Pareto Principle

also called 80-20 Rule, the law of the few or principle of factor sparsity

In 1906 the wily Italian economist and sociologist Vilfredo Pareto proposed a theory regarding wealth distribution in society. The Pareto Principle is genius and can permanently change your life. Really.

Pareto lived from 1848-1923. A former engineer, Pareto's seminal work was a mathematical formula showing how 80% of the wealth in Italy is created by 20% of Italians. The unequal distribution of wealth is not the only example of the Pareto Principle. Soon after, many other experts noticed the trend in their field. Dr Joseph Juran was the first to apply the law on a broad scale. He took Pareto's observations on economics and applied it broadly. His formulations - "vital few and trivial many" - were confused with Pareto's, so the name became the Pareto Principle. In its most general form, the law states that 80% of the effects result from 20% of the causes.

What does the Pareto Principle mean?

In any given circumstance, 20% of the inputs are valuable, while 80% are insignificant. Examples:

• 20% of what you eat results in 80% of your unhealthiness
• 20% of Pareto's garden pea plants create 80% of the peas
• 20% of the activities you result in 80% of your happiness
The list doesn't end here. It is almost endless. Oftentimes, the ratio is even more skewed 90/10, 95/5, 99/1.

How can the Pareto Principle help me?

Anybody can learn where and how to implement the Pareto Principle in their life. Ask yourselves two questions:

1. What 20% of my inputs are creating 80% of my unhappiness and distress?

2. What 20% of my inputs are creating 80% of my happiness?

Apply the Pareto Principle ruthlessly; cut the fat out of your life. From relaxation activities to work, recall the 80/20 Rule. The truth is going to hurt initially, but it can change your life. Throw it all up on the wall and see what sticks.

Misapplications

1. 80+20=100

Don't be fooled by the numbers. The Pareto Principle says that 20% of inputs result in 80% of the outcomes. That's not to say that 4% of the inputs can't account for 52% of the outputs. The numbers do not have to add up to 100. It's simply a coincidence.

2. 80/20 Applied Recursively

It is not true that eliminating 80% of tasks will eventually eliminate 100% of your tasks. Rather, apply the Pareto's Principle will result in you completing the top 20% and possibly having free time to do the other 80%.

3. "But I still have to do it"

You may think that although a task is unimportant and inconsequential, you still NEED to do it. That conceals the bigger lie: You are not liberated. Focus on liberating yourself from email, telephone calls, and whatever else is tying you back.