Pareto law

“Strive for Excellence in few things, rather than good performance in many” – 80-20 Principle by Richard Koch.

Richard Koch’s The 80/20 Principle guides us on how to ensure that our efforts produce the best possible outcome for any job at hand.

This principle has been expressed in many forms namely Pareto’s Law, Juran’s Law of the Vital Few, Zipf’s Principle of Least Effort but the idea behind all remains the same that few things do matter a lot and most things matter less.

This principle is applicable for all aspects of life be it business, you want to learn something new(Read here), studies, Research, etc.

Let’s have a look at a few significant practical aspects of this principle from the book enumerated below:

1: Fewer inputs leads to a majority of outputs(80-20).

Example, think of your wardrobe full of clothes but there are very few (20% of them) that you wear most of the time (80% of the time)

Now check out your smartphone for contacts, it’s certain that there are only a few contacts (20% of them) with whom you spend the majority of your time. (80% of your non-sleeping time)

To reiterate fewer causes create the majority of effects.

Think about the decisions you’ve made so far in your life. You take many decisions throughout the day, but where you are now can be traced back to just a few decisions you made that have led you to where you stand now.

The same thing is applicable to investments – the majority of the portfolio returns come from a few critical choices you made to purchase or sell certain securities/assets (to learn about stock market click here). Similarly, most of the loss generation on a portfolio also comes from a few decisions.

2: A minority of efforts lead to a majority of results(80-20).

Think of everything you’ve achieved so far in life be it education, career, etc. There are very high chances that the skills you need to do your job are a small section of what you’ve learned or what you can do better, but these small sections produce the majority of what you earn.

3. Identify and build upon 20% of efforts that produce 80% of the results.

If you really want to improve at anything, focus only on what matters most. Irrespective of the field whether it’s conducting business, working on a project, trying to crack a competitive exam, or strengthening personal bonds. Few things matter a lot and many that don’t matter at all.

If you pledge to study what matters most, you improve your effectiveness tremendously. You’ll be spending lesser time, money, and efforts – and get far better results.

4. Eliminate or reduce the 80% of efforts that produce poor results.

Vice-versa to the above points also holds true: in every task, there is an umpteen number of ways to waste your time and resources. It pays to use your energy wisely. If something is just a little useful, delegate or delete it.

By making some tough decisions about what to focus on and what to not, you’ll unlock a huge amount of productivity in terms of time and energy to focus on what will really want to achieve.

5: When it comes to business, focus on your products and customers that bring you major profits & reduce the rest.

Every individual is created equal, but the same does not hold true for all the customers. Some will feel like presents sent from heaven & will enthusiastically buy anything you offer. Others will feel as if rising from hell – will buy whatever you sell, but will never be happy, they’ll fill you with complaints, and will demand special treatment.

Here’s the rule: segregate your best customers, and focus on doing everything to serve them the best of service possible. Similarly, identify worst customers, and fire them – they represent a huge opportunity in terms of time and effort.

6: In life, focus on the things that give more satisfaction.

The 80/20 Principle extends to life satisfaction as well. A few activities contribute most to your overall happiness and inner peace. These things are the ones that you should build your life around. For some, its spending time with family and friends, having fruitful discussions with people, sharing knowledge, or reading everything that intrigues your interest. If you want to lead a happy life, then this is how one should spend most of their time.

To summarize up all, always remember Its never your efforts for which you are rewarded. Nobody cares how much time you spent doing something. All that is cared about is how important and meaningful is your final outcome.

For example, You may spend years tirelessly doing labor jobs no one will bother but spending those years doing something like curing a serious disease, and EVERYONE will care.

So, whatever you decide to do, just spend some time, in the beginning, breaking that goal into subgoals (20%) that appears to be more important to master the majority (80%) of end result.

If you liked the summary you will definitely like the whole book, it is one of the must-reads.

To get the book please click on the book icon above or here.