The Pareto Principle


How can you be more productive?

How can you navigate your to-do list?

I have been raised to lead a “balanced life”. It is not a bad way to live but the problem is that you do everything just okay. You don’t excel at anything. For example, at school I was told to do academics, to take part in sports as well as in cultural activities. I did everything in an equal amount of time. I enjoyed it and it was fun, but there were some things that I had more talent in than others. I did not pursue those things.

The mindset of giving equal attention to everything I do has followed me into adult life. I find myself spending the same amount of time on my hobbies and my daily activities. The problem with that is that I have a lot of interests and I don’t see everything through to completion. I’m not really excellent at any of the things that I do. You can call me a “Jack of all trades”. But the truth of the matter is, I am not a master in any of the things that I do. Fortunately, I have discovered this life-hack that really changed the way I do things now as well as the way I plan my daily routine.

During the 1890’s there lived a man by the name of Vilfredo Pareto. He was an Italian Economist and Engineer and he noticed that in Italy, 20% of the people owned 80% of the land. He found this quite odd because he assumed that there would be a one-to-one ratio or at least that if the wealthiest people should own more land, that it wouldn’t be this drastic a difference. As an Illustration, if you had 100 portions of land; 80 people own 20 portions of the land and only 20 people own 80 portions of the land. It seemed completely imbalanced to him. Later, he discovered the same thing in his vegetable garden. He saw from his pea harvest that he got way more peas from 20% of his peapods than from the remainder. He could actually get all his requirements from only 20% of the peapods.

Pareto formulated a theory that if you focus your attention on the 20%, that it will have a greater impact on your end goal. In other words, rather than focussing on 100%, it is more effective to work with just 20%. This theory has been taken further by Dr. Joseph Juran. He wrote the Quality Control Handbook based in part on the Pareto Principal.

Japan was a militaristic and imperialistic society before WWII. Most of their economics were based on military growth and their resources went into the military. After losing WWII their militaristic approach to economics had to become more diplomatic. They managed to manufacture many goods but unfortunately, the production quality was atrocious. Their products did not last. To solve their production problem, they approached Dr. Juran.  He directly applied the 80/20 principle (The Pareto Principle) to the Japanese industrial sector. He had a look and realised that 80% of their problems came from only 20% of the sources. He resolved the 20% and in a couple of years, he managed to turn the entire industry around from being one of the most infamous producers to becoming a leading producer of good quality products.

In a 1990 interview, Steve Jobs talks about Dr. Juran and what impact he has had on his own business. In this interview, he also mentions how the USA has slipped behind Japan in terms of producing quality goods.

The Pareto Principle has been applied throughout the last century in marketing, farming, leadership, business as well as investing. Warren Buffett claimed that he invested 90% of his wealth in only 10 investments. In marketing studies, you are taught to focus on 20% of the market. As a leader of a company, look at the 20% of the people who does the most work and focus your intentions on them.

“The 80/20 principle has played a huge part in my life across various facets. Two of the areas where I’ve seen it really reap rewards is in my athletics ability, and also in my business. From a training perspective, I run ultra-marathons and one thing I’ve realised is that if you train too hard all the time you do not get better as a runner. Basically, what you want to do is focus 0n 20% of you workouts as hard as you possibly can, above your maximum heart rate, and 80% of those workouts are way below your maximum heart rate. The easier you go on the 80% the better, the harder you go on the 20% will reap massive rewards.

The second area where I’ve seen big results is in our business. We do quarterly reviews where we take a look at each one of our businesses to see where we are getting the best results. We also look where we are spending most of our time and [frequently] we end up spending 80% of our time in businesses or areas of our business where we are only getting 20% of our results. What we do is recalibrate and look at where we can spend more time in the 20% areas to try and grow those. It is essentially like throwing petrol on a fire. We really get to explode our business when we do that and it has been immense since we’ve started doing it.”

Brad Brown (Radio host on SAFM)

How can you apply the 80/20 principle to your life?

Here are 2 ways of applying the Pareto Principle to your daily routine:

  1. Create 4 columns on a sheet of paper
  2. In the first column, write down your tasks for a day.
  3. In column 2, on a scale of 1 to 10, write the amount of effort it will take to do the tasks (1, least, 10, highest)
  4. In the third column, rate the potential positive outcome of completing the task (1, least, 10, highest)
  5. In the final column, divide the effort by the potential result.
  6. Complete your tasks from the lowest number, to the highest number.

Using this calculation, you will prioritise to do the things that will take the least amount of effort but will produce the most positive results. This is based on the Pareto chart.

  1. In a corporate environment, do the following:
  2. Write down your top 6 priorities for the day in order of importance
  3. Cross out the bottom 5 to leave the top priority
  4. Work on the first priority for 90 minutes, first thing in the morning. (Make a note of all possible distractions and focus on the job at hand)
  5. Once completed with the first priority, move on to the second priority.

The advantage of this method is that you train your brain to concentrate on a single task and in so doing, complete the task faster.

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