’s a HUGE factor for your happiness, so be careful in picking what you do.

What is Vital For Your Relationships?

When it comes to relationships, it is the people you hangout with the most that affect your happiness. We have already written how a mastermind can affect your productivity. When you have applied the mastermind idea to your life, you have essentially applied the 80/20 rule. The mastermind people, the 20%, will give you the most results of your happiness and for becoming the person you want to be. Now that does not mean that you should cut out all your friends who fall in the 80% who do not contribute as much. What we are saying is that you want to spend most of your time with the 20% of your friends that will give you the most fun, joy, and good emotions.

The same rule can be applied to your dating life if you are single. Whether you’re female or male, as a single person you will likely have a bunch of people in your contact list that want to go out with you. But there will also be people in there who you are chasing down but they’re hesitant on going out with you. As you will notice as you have called or texted, some of them are really slow in responding or luke warm in meeting up with you for a date. You should apply the 80/20 rule here too.

Focus on the people that want to go with you right away and foster those relationships. Pick the 20% that want to go out with you and don’t spend too much time on the other 80% that aren’t willing to meet up right away.

Project Management using the Pareto Principle

You may not be Italian economist Vilfredo Pareto, but you can can benefit from his principle. Remember, before you start anything, keep the 80/20 rule in mind. Identify what the 20% is that will give you 80% of your results.

Track Your Time

Now that you know your 20%, try to be consciously aware of how you spend your time. That’s why we always advocate people to track their time in a day, so they can see the (real) data behind what they do in a day. Numbers do not lie. After a week of tracking your time, ask yourself if most of it was on the 20% activities that mattered.

Multiply Your Personal Productivity

If you can spend most of your focus on the 20% that matters, your life will not be the same. Just doing this will save you a lot of time, and you’ll reach your goals and dreams much faster. On top of that, if you make the 20% activities your most important tasks your life will be on the fast lane to success land. When you practice the Pareto Principle, you’ll be happy, productive and prosper.

The same is true for leaders. With the proper distribution of responsibilities to team, you can multiply the effectiveness of your team or organization.

Get Started with the 80/20 Rule

1. Identify the 20% in your areas of responsibilities that will give you 80% of the results you desire.
2. Foster your 20%, oversee your 80%.
3. Track your time and spend your time on the 20% that matters.

Photo by: Jordanhill School D&T Dept