Subject: Pareto Principle - The 20/80 Rule
Event: Birthday of Vilfred Pareto, 1848
What are examples of small things you can do each day at work or in your personal life that get the biggest results?
To answer this question, it’s good to get to know a man who was born on this day in 1848, an economist and sociologist named Vilfred Pareto. Pareto’s insights began when he was crunching numbers related to his home country’s economy. He calculated that 80% of Italy’s income was earned by 20% of its population. Fascinated by the disparity of this statistic, Pareto began applying it to other areas of cause and effect or input and output. Based on his thinking, he developed what has come to be known as the Pareto Principle (also known as the 80/20 Rule), which states: 20% of input results in 80% of output.
In The Decision Book, authors Mikael Korgerus and Roman Tschappeler give some examples of how the Pareto Principle might be interpreted beyond just national economics: “20% of criminals commit 80% of the crimes; 20% of car drivers cause 80% of the accidents . . . . We wear 20% of the clothes we have in our wardrobes and spend 80% of our time with 20% of our friends”(1).
Image by Arek Socha from Pixabay
Of course, the percentages are not exact in all cases, but they are useful as a general rule of thumb when you’re brainstorming how to maximize your time and your results. If it is true that small actions generate the bulk of your results, it makes sense to spend some time analyzing critical tasks and efforts from less critical ones.
In his book The Babinski Reflex, Philip Goldberg tells a story about how Charles Schwab, president of Bethlehem Steel, benefited by putting the Pareto Principle into practice in the 1940s. Based on the advice of a consultant named Ivy Lee, Schwab made a list of his daily tasks and then ranked each based on its importance. The next day, Schwab began work on his list of tasks, beginning with the top ranked one. Based on Lee’s advice, Schwab worked on that task until it was completed, resisting the urge to move on to other tasks on the list. Schwab was so pleased with the new strategy that he awarded Lee $25,000, saying “that it was the single most important investment that Bethlehem Steel made that year.” (2).
The Pareto Principle gives us insight into how goal setting can help us be more productive. Often people fill their day with minor, low value tasks, which typically take little time and are easy to accomplish. The problem here is that these tasks allow us to procrastinate, avoiding the higher value tasks that require a bit more effort. The solution is to sit down and identify and prioritize your goals and tasks like Charles Schwab did. Doing this will allow you to identify the difference between being productive and being busy. Even if you don’t complete one of your priority tasks, at least you will know that the time you are spent on it will yield greater results in the long run than the time you spent on three menial, low value tasks.
Challenge - Practice the Pareto Principle: Identify a goal you would like to achieve. Then, brainstorm a list of specific tasks that you must accomplish in order to achieve it. Next, rank the tasks from most to least important. Looking at the highest value tasks, think about what you might do each day to contribute to completing that task; furthermore, assess, using the Pareto Principle, how much that task realistically relates to your results.
Sources:
1-Krogerus, Mikael and Roman Tschappeler. The Decision Book: 50 Models for Strategic Thinking. New York: W.W. Norton & Company, 2012: 106.
2-Goldberg, Philip. The Babinski Reflex. Tarcher, 1990: 166.
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