An Introduction to the 80/20 Rule

In Essays, Productivity, Self Improvement

Introduction to the Introduction.

What do we want from life? I guess for many the word “happiness” comes up in the answer to that question. Don’t worry, this is not a guide on how to find happiness in your life. The answer to that is quite simple: inside yourself.

Perhaps the second most popular answer to the above question is “more”. This is where I can help. I discussed in my essay on How to Be Content how it’s not always wise to want more and more, but would it not be great to be able to have what one currently has with far less work and/or effort?

Obviously everyone has a limited amount of resources; most people have limited amounts of money, and everybody has a limited amount of time on this earth. Let’s not even mention how little concentration one can achieve with today’s distractions.

So, knowing that we have a limited amount of resources, it makes sense to use these resources that we do have in the most efficient way possible.

This can allow you to either:

  • Work Less
  • Accomplish more for the same effort/time

Both of these are worthy goals and actually not that difficult to accomplish, with the correct knowledge.

Enter the 80-20 Rule, perhaps one of most interesting life-principles around.

The 80-20 Rule is also known as:

  • The Pareto Principle
  • The Law of the Vital Few
  • The Principle of Factor Sparsity

In a nutshell, it’s very, very simple:

80% of the effects come from 20% of the causes.

The appeal of this rule is immediately clear: More results using fewer resources/work.

Every intelligent person should apply the 80/20 rule to their own life. It’s simply the best way to deal with the pressures of modern life. It’s one of the great secrets of our times.

This principle was discovered by Vilfredo Pareto in 1906. He noticed that this principle applied in two specific cases, and that got him thinking.

Case 1: 20% of the pea pods in his garden produced roughly 80% of all the peas.

Case 2: 80% of the land in Italy at the time was owned by 20% of people.

This is hardly surprising when you think about it enough. I mean, mathematically speaking it makes perfect sense. Let’s get good old Wikipedia on the case (if you are not mathematically inclined then feel free to skip the next paragraph).

“Mathematically, where something is shared among a sufficiently large set of participants, there must be a number k between 50 and 100 such that “k% is taken by (100 − k)% of the participants”. The number k may vary from 50 (in the case of equal distribution, i.e. 100% of the population have equal shares) to nearly 100 (when a tiny number of participants account for almost all of the resource). There is nothing special about the number 80% mathematically, but many real systems have k somewhere around this region of intermediate imbalance in distribution.”

A few more examples:

  • A business makes 80% of its profits from 20% of its clients.
  • A website receives 80% of its visitors from 20% of the content.
  • 80% of your exercise time (the High-Intensity stuff) may be responsible for 80% of your fitness.

And a couple of more amusing ones:

  • 80% of the world’s beer drinks be 20% of beer drinkers!
  • 80% of married people are responsible for 80% of divorces!

Quick interlude: I wonder what kind of overlap there is in the 20% of people who drink 80% of the world’s beer and the 20% of people who are responsible for 80% of divorces?

Clearly, it would be very cool to be able to 80/20 everything in your life. Imagine what you could do. Work two day weeks and accomplish far more than you are currently. Almost sounds too good to be true.

Needless to say, this is easier said than done.

Before we go any further, I think it’s wise to discover a bit more about the history of the 80/20 Rule.

A Short History Lesson on the 80/20 Rule.

While our dear friend Pareto did a great job in discovering the 80/20 rule, he wasn’t so great at communicating it with others. His ideas were taken by the Italian Fascists under Mussolini and twisted for their own agendas.

In fact, it took over 40 years and a couple of world wars for the ball to start rolling and for people to start sitting up and paying attention. This was the result of the hard work of two men: an engineer called Juran and a Harvard lecturer called Zipf.

Juran rediscovered “The Pareto Principle” in the form of “The Rule of the Vital Few” while Zipf created and elaborated “The Principal of Least Effort”

The Principle of Least Effort also conveniently explains why your desk is messy. The frequency of use draws near to us things that are frequently used!

As America was too busy enjoying its newfound superpower status, it simply ignored both of these men and they didn’t find an audience for their radical, but not-so-new, ideas.They both ended up in Japan where their theories did not fall on deaf ears. Together they were responsible for the “Quality Revolution” of the 1960’s. This goes something along these lines: “80% of the problems in a product are caused by 20% of the engineering or manufacturing techniques”

By concentrating on the 20% of manufacturing techniques or design that caused the vast majority of the problems for the consumer, Japanese companies were able to create vastly superior products to their American counterparts in terms of reliability. By the time that products from Japan started flooding the United States, there was a such a large gap in terms of quality control that US business could not afford to continue ignoring Juran and Zipf.

An example of this is IBM, who in 1963 realized that 80% of their computer’s power went towards processing 20% of the code. They decided to completely rewrite their code to make that 20% as efficient as possible. The result? Their machines were far faster than their competitors and they become the dominant computer company for the next few decades. Then, along came Microsoft…

Anyway, fast-forward to the present day and many people have heard about the 80/20 Rule and most of the can probably parrot the usual phrase “80% of the results from 20% of the work” but hardly anyone has stopped and actually thought what that means!

And here ends the history lesson.

When the 80/20 rule is pointed out to business owners, they are often taken aback that four-fifths of their company are not really contributing much to the bottom line. This often puts people on the defensive. After all, if you tell someone that 80% of what they are doing is a waste of time, you are telling them that they are wrong. We have seen how telling people they are wrong just doesn’t work.

By the way, let’s clear up a misconception about the 80/20 rule that’s thrown around all over the place. The split is not always 80/20. It can be 87/13, 99.5/0.5, or even 95/35.

Please notice that last split. The numbers don’t add up to a hundred. While it instinctively looks incorrect, it’s actually a perfectly possible combination. You have to remember that the 80/20 rule is actually comparing two sets of data. If I bring up the rule again you will immediately understand:

80% of the effects come from 20% of the causes

Data Set 1 is the result from the work. (i.e. the effect or effort)

Data Set 2 is the work itself.

So in the previous split of 95/35: 95% of the results come from 35% of the work.

Make sure you have understood this before continuing. After all, if you don’t understand a principle you are hardly ready to begin to apply it to your life.

Nasim Taleb, author of the Black Swan would agree that in this highly globalized and fast paced world the 99.5/0.5 ratio is quite likely! The 80/20 rule is, in fact, obsolete and the result/work ratio is even more skewed. The division of wealth in the 21st century is much closer to the 99.5/0.5 split than the 80/20. The vast majority of today’s wealth is concentrated in the hands of a tiny elite.

I highly recommend you get yourself a copy of this book – it will change the way you think. I read and re-read it for over three months on the way to work until every last word sunk in.

Then I quit my job.

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