This is a popular way to evaluate efficiency and optimize activities in various industries and businesses.
Companies often find that they get 80% of their profits from 20% of their customers; that 20% of sales reps close 80% of sales and that 20% of value accounts for 80% of costs. The same thing with time: 80% of productivity takes 20% of time, 80% of profits come from 20% of employees. Examples can be given further.
Of course, the numbers are not always exactly 20/80. It may be 76/24 or 83/17, but the ratio of four to one can always be traced.
The 20/80 principle is widely used in business, but it can also be applied in Everyday life. First of all, at work.
What tasks do you spend 80% of your time on? On ? Messengers? Remember that it only brings 20% of the benefit, and focus on what really matters. And what part of your work activity brings you 80% of your earnings, demand from your superiors and respect from your colleagues?
Try to answer the following questions as well. They seem complicated, but only because you've never tried to calculate them before.
- What 20% of things have the most value to you (80% or higher)?
- How do you spend 20% of your time and get 80% of your happiness?
- Who in your circle makes you happiest?
- What 20% of clothes do you wear 80% of the time?
- What is included in the 20% of foods and dishes that make up 80% of your diet?
Did you answer? Now think about how you can improve these areas of your life.
For example, if it turns out that you spend 80% of your time with those who give you pleasure only 20%, then you should change your social circle.
If you spend 80% of your time, for example, on the Internet, but only get 20% of your enjoyment, think about what you do on the Internet? Maybe you should change your activities or reduce the time you spend at the computer.
If you only use 20% of 80% of your items, throw them away or sell them. It's the same with clothes.
By analyzing your diet using the 20/80 principle, you will understand how healthy your diet is. If you eat fatty foods 80% of the time, is it time to go on a diet? Review the proportions so that not entirely healthy food takes up only 20% of your table.
The rational Pareto law applies even to the sphere of love, which at first glance is completely irrational. What 20% of actions provoke the 80%? What were those 20% of conversations that brought you and your partner 80% closer?
Most of us have never looked at relationships this way, and it can be very helpful.
Every aspect of life has its own efficiency.
Using the 20/80 principle, you can not only assess the effectiveness of your life, but also take control of it. Take responsibility and improve those areas where there are problems.
Of course, Pareto's law is not a panacea. One should not elevate it to the rank of a life credo and weigh absolutely everything according to this principle. But the 20/80 rule is a great tool to bring something new into your life.
Think about what you could change in your life based on the 20/80 principle?
Record your answers on paper or in the comments.
In the 21st century, the emphasis of the world community has shifted from scientific and technological progress towards the quality of a particular personality. And this is no coincidence.
Perhaps someone will doubt the accuracy of the established ratio: eighty to twenty. But these numbers certainly cannot be considered an axiom. It's more of a guideline.
Although for his time the scientist quite accurately determined that eighty percent of Italian income is concentrated in the hands of twenty percent of families.
Pareto's law reflects the uneven distribution of causes and effects in nature, and it can be observed in almost any area.
For example, 20% of people have 80% of the capital, a fifth of regular customers bring most profits, etc.
It should be understood that numerical values are not essential. The very fact of the colossal difference between these indicators is important.
Disadvantage of the Pareto principle
However, the Pareto principle also has its drawbacks. Despite the fact that it is completely justified, follow it literally in real life does not seem possible.
Let's put it another way. Even with full awareness of the fact that only a fifth of the effort produces the lion's share of the result, the remaining 80% of the effort still has to be spent. It is simply impossible to organize activities in any other way.
For example, a customer regularly uses only 20% of the products you produce. But he is not satisfied if you produce only this percentage. He needs 100% so that he has a “product range” and “there is plenty to choose from.” This is what all processes have in common.
An interesting fact is that science has long known this drawback. Moreover, it is enshrined in the following statement: “20% of scientists make 80% of the discoveries, but this would not be possible if there were no remaining 80% of scientists.”
We hope that you caught the pattern.
Pareto principle Now we present the most important consequences of Pareto's law.
- There are few key factors, and many unimportant ones, so only a few actions can bring the main success.
- The vast majority of efforts do not bring the desired results.
- There are always hidden factors - this should not be forgotten.
- As a rule, we get results that are different from what we planned (hidden forces are at work).
- Most of the troubles occur due to the action of a small number of highly destructive forces.
- Most actions (group or individual) are a waste of time, as they do nothing to achieve the desired result.
If you wish, you can easily notice that all of the above consequences of Pareto’s law use the same principle. Therefore, you can actively apply it in any area of life: both at home and at work.
This may seem surprising, but the Bible mentions the described principle identified by an Italian scientist.
Joseph, being Pharaoh's deputy and knowing that 7 years of famine would soon come, issued a decree according to which all Pharaoh's subjects had to bring a fifth (20%) of their harvest to Pharaoh's granaries.
The Egyptians almost did not notice this expense from the general income, but Joseph was able to collect such state grain reserves that the country survived the seven-year famine.
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Good afternoon, dear readers of my blog about money! Today we will take another step towards our goal. This article will discuss how to achieve your goals as efficiently as possible, including financial ones, with minimal costs (time and money). Pareto's law will help us with this.
Pareto's law is found everywhere in our lives, in various industries, business, production, work and even in everyday life. Many (or rather almost everyone) don’t even know about it.
Pareto's Law states:
Only 20% of the effort expended brings 80% of the results.
There are many examples in life that confirm the truth of this rule.
In the world, 20% of people own 80% of all wealth.
In sales, 20% of the product mix generates 80% of the profit. 20% of customers make purchases worth 80% of the rest.
In life, 20% of criminals commit 80% of the crimes. 20% of drivers are at fault for 80% of road accidents. People wear 20% of their personal items 80% of the time.
The list goes on and on.
It turns out that to achieve 80% of the result, we only need to spend 20% of the planned efforts. Other actions are practically ineffective or ineffective.
Let's say you decide to learn English language. It will take about 4-6 months to reach a more acceptable level, when you start talking a little and they will understand you a little. Basically, you won't get lost. You will still be able to communicate with foreigners. There is a result. You understand, you are understood.
If you decide to master English perfectly in order to talk about politics, art, and generally maintain conversations on any topic, your learning period will increase by several years at once.
To achieve our goals, it is necessary to focus our priority efforts on exactly 20% of the actions we need.
How will this law help financially?
As always, we will look at examples for clarity.
Option 1
You decided to invest $100 monthly for 20 years, that is, $1200 per year at 20% per annum. After this period, you will have an amount in your account equal to $270,000. On this amount you will be charged interest of $54,000 per year or 4,500 per month. Not bad.
Option 2
What if we decide to start investing money only after a couple of years? We only have 18 years left to achieve our goal.
So, after 18 years, our total amount from investing will be only 185 thousand dollars. It turns out that for the first 2 years that we missed, lost profits amounted to $85,000 or $3,500/month. Practically, every day of inaction cost us about $120 per day in the future.
Option 3
We decided to invest 2 times more in the first 4 years, i.e. $200 monthly, and then $100 as usual. After 20 years your amount will be $440,000. It turns out that we initially deposited an additional $4,800 ($100 x 12 months x 4 years), and received a result of 170 thousand more or more than $35 for every one additional dollar invested.
Option 4
We placed our money at a slightly higher interest rate, allowing for 24% per annum. In 20 years we will have more than $450,000 or 1.8 times more than in the first case.
Option 5
We combine options 3 and 4. The rate is 24% and pay 200 bucks each for the first 4 years, then 100 each.
After 20 years we get $780,000 or almost 3 times the amount, compared to the first option.
What conclusions can be drawn?
1. Don't procrastinate. Take action today, today. Think about how much money you lose every day from inactivity.
2. Try to invest more funds at the initial stage. This will bring the greatest efficiency in future revenues.
3. Increasing your return by just a couple of percent per year over a long period will yield more significant results.
4. Use points 1-3 together, so you will achieve maximum results.
Using Pareto's law and its 80/20 principle, you can use your personal finances much more effectively and get a higher return on your actions.
Hello, my dear readers. I don’t know about you, but I used to really complain about how much efficiency may not correspond to the effort expended. It happens to you too: you work and work, but the effect... Maybe not zero, but 20-25 percent of what was expected. And vice versa: sometimes it seems like you didn’t really try, didn’t strain, but the result exceeds all expectations. But I’m not one of those people who are used to blaming chance for everything. The search for patterns between efforts and their results allowed me to make my own personal discovery: the Pareto law explains everything 20 80 .
The essence of the Pareto 20/80 method
The Pareto rule is empirical in nature: it is based only on experimental data and is not supplemented by theoretical conclusions. And it sounds like this:
“20% of effort produces 80% of the result, and the remaining 80% of effort produces only 20% of the result.”
This rule looks even simpler like this: if we bet on the right actions, we win the maximum or so (80%) of the expected result.
This simple principle explains why 90% of the planet's money and wealth is in the hands of just 10% of the population (we can assume that the remaining 10% simply do not advertise their wealth). Mentally compare the wealth of your friends: isn’t it so?
Keeping this simple pattern in mind will help you look at your life and work differently. The conclusion is that most efforts do not produce the desired results. Which means it is a waste of time. Therefore, in order to truly achieve the life goals you have set for yourself, you need to omit such additional, auxiliary matters. In fact, they do not help, but only delay the expected result, taking away precious time and effort. The result is a significant increase in efficiency!
Briefly about the history of the discovery
Vilfredo Pareto was an Italian economist and sociologist who lived at the turn of the 19th and 20th centuries. While doing scientific research in the field of macroeconomics, he wondered how wealth is distributed among different segments of the population in different states.
Comparing data for European countries, he came to an amazing conclusion: 20% of the population owns 80% of the wealth in the country. And this pattern remains unchanged not only in different countries, but also in different historical eras, data for which were available to the Italian sociologist.
This discovery probably had some success in the narrow circles of Pareto's scientific colleagues. And that would have been all there was to it if it weren’t for researcher Joseph Juran, the American “quality control guru.” In the mid-twentieth century, he became acquainted with a book by an Italian sociologist and interpreted the 20/80 method he described - “the principle of a little that makes a difference” - as a universal relationship between effort and results.
Today this law is applied in a variety of fields of activity: economics, trade, management, political science, programming, education, interpersonal communication etc. You may be surprised, but many successful entrepreneurs, scientists, and stars know about the Pareto principle. And they not only know it, but also actively use it in building their career and business.
Main conclusions from the “imbalance principle”
Knowing the 20/80 pattern provides great opportunities for those who are tired of knocking on a closed door. The main thing is to draw the right conclusions from this statement. Of course, you can practice building logical chains on your own. But just in case, I’ll tell you the main conclusions (this will be exactly in the spirit of our topic):
- most of our daily efforts have little effect and simply take away our precious time;
- important factors that truly determine success are single, trivial ones are numerous;
- our vision of reality is often far from objective, therefore it is important to take into account the nuances;
- You need to be able to evaluate the effectiveness of an idea at the very beginning, and if it is insufficient, think through optimization options;
- no matter what efforts we make, they will be largely ineffective.
By considering all your affairs and concerns in this context, you will learn to manage your time and energy, money and emotions as efficiently as possible. If, of course, you are focused on success, and not just going with the flow.
How the 20/80 theory works in practice
Examples of how Pareto theory works in life can be found at every step. Let's take the sphere of trade: 20% of customers provide the store with 80% of the revenue, and the remaining 80% provide only 20% of the revenue. Or the economic sphere: 20% of the working population of the state “supports” 80% of pensioners, the remaining 80% earn (officially) so little that only 20% of pensioners are able to provide financially.
Pareto statistics work not only in areas related to finance, but also in education, science, and culture. Thus, 20% of gifted students use 80% school knowledge, the remaining 80% is only 20% of what the school gives them. Is this a familiar picture?
The 20/80 ratio can just as easily be applied to our social circle, home library, objects (or labels) located on the desktop, the entire volume of the wardrobe. Not to mention our time or family budget! The numbers remain inexorable: 20% - with maximum benefit, 80% - practically to no avail.
How I use Pareto's law
In everything I try to find that cherished 20% (actions, people, books, etc.) that will provide me with 80% of the result. What does this mean? I don't waste time learning skills that I can't apply anywhere. On the contrary, I know what I do best, I know my strengths - and I make the most of them. I don't read texts that have no reality practical application, - I choose only useful articles and books that make me spiritually richer.
From the same position, I advise you to approach the identification of the main sources of income (with the exception of passive sources: deposits and passive investments), the most productive days of the week and hours of the day, the primary tasks for the day, useful and pleasant acquaintances and all other components of your life.
Try to look at reality from a 20/80 perspective. Perhaps this way of perceiving the world will be very difficult for you. Much of what previously seemed so logical and natural will have to be reconsidered and reevaluated. Is every customer important to your company? Is every deal crucial for your business? Think a hundred times before answering. The 50/50 Fallacy is costing us too much!
Conclusion
If you add time management techniques to this system, wow, you get an explosive mixture of a very effective system for personal success. Let me remind you that we have previously studied the basics of time management. You can read it at the link: .
If you are actively using social networks, VKontakte or Google +, then perhaps it will be convenient for you to subscribe to my groups (the buttons are at the top right in the subscription form). There I always post the best excerpts from articles, so you can add the necessary information to your wall. And also don’t miss the release of blog updates.
I sincerely hope that this article has become for you the 20% of information from which you can derive 80% of the benefit. I look forward to your comments and descriptions personal experience in applying the Pareto law! And see you soon on the blog pages!
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It is impossible to radically improve the quality of life without changing the way you think and act. It has long been noted that in the pursuit of happiness and success, in most cases we make much more effort than necessary. In fact, in order to stop the daily “mouse fuss” and find a feeling of happiness in the near future, it is often enough to do only the little that gives us pleasure.
As Richard Koch, author of the bestselling books The 80/20 Principle and Living the 80/20 Principle, explains, the principle is based on two main postulates:
A. Law of Focus: Less is more.
B. Law of Progress: More is created through less.
The idea of focus comes down to the fact that correct focusing and putting 20% of our efforts into action allows us to realize 80% of our desires. Efforts made beyond this 20% often result in wasted time and effort. Correctly focusing attention and effort means being able to identify things that are of primary importance to us, the main values that fill life with meaning and vibrant content. With this skill comes an understanding of the law of focus - less is more.
The idea of progress states that we can achieve and gain more with less time and effort. We really don't have to do everything. It is necessary and sufficient to learn to do only what brings results. This is the essence of the Pareto principle, which in its original version sounds like this:
“20% of effort produces 80% of the result, and the remaining 80% of effort produces only 20% of the result.”
Learning to use this rule, ingraining it in habits, way of thinking and actions means completely and qualitatively changing your life, gaining those advantages that 80% of our surroundings pass by every day and habitually. With a creative, correct approach, the principle works in business, self-improvement, relationships, social models - almost everywhere where a person and his vital interests are present in one way or another.
It is worth looking around carefully and impartially and we will come to the conclusion: in various spheres of life, the Pareto principle, to some approximation, manifests itself with amazing consistency. The accuracy of this relationship may vary, but the main conclusion always works: the majority of effects manifested are the result of a minority of causes.
The Pareto principle is applicable both in a professional environment and in personal life. The main thing is to understand that at every moment in time we can determine and use for ourselves that little that can give us a lot. On the other hand, by simplifying life, by sweeping out of it what does not work and does not correspond to our values, we more easily identify the small things that are valuable and achieve the desired big results with their help.
Example. You can spend the day with a loved one, but in the evening you will hear from him that you have been paying almost no attention to him lately. Or you can give him just one hour instead of four, and he and you will remember this hour for the rest of your life. The secret is simple: in the first case, you actually didn’t devote a single minute to it, periodically being distracted by TV, phone calls or discussing empty, unimportant things. In the second, they gave the person all their attention, placing emphasis on the quality of communication, and not on the number of hours spent together.
In the decision regarding simple tasks, where the main criterion for success is a quantitative factor, indeed, it is often possible to determine for yourself those 20% of reasons that will allow you to achieve 80% of the result or get closer to the ratio of 20/70, and in exceptional cases, to 10/90. Strictly speaking, it is more correct and useful to get rid of the hard percentage and be guided by the logic of the principle itself. And this is quite enough to get closer to your goal much faster, more efficiently and more comfortably. Let's back this up with examples...
In the arsenal of many existing languages, you can count up to more than a million words. From the point of view of the Pareto principle, the word superfluous is not an exaggeration at all. For real everyday communication, a few hundred and, even more so, a few thousand are often enough for us.
Having replenished your vocabulary with several thousand frequently used words, you will be able to communicate at an everyday level. Of course, to communicate on highly specialized topics you will have to expand your knowledge, but in all other cases this additional knowledge will most likely remain unclaimed. This way, you deliberately lower the bar by focusing on the speaking aspect and achieve the result you want without much effort in just a few months. The main condition for achieving results is not the dull memorization of hundreds of stillborn words, but the practice of live communication with native speakers.
In order to achieve dramatic improvements, it is enough to change your daily diet at the initial stage of maintaining the diet by only 20%. So if you are a supporter of the paleo diet (the diet of our ancient ancestors), to achieve the effect, it is enough to exclude dairy and grain from the diet. Then whether you continue to eat legumes or not will not affect the final result. It is important to use the principle here - not to think about how many kilograms you will lose in a month if you completely rebuild your entire diet, but to exclude several ingredients from your daily menu that can bring tangible results in the foreseeable future. Further, based on it, you can achieve big changes in the future.
Why spend hundreds of dollars on exotic juices and cleanses when you can eliminate grains and dairy for at least a month? Experiment and see for yourself...
Tangible and pleasant progress in fitness can be achieved anywhere, without a complex training program, outside a gym equipped with hardware and electronics and a “currency” trainer. You can achieve results using your own weight and sprinting. You just need to start working on a few exercises, concentrate on them and make them a habit. Work with your weight for a month for 20 minutes a day, combining exercise with diet and sprints, and then evaluate the result.
Contrary to the popular belief that “the customer is always right,” in practice this rule often does not work. However, customer service managers often receive instructions from management to retain clients at literally any cost, even if they delay settlements, accompanied by constant dissatisfaction with staff. With minimal conversion, the real loss from one such client can amount to tens of thousands of dollars. Concessions in the form of loyalty programs, etc., do not change the situation. Such clients certainly fall into the category of those who are determined to pay less and get more, slowly but surely tightening the noose around the neck of even the most successful business.
In order to radically change the situation, it is enough to simply get rid of such clients, adding preferences to those remaining who are loyal to the company and bring it a constant income, without burdening management with headaches.
Interesting statistics confirming the effectiveness of the 80/20 principle have been collected for many areas of our lives. Eg:
- If you're a blog author, you've probably noticed that 80% of your valuable traffic comes from 20% of your posts.
- If your business is related to trade, then you get 80% of your profit from selling 20% of your product line.
- The item spending 20% of your bills is 80% of your total expenses.
Having a website on the Internet, you don’t need to focus on all marketing channels - it’s enough to evaluate the existing statistics on the main sources of traffic for 90 days and concentrate all your attention and resources on them. The rest, at least temporarily, can be left behind. Evaluate the result after 90 days.
Analyzing sources of income and comparing it with the amount of effort applied per person sometimes leads to unexpected results. You may find that you are systematically passing up an easy, accessible, and fast income stream that is literally just an arm's length away. By focusing on the flows that significantly cover the entire investment, at the same time get rid of unprofitable or sluggish unpromising channels. Evaluate the result after 3 months.
There are no and cannot be perfect people, as well as the results of their work. In most cases, it is enough to have a good result and remember that the perfectionist inside you and enjoying absolute power over your time, emotions and energy is the strongest inhibitor on the path to your effectiveness and satisfaction with life. Learn to settle for “good” rather than “flawless.”
Any of our undertakings can be analyzed from the point of view of the Pareto principle and we can determine for ourselves the key points of application of efforts. Caution in using the Pareto criterion is required when we have to carry out a complex, responsible task, where we will have to give our all. Here, the quality of the result is given a key priority and sacrificing time and effort even in one, even difficult, aspect means questioning the success of the entire endeavor.
There are exceptions to every rule. Perhaps you are a conductor, general designer or, for example, a sign language interpreter voicing text at a memorial ceremony. In this case, knowing the basics of your profession in detail does not imply compromise. Unless, of course, you are interested in communicating with your audience in sign language, like this guy:
Following the Pareto principle means clearing your life of garbage and rubbish, learning to properly allocate time and direct efforts towards goals, the implementation of which will bring maximum benefit. But blindly following the 80/20 principle can lead to the fact that, having surrounded ourselves with what is pleasant to us and at the moment brings the expected result, we will be left broke if the situation “on the life market” changes not in our favor. Therefore, it is still better to build your building of success by putting your eggs in several baskets, and having one or more acceptable solutions as an alternative.
Despite its undeniable practical value, Pareto's law is nothing more than an empirical observation that cannot be considered as a universal and immutable Law of nature, a postulate that has a strict mathematical basis and evidence base. It is clear that in many cases, 80% of seemingly insignificant efforts remain a necessary condition achieving the final result.
People experiencing financial difficulties, often associate the concept of happiness with passive income, that cloudless time when all existing problems will be solved once and for all, and life will turn into a continuous milky white stripe of accessible and easily realized pleasures. They dream of living according to the Pareto principle, making “a minimum of bodily movements” and getting the maximum benefits from life.
In order not to turn into a vegetable, generously watered with the benefits of civilization, we should remember another, no less important principle: truly valuable for a person is only that for which an adequate price is paid. Development without meaningful effort, creative improvement and movement forward turns out to be impossible. It is important to maintain this understanding, find your meaning and define the goal to learn to balance - not to waste 80% of your time and effort on going through the same or empty lessons. Otherwise, the search for ways and means of “minimizing body movements” while achieving the maximum effect in the form of reward will turn into an end in itself and will lead to blocking of any development and degradation.