80-20 Principle

The 80-20 Principle

Here’s a slap in the face: almost all of what you do in your day-to-day life doesn’t matter. Practically all of the time and effort you put into your work and life contribute very little to the outcomes you experience.

Does that sound insane?

Why yes, yes it does. But it’s proven to be true. And it’s extremely liberating.

Let’s hop right in:

What is the 80–20 Principle?

“The 80/20 Principle asserts that a minority of causes, inputs, or effort usually lead to a majority of the results, outputs, or rewards,” defines Richard Koch, the author of the seminal book on this exact topic.

This striking imbalance between input and output was first discovered by Italian economist Vilfredo Pareto, and since his discovery, 80–20 relationships have been thoroughly researched and confirmed in business, in nature, and otherwise.

The conclusion: there are only a few vital inputs that ever produce important results.

Contrary to popular belief, there is not a perfect 50–50 correlation with our time, effort, and resources to our desired outcomes. Rather, 20% of the causes, inputs, or effort lead to 80% of the results, outputs, or rewards. The remaining 80% results in a mere 20%.

See what we’re getting at?

A lot of what we do has little to no impact on the outcomes we experience.

Now, everything is not a perfect 80–20 split. Sometimes it’s 70–30, 90–10, or even 99–1. The exact number is not the point. The extraordinary imbalance between inputs and outputs is.

So what does this mean for us?

To be frank: we’re wasting a ton of our time and effort on meaningless activities when we ought to be using this principle to our advantage! If we can pinpoint those 20% activities that lead to the 80%, we can stop spending so much time on the rest and focus all of our efforts on those vital few.

Use in Your Business

The 80–20 principle holds true in business; in fact, they teach it in business school. It’s been proven that often 20% of a business’ products lead to 80% of revenue, that 20% of marketing spend leads to 80% of new purchases, and that the 20% best customers contribute to 80% of the company’s profit.

Thus, desired business outcomes can be multiplied if we identify our best selling products, our most effective marketing channels, and our most profitable customers. Why wouldn’t we? By focusing on a specific area of our business that is performing well, we amplify its effects, reduce costs on unnecessary expenses, and deliver increased value to our customers. It’s a win-win-win.

Whenever we discover a 20% activity in our business, we must immerse ourselves in it. Find out what’s working and do more of it— A LOT more of it. If something isn’t working, fix it until it is. Our goal is to locate the vital few success drivers of your business, and put our pedal to the medal on each of them.

Use in Your Life

As in business, our personal lives can benefit immensely from the 80–20 principle.

First and foremost, our relationships with others contribute greatly to our happiness as well as our unhappiness. In particular, the 80–20 principle states that roughly 20% of the people or activities in our lives contribute to 80% of our happiness and desired outcomes, and that roughly 20% lead to 80% of our unhappiness and problems.

You’ve probably noticed this yourself. Spending time with some people makes you feel like you’re on Cloud 9. With others, like you’re in hell. It’s time to distinguish the two and spend more time with the people who make you feel great while eliminating the time with those who upset you. This is very much in your control. You simply have to take the matter in your own hands; you get to decide who you spend your time with. Spend it with those who make you happy.

On a similar note, most people spend their free time on activities that are of low enjoyment to themselves and others. Whether pressured into it or simply drifting through life, it’s imperative that we stop. Take the time to write down the 20% of hobbies and other activities in your life that bring you 80% of the joy. Then, allocate your time and effort appropriately.

This won’t be an easy change; no, this is a lifestyle change and there will be growing pains. You must embrace it; you must face your new 80–20 life head on, without fear.

Make more time for the few things that make you really happy in life.

What’s the 20%?

At the end of the day, the 80–20 principle can have a profound effect on both your business and your life, but it requires conscientious effort on your part. It is your job to identify the vital few causes, inputs, and effort that leads to the 80% of the results, outputs, and rewards you experience.

Stay focused on the most important inputs and avoid the numerous, time-consuming others. Measure the results and follow what works. Then, spend all of your time and effort on that 20%. You’ll multiply the desired outcomes and be well on your way to a more effective business and life.

Never stop asking yourself: what’s the 20% that’s leading to the 80%?

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