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The Pareto Principle

Why Winners (Almost) Take All

Why Winners (Almost) Take All

In Pareto Principle, the winner takes almost all. The-Winner-Take-All effect happens isn’t because winners are better, smarter, and stronger than everyone else. In fact, most of us started at about the same place. But that tiny little advantage can take a person a long way by compounding effect over time.

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The Pareto Principle

The Pareto Principle

https://medium.com/the-blog-of-dean-yeong/the-pareto-principle-a3e25b51f73

medium.com

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Key Ideas

Small Improvement Matters

Don’t be discouraged even you are being left behind, as long as you are making a progress, you are already making a difference.

Strategies for Keeps

  • Pick one goal for your business to improve focus and decision-making.
  • Optimise the first item in a funnel that has cascading effect to the entire funnel
  • Work hard to understand the 20% of your customer.
  • Create high margin products that bring 80% of all profits.
  • When assessing risk, recognise not all risks are equal.

The Pareto Principle (the 80/20 Rule)

It is an idea discovered by an Italian economist. It says that power and wealth is distributed like a reversed hockey stick where a small percentage of the population (20%) owns majority of the wealth (80%). 

80/20 Rule: Threat or an Opportunity?

It is hard to accept the truth that there are inequalities everywhere. But depending on how you see it, the rule could help us filter out unnecessary data, better channel our resources, and make better decision in work and life.

80/20 Rule All Around

The Pareto Principle could also be observed in almost every industry:

  • In software, 80% of the errors and crashes in a system would be eliminated by fixing the top 20% of the most reported bugs.
  • In sports, 20% of athletes participate in 80% of the big games
  • In business, 20% of the products bring in 80% of the revenue.

Implementing 80/20

Phase I: Self-analysis
Reflect
on where your current focuses are. How do these impact you in different areas in life?

Phase II: Identify the 20 Percent
Link
those good or bad results to the source of your activities.

Phase III: Focus on the Fat Tail
Eliminate
or at least, minimize destructive routines and focus your time and energy on the top 20% habits that lead to good progress

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Identifying Productivity Constraints

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Identifying What's Truly Important

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. 

Choice minimalism
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  • Eat the same few meals.
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Do a self-diagnostic
  • Track decisions. Spend a week tracking all the choices you make in a day.
  • Evaluate effectiveness. Review your notes and group decisions by category. Then ask, “Does this decision affect my desired outcomes?” Many of them won’t.
  • Do a Pareto analysis. Ask, “What are the 20% or fewer useless decisions that are taking up 80% or more of my time?” Those are the ones to tackle first.