The Pareto Principle

The Pareto Principle is a powerful tool that can be used to save time and money when applied correctly to tasks.

In the late 1800s an Italian economist was studying the distribution of wealth in European countries. He discovered a predictable imbalance in the distribution of wealth. His name was Vilfredo Pareto.

Vilfredo Pareto discovered that approximately 80 percent of the wealth in European countries was controlled by approximately 20 percent of the population. This was later known as the Pareto Principle, or the 80 20 rule. #1

The Pareto Principle is an observable natural phenomenon. It governs many scenarios in life in which 80 percent of the results come from 20 percent of the inputs.

There is a beauty and elegance to life that repeats itself again and again. The Pareto Principle is one of these rules of thumb that reflects human nature, and how the world operates.

Here are some examples of the 80/20 rule:

• Eighty percent of the work done at a company will be done by twenty percent of the people.

• Eighty percent of the people who fly will be travel with twenty percent of the airlines.

• Eighty percent of the computers will be built by twenty percent of the manufacturers.

• Eighty percent of the music listened to will be created by twenty percent of the artists.

These statements are clearly not exact. However they can be made without a great deal of research, and serve as useful guidelines when making general assumptions on how things work. This is using pareto logic.

Why does the 80/20 rule work so well? The answer is simple. 20% of the people, nature, products and systems stand out (excel) from the rest.

Beyond that explanation would probably take many years of research and a PhD dissertation thrown in for good measure. The results probably wouldn’t give a much better explanation.

Tasks can frequently be overwhelming. It is easy to flounder if you don’t know where to start.

The beauty and power of the pareto principal is that it can frequently be used to help you determine where to begin.

Where should you put your energies?

When beginning any task first ask yourself:

“Where should I put most of my energies to give me 80% percent of the desired results?”

This insightful question will help take a seemingly overwhelming task to something that begins to be manageable. Select the parts of the task that will give you the greatest benefit for your time invested.

Click here to see a Pareto Diagram Example.

#1 Rigg, Alan. How to Beat the 80/20 Rule in Selling--Why Most Salespeople Don’t Perform and What to Do About It (Tucson AZ: Hats off Books 2003, 2004).

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