The Pareto Principle

The Pareto Principle

... or the 80/20 principle was coined in the early 1900s by Vilfredo Pareto, an Italian economist. He observed that the pea pods in his garden were producing peas at this rate. 20 percent of the pea pods produced 80 percent of the peas. This output was then observed by him on a larger scale, across industries, societies and companies.

This principle states that 80 percent of the output or results comes from 20 percent of the input or effort.

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The Pareto principle has been seen working in various fields, and domains:

  • Sales and Marketing departments recognised that 20 percent of the customers brought 80 percent of the products, and 20 percent of their sales force made 80 per cent of the sales.
  • Businesses realized that 20 percent of the costs led to 80 per cent of the expenses. They saw that only about 20 percent of their effort created 80 percent of productivity.
  • Human Resource departments observed that 20 percent of the employees created most of the value (80 percent).

We have never considered this before but the same principle applies to our lives.

  • The kind of food we eat, only 20 percent of it really matters.
  • The people we meet, 80 per cent of those are not worth meeting.
  • The stuff we buy (like clothes and gadgets), 80 percent of it we hardly use.
  • The things we do 80 percent of the time, are not providing many benefits or fulfilment.
  • The money we spend, most of it is not useful or healthy for us.

The 80/20 law, like gravity, is everywhere in your life.

Check your money flow, relationships, possessions, and the things you spend your time on, and find if there is any improvement that can be made in your life.

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RELATED IDEAS

Clarity. Have a clear vision of your desires and future to help you stay focused on your goals.
Competence. Commit yourself to doing something that enables you to become better at doing the most important things in your field.
Concentration. Persevere, without diversion or distraction, in a straight line toward accomplishing your goals.

5

IDEAS

20% of your activities will account 80% of the results, and vice versa. Start working on the most important tasks, it may be complex or difficult but it holds majority of the outcome. 

2. Elimination
  1. What do you need to eliminate? Your old mindset about time management.
  2. Once you define your goal and you understand how much money you need to make it happen, you’ll find the source of that income. The source won’t be the work in the office.
  3. Remember: your goal is not building a multimillion-dollar empire. It’s about living a stress-free life that lets you experience the most of it.


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