80/20 Rule: Remarkably Easy Way To Make Good Decisions

The Pareto principle—or 80/20 rule, the law of the vital few, the principle of factor sparsity—states that for many outcomes, 80 percent of consequences come from 20 percent of causes. It was named after Italian economist Vilfredo Pareto, who noticed that 80 percent of Italy’s wealth was owned by 20 percent of the population. Most things in life are not distributed evenly. Each unit of work or time does not contribute the same amount. In a perfect world, every hour worked by every employee would yield that employee’s output per hour, but life is just not that simple.

The 80/20 rule taps into that unequal distribution of outcomes. We’d like life to be a linear line upward. Planning would be too easy. Yet it’s way more complicated when 20 percent of work contributes 80 percent of results, 20 percent of bugs contribute 80 percent of crashes, 20 percent of customers contribute 80 percent of revenue, 20 percent of features create 80 percent of usability… The point is that we get the most bang for our buck if we put our effort into the first 20 percent.

This is why it makes sense to “waste” an hour planning your day to not waste the other 8, or to “waste” 10 minutes planning future content for your channel instead of hours making content you are not sure will perform. These techniques ground you doing the vital few. They ensure that you get done the things that matter. A small portion of inputs disproportionately influences the results. Compare them to your compound lifts in a physical exercise regimen: most of your growth comes from them, followed by the accessory lifts.

The Pareto principle is one of the most versatile models. It can be applied to almost any domain, from economics and business to personal productivity and relationships. At it’s core is the imbalance between inputs and outputs. The split does not have to be exactly 80/20; the point is an uneven distribution. Most systems have a few vital components while the rest are relatively meaningless. Effort does not equal impact. Many activities yield minimal results, while a few yield the rest. 20 percent of your tasks, customers, issues, bugs, and salespeople probably generate 80 percent of your progress, revenue, crashes, and profits. It can also be applied recursively: the top 20 percent of the top salespeople at your company probably get 80 percent of that team’s sales, and so on.

Real life implications of the Pareto principle:

• Health: occupational safety professionals use the 80/20 rule to underline the importance of protection against hazards, as 20 percent of the hazards account for 80 percent of the injuries;

• Healthcare: the 80/20 rule has been proposed as a thinking shortcut for calculating healthcare costs as, for example, 20 percent of patients with chronic illnesses account for 80 percent of overall healthcare expenses;

• Business: supposing 20 percent of your products or services generate 80 percent of your revenue, you can develop and hone similar goods, as well as focus your marketing on those products;

• Fitness: 20 percent of exercises usually yield 80 percent of your fitness results, typically referring to the compound lifts like squats, bench presses, and deadlifts, so it would make sense to do those if you are low on time;

• Relationships: 20 percent of your relationships will be where 80 percent of your emotional support, belonging, and fulfillment comes from, so invest time and energy into nurturing these above all others;

• Learning: 20 percent of a given skill in a domain often makes for 80 percent of one’s competence level, like the top 20 percent of words in a given language make up most of what is said in daily conversation;

• Finances: 20 percent of your bad purchases might account for 80 percent of your financial waste, so try to identify those overly-expensive lattes and ask whether they are worth it.

How you might apply the Pareto principle as a thinking tool: (1) identify the vital few, seeking out the 20 percent of factors that contribute to 80 percent of the outcomes you are aiming toward; (2) strategically prioritize your efforts and resources on the top 20 percent first, allocating yourself where the smallest inputs generate the biggest outputs; (3) trim the fat, minimizing the low-impact activities that sap your time, energy, or resources on non-vital tasks; (4) iterate and refine, re-applying the 80/20 rule and identifying ever-more critical subsets of things to concentrate on to optimize your time-spending further; (5) while the 20 percent are crucial, don’t forget the 80 percent if these make the journey more sustainable for you.

Thought-provoking insights. “Perfection is not when there is nothing more to add, but when there is nothing left to take away.” Antoine de Saint-Exupery reflecting on how eliminating the unnecessary 80 can free us to spend more time on the vital 20 percent. “Work on the vital few, not the trivial many.” and “Efficiency is doing things right; effectiveness is doing the right things.” Stephen Covey and Peter Drucker set things straight, reminding us that sometimes it’s better to even not do certain tasks if they are trivial. Mastering the Pareto principle is about achieving more with less. Apply the lens in how you view your personal and professional practices. Are you wasting away at the unneeded 80 percent before the vital 20 percent is ticked?

Grab the 80/20 thinking template and put it into action.

Questions to reflect on:

1. What activities or tasks contribute most significantly (80 percent impact) to my success or goals?

2. How can I identify and eliminate the least productive (80 percent of unproductive time-spending) of my efforts?

3. How do I prioritize the most impactful tasks in my current routine?

4. What changes can I make to maximize the impact of my limited reach and resources?

5. How can I use the Pareto principle to optimize my financial investments?

Quotes that encompass the concept:

1. "It is not the daily increase but daily decrease. Hack away at the unessential." - Bruce Lee, martial artist and actor.

2. "Efforts and courage are not enough without purpose and direction." John F. Kennedy, 35th President of the United States.

3. "Simplicity is the ultimate sophistication." - Leonardo da Vinci, Italian polymath.

Example use cases:

1. Business management: a company could use the 80/20 rule to identify the top 20 percent of customers that generate 80 percent of the revenue. This allows the firm to concentrate on retaining these high-value clients and improving the experience for them.

2. Sales: sales teams use the 80/20 rule to determine which 20 percent of their products or services generate 80 percent of their buy-in. This helps streamline their offerings to focus on the best-sellers.

3. Marketing: advertisers analyze which 20 percent of their campaigns or channels bring in 80 percent of leads and/or conversions, enabling them to allocate resources efficiently to tried-and-true marketing strategies fit for their audience.

4. Personal development: you can use the principle to underscore the 20 percent of habits that have the most significant impact on your well-being. Put your effort into maintaining and improving these.