The 80/20 Principle: The Secret to Success by Achieving More with Less
The 80/20 Principle: The Secret to Success by Achieving More with Less
How anyone can be more effective with less effort by learning how to identify and leverage the 80/20 principle–the well-known, unpublicized secret that 80 percent of all our results in business and in life stem from a mere 20 percent of our efforts.
The 80/20 principle is one of the great secrets of highly effective people and organizations.
Did you know, for example, that 20 percent of customers account for 80 percent of revenues? That 20 percent of our time accounts for 80 percent of the work we accomplish? The 80/20 Principle shows how we can achieve much more with much less effort, time, and resources, simply by identifying and focusing our efforts on the 20 percent that really counts. Although the 80/20 principle has long influenced today’s business world, author Richard Koch reveals how the principle works and shows how we can use it in a systematic and practical way to vastly increase our effectiveness, and improve our careers and our companies.
The unspoken corollary to the 80/20 principle is that little of what we spend our time on actually counts. But by concentrating on those things that do, we can unlock the enormous potential of the magic 20 percent, and transform our effectiveness in our jobs, our careers, our businesses, and our lives.In 1897, Italian economist Vilfredo Pareto, in his study of the patterns of wealth and income, observed that the distribution of wealth was predictably unbalanced. He first discovered this pattern in 19th-century England and found it to be the same for every country and time period he studied. Over the years, Pareto’s observation has become known as the 80/20 principle.
Now in 1998, Richard Koch takes a fresh look at the 80/20 principle and finds that the basic imbalance observed by Pareto 100 years ago can be found in almost every aspect of modern life. Whether you’re investing in stocks, analyzing company sales, or looking at the performance of a Web site, you’ll find that it’s usually 20 percent that produces 80 percent of the total result. This means 80 percent of what you do may not count for much. Koch helps you to identify that 20 percent and shows you how you can get more out of your business, and life, for less.
User Ratings and Reviews
5 Stars Highly useful, very clearly written, inspirational
This is one of the more useful books I’ve read in my life. It is applicable to most things (not everything, in spite of the author’s protestations), and the prose is not the leaden yuck that burdens many business tomes.
Furthermore, there are many sentences that are actually memorable, not just non-leaden. There isn’t much pseudo-math in here; Koch is willing to let you simply try these principles and see if they work for you or not. Certainly his best work (of what I’ve read) and not one you want to miss. I wouldn’t call it precisely a “business” book, although it certainly is that; it is as much a life book as well, for example he says that the people you spend your time with is one of your key decisions, most importantly your mate. Obvious, of course, yet often overlooked. Highly recommended.
5 Stars Ground-breaking tools for adding hours to your days and happiness to your life.
Why You Should Read It: The principles in this book can literally add hours to your days and compound your happiness. It’s worth a look. What’s more important than having time?
Average Read Time: 4.5 Minutes
We’ve all surely heard of the 80/20 Principle, or Pareto’s Law as it’s more formally known. It goes something like this:
80% of the results come from 20% of the effort.
It’s often thrown around in business as nothing more than a buzzword. Few actually do a full 80/20 analysis of their business and almost no one I’ve come across has applied the same to their life as a whole. Other than two people that is: Richard Kock and Tim Ferriss-and the people who have since followed in their footsteps (me included). The 80/20 Principle is the source material for what Tim wrote in The 4-Hour Work Week. It took me reading it a couple times to grasp the simplicity and life-altering implications of the principle. The time saved and gained will blow your mind.
The amazing thing is that the studies in this book show the principle working in just about every possible scenario. Of course it’s not always 80/20. Sometimes 90/10 or 95/5 or even 70/30. But the point is it works-without fail.
Richard’s purpose was to explain this ancient principle in a way that would inspire action and application to every part of life. When applied to work, productivity will go through the roof, but when applied to your life outside of work, happiness and fulfillment do just the same. All it takes is a shift in thinking. Try the following for a few weeks and the time in your life will never be the same.
5 ways to apply the 80/20 Principle to enhance your life:
1. Do the 20% of your work that leads to 80% of your results: Track all the time you spend on projects each hour of each day for a week. How many of these things were necessary? How many got you closer to your goals? How many were a waste of time? How many could someone else have done? Pick the 20% of your tasks that yield 80% of the results and outsource or simply discontinue the rest. Wondering what to do with your remaining time? Enjoy life. I outsourced a significant portion of my work to two very reliable virtual assistants in India starting in 2006. Ravi and Vikash now do that 70 or 80% for me. At $3-5/hour it is very hard to beat. Check out [...] if you’re looking to out source. Search “Virtual Assistant”. Once you start outsourcing, you’ll never go back.
2. Locate the 20% of your customers who drive 80% of your profits: Find your top 20% customers (by profit, not revenue) and fire the rest. Yes, fire them. The goal is not to work your life away. It is to make a good living to enjoy your life. If you must work more, then list out the characteristics of your 20% customers and go out and find more of them. You will not believe how liberating it can be to fire a customer who’s been a real pain in the ass.
3. Prioritize the 20% of your friends who provide 80% of your support and enjoyment: If you apply 80/20 to your relationships you will surely find that a few people in your life provide the majority of your support, excitement, laughter and feelings of connection. On the other side, there is likely another 20% group of people who account for most your sleepless nights, tears, anger and frustration. If you don’t want to feel this way, stop spending time around your bottom 20. Fire them and work on duplicating your top 20. This may sound a little calous, but it’s not. It’s practical. The quality of our life comes down to the quality of the people and experiences that fill it.
4. Fill your life with the 20% of your experiences that provide 80% of your happiness: As humans, our two biggest priorities are to move towards pleasure and away from pain. As mentioned above, find the few people, things, places and experiences that provide 80% of your happiness, fulfillment, pleasure and excitement. Also find the things that cause you to feel the majority of your negative emotions. Focus your time on the top 20% and avoid the bottom 20% like the plague.
5. Do the 20% of your workouts that lead to 80% of your physical gains: The majority of fitness results come from a small portion of most workouts. 80% of the muscle is built in the last 20% of the reps. Crossfit is a great example. The workouts are 7-14 minutes long on average but they provide more physical benefit than most hour-long workouts. Spending more time on something is not always a good thing. If you believe your workouts must take an hour then you’ll likely miss a lot more of them. What if they only took 7 minutes, but that seven minutes really tested your limits? You’re likely to show up a lot more often.
I know this sounds simple. But few people stop to actually do it. It is truly possible to spend the majority of your time doing the things that you love. The only way to get there is taking Pareto’s 80/20 principle seriously. It will make all the difference.
Do not let more than 3 months go by without performing a full 80/20 breakdown of all areas of your life (especially your personal life). It will only take a couple hours and those hours will likely save days before you know it… 80/20 in action yet again.
Somewhere along the path of life, most of us were taught to associate fulfillment and worth with the number of hours spent-thinking the more the better. This has lead many of us to working aimlessly just to say we filled the day. This IS NOT the goal. The goal is be fulfilled, happy, efficient, effective and more than anything else, to enjoy life. Happiness is a daily right. It is not something we need to work our ass off for years to finally achieve. That is what Pareto stumbled on all these years ago. I encourage you to do the same.
5 Stars Be 80% Better With 20% of the Effort!
The book I read this week was The 80/20 Principle by Richard Koch. What a wonderful book on results-based living. The 80/20 Principle is about inputs and outputs, an imbalance in the world. 80% of the results, outputs, or rewards come from 20% of activity, inputs, or effort. For instance, 80% of accidents on the road are caused by 20% of the drivers, 80% of wealth is held by 20% of people, and 20% of the work you do results in 80% rewards. This principle is used in business… many know it as the Pareto Law… The law of the trivial many and the vital few. The most important take-away is that there is an imbalance in the world… Things are not 50/50. I will help you apply this principle in 3 areas of your life: Business, Investing, and Happiness.
Business
Many consultants will use this principle when working with a firm and it results in enormous lasting effects. Koch was a consultant for Boston Consulting Group early in his career and I am sure he used his 80/20 principles many times in the course of business. How does it effect business? Many ways, but my favorite is that 80% of sales come from 20% of a company’s products or clients. This also means that 80% of a company’s products or clients only result in a small 20% of sales. So… Focus on the 20% of your products that give you 80%… If you are working with clients, build those relationships up and build on them. Big time clients have relationships with other business’ and people like them, so exploit this information and build your sales portfolio with similar clients. If you are in retail, find the 20% of your products that result in 80% of sales and make them more visible. Put them in front of the customer. Too often do I find myself in a store and see a “hot” item tucked away in the back. Why? Most likely a mistake. Use this information to your advantage. Talk to the managers and make your business better. This will surely get you noticed and put you on the fast track to success.
There are many applications within the business world to utilize the 80/20 Principle… just think about your inputs and outputs or effort and results and think about how you can implement a more successful way of doing things. Generally, it comes from simplifying an existing idea. Great examples of this come from Wal-mart, IKEA,and Gas Stations. They have taken an employee out of an operation and it has resulted in increased sales and a simpler operation. In what context? Wal-mart has made it so customers can check themselves out, IKEA lets people build their own furniture, and Gas Stations everywhere let people pump there own gas. This allows the respective business’ to take the cost of an employee, the person that once did those services, out of their prices and gives them a huge competitive advantage. In what area could your business trim a service down to save some money? Be different and think simple… it works!
Investing
It should be clear to most people that there is an imbalance on Wall Street. Some investments go up while others go down and in dramatic ways. This is why many people encourage having balanced portfolios (like me), however, Koch disagrees with this logic with good reason. Because there is an imbalance you are much more likely to make huge returns if you are heavily invested in one investment, about 80% invested. My thoughts on this is that when you throw all your eggs in one investment you do have a chance at great rewards, but you are heavily increasing your risk. Koch’s investment strategy could work for you if you have a lot of knowledge and information of the investment you are putting yourself into. For example, you could invest in the company you work for because you know about the operations and you know whether it is getting better or worse. I encourage everyone to find the investment strategy that fits their personality best and if this one is for you, go for it!
Happiness
I am a huge advocate of always striving to increase levels of happiness in life. This book declares that 80% of our happiness comes from 20% of what we do. So we should simply analyze what falls within this 20% and do more of it and less of the 80% that only slightly increases our happiness levels. So if going on vacation with your family is in your 20% than arrange your life to do it more. And on the other side, if you have things in your life that you feel are pointless and result in low levels of happiness or unhappiness, then do them less or stop them all together. If its a social event or a meeting and you feel its pointless, you probably won’t be missed if you stop attending and if its a chore, assign it to someone else. If this means getting a housekeeper, then do it. Happiness should take a very high priority in your life.
I also want to mention that the 80/20 Principle is not linear. Meaning that it does not have to add up to 100. 80% of a company’s profits could be from 5% of products and on the same note 95% of your happiness could be a result of 30% of your activities. The idea behind the book is that there is an imbalance. Once you understand this concept you can start looking for it and use the information to become more efficient in every aspect of your life.
So there you have it. Applications for the 80/20 Principle. I have been asked by many people how I do everything I do: Read a book a week and write this, work on my career, analyze new investments and have a life. Well I guess I use some of the ideas outlined in this book and I didn’t even know it. Additionally, I don’t see anything I do in my life as “work”: I love reading, I love writing this blog and teaching others how to be better, I love my career and the work I do, and I love learning about new investments and using that information to build my wealth. When I don’t like doing something I find a way to do it differently so it’s enjoyable or I ask someone else to take care of it for me. If you enjoy doing something there is a high probability that you are good at it. If you aren’t good at something then giving that task to someone who is good at it, and following the same logic, that person will most likely enjoy it, this means it is the right decision. In fact, if you work on being smart about your delegation of tasks, you simultaneously turn yourself into a better leader.
There is a lot of great information in this book and I think anyone that reads it will improve their life greatly. I recommend it to everyone. If you have any questions on the book don’t hesitate to ask. I would be more than happy to help anyone that wants it.
5 Stars get more done in less time (and that’s just the start)
Good book with a great way to learn your life. And if you can figure out which 20% to read, you’ll get 80% of the knowledge within it.
Seriously, there is an 80/20 rule for readings books and you can use it on this one. 
We all know the 80/20 rule but, if you’re like me, you haven’t though about all the ways you can apply it to your life. Time management, relationships with friends, relationship with your girlfriend/wife, money, business, and more. Definitely worth reading!!
5 Stars Great book
This book is a gem. It could be a repetitive concept for many, but in my experience some concepts the are simple and powerful at the same time as this is, require many different approaches for the reader to completely grasp and understand. Koch is a great business thinker.
Filed under: Personal Finance Book Reviews