Pareto's Law

Whether it relates to schooling, work, or our personal lives, I’ve been told since I was a child that results are based on input or “you get back what you put into it”.

Decades later, I find myself questioning this statement and don’t believe it’s a value system that reflects how life works.

The term 80/20 is a colloquial term often used in the business world to reflect imbalances that exist.  For example, 20% of products generate 80% of sales. Managers and consultants repeatedly see this rule apply when analyzing companies.

In other words, companies see this imbalance where a minority of causes, inputs, or efforts lead to the most results outputs, and rewards.

The 80/20 concept was discovered by Vilfredo Pareto in 1897 and continues to prove useful in business contexts.

I believe the 80/20 principle can be used by each one of us in our daily lives!

The imbalance between cause and effect and inputs versus outputs takes place in many areas outside of business.

Following are some basic examples:

·       20% of our clothes get 80% use

·       20% of our carpets get 80% use

·       In a combustion engine, 80% of the energy is wasted in combustion with 20% going to the wheels

·       80% of the increase in wealth comes from 20% of our investments.

Note that the 80/20 principle is not a set formula.  It is a principle that reflects imbalance and disequilibrium.  For example, a recent study showed that 1.5% of movies earn 80% of box office revenues.

We have been taught to believe that results are directly tied to efforts however when I reflect on this in my own personal life, it is certainly not the case.   Think about your own achievements.  There is an imbalance between what you achieved, and the time taken to create it.  Even happiness works this way.  We obtain the most enjoyment from our inner circle of friends.

Given that 20% of an engine’s inputs generate 100% of the output, we can surmise that small fragments of our time are much more valuable than all the rest.

If our own happiness or achievements occur in a small proportion of our lives, it would seem we are not short on time but in fact, have an abundance of it.

So how do we work these counterintuitive imbalances to improve our daily lives?

We need to look at time differently!

Time management is a multi-billion-dollar industry.  It focuses on prioritizing activities into categories. You then build “to do” lists that reflect priorities ranked as A, B, C, etc.   This way we can manage time more efficiently.

Despite all the time management strategies, everyone is still too “busy”

The 80/20 principle suggests time management is a flawed concept!

Ranking our “to-dos” as A or B doesn’t change WHAT we are doing. We need to be asking ourselves how we use our time rather than finding the time.   We need to identify the 20% of our activities that have the most impact.

What if we focused on quality rather than efficiency?  This means identifying the 20 percent that gives you 80 percent.

The best way to accomplish this is by asking yourself these questions and writing down the common traits.

1)      What small amounts of time have contributed disproportionally to my happiness?

2)      What are short periods of time when I achieved a high ratio of value to time versus the rest of the week or month?

According to the 80/20 rule, most of what we do is low-value uses of time.

Here are some examples:

·       Things other people want you to do

·       Things you don’t enjoy doing

·       Things you aren’t good at doing

What if you were to change how you spent your time to high-value uses of time as follows:

·       Things that use your creativity

·       Things that advance your overall purpose in life

·       Things for which it is now or never

·       Things other people tell you can’t be done

In the investment world, conventional wisdom is not to put all your eggs in one basket, however, shouldn’t you choose your basket carefully and load 80% of your investments in it?

What can you be doing to increase your high-value activities from 20%?

Karl

“The reasonable man adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself.  Therefore, all progress depends on the unreasonable man”.  George Bernard Shaw

“God plays dice with the universe.  But they’re loaded dice.  And the main objective is to find out by what rules they were loaded and how we can use them for our own ends”.  Joseph Ford