Introduction
Most readers can probably guess the origin of the book's title. It is based on the principle of the Italian economist Vilfred Pareto. Pareto studied patterns in mathematics and economics. During the research, answers to the following questions were obtained:
Is there a balance among the population's income? No. The minority gets the majority.
- Is there a balance among the efforts to acquire goods? No. Little gives a lot.
- Is there a balance between results and time? No. A little goes a long way.
It was determined that 80% of results are achieved through 20% of efforts. The book's author, Richard Koch, goes further. It affects people’s lifestyles and demonstrates the “80/20” imbalance in everything that surrounds us. It is important to understand this proportion in its essence. By accepting the principle, your whole life will begin to change.
Don't take everything literally. “80 to 20” does not always work out; sometimes the proportion “70 to 30” or “95 to 5” works. To understand the imbalance and its consequences, to understand the impossibility of an ideal balance “50 to 50” is the main task of the reader
The book itself is an example of an 80/20 relationship: approximately 20% of the book contains the most important 80% of the ideas.
Firstly, you should first make sure that it works not only in mathematics. Secondly, understand exactly how you can use it. Next, understand the results that can be expected from using this principle in life.
And after getting acquainted with the summary, you will be able to choose: follow the principle and change your life or continue to waste time on the insignificant 80%.
Part one. Who lives and what functions according to the 80/20 principle
1.1. It’s safe to say: any activity is based on two numbers: 80 and 20.
1.2. The entire business sphere is the business of big players.
For example, according to Forbes, 5–10% of businessmen earn 75–80% of the country’s GDP. This same percentage accounts for 70% of the production of goods and services. And only the remaining 90–95% collect “residues” and fall on small and medium-sized businesses.
1.3. When looking at an individual company and its earnings, there is no surprise either. A fifth of consumers brings 4/5 of all profits. The sales matrix shows the same relationship: 20% of products and 20% of salespeople bring in 80% of the revenue.
Conclusion: a loyal customer is worth three “disposable” ones.
The Royal Bank in Toronto calculated the profitability of its clients. The result turned out to be: 17% of all clients generate about 93% of net income.
1.4. What about in your personal life? Conduct your own little experiment. List 20 people in the categories: friends, helping colleagues at work, dangerous competitors. In the context of relationships, the 80/20 principle says:
20% of friends are the closest and help in a difficult situation,
20% of colleagues are the most helpful,
20% of competitors are the most dangerous.
Compare: About five people on each list are significantly different from the rest in their category.
1.5. Social spheres are also full of imbalance. The spread of 99–100% of diseases is carried out by only 1–5% of virus carriers. About 20% of schools produce 80% of the most educated graduates. About 15% of theaters are visited by 75% of lovers of this art.
1.6. Objective scientific knowledge indicates the correctness of the concept: 20% of the Earth's territory contains 80% of the world's mineral resources. OPEC unites 70-75% of oil fields and 7-10% of the world's population. Population also demonstrates the principle with remarkable accuracy: in the UK, 79.8% of residents are found in 20.2% of cities. At the same time, in any locality, 20% of thieves take away 80% of stolen goods in a year!
The 80/20 principle can be observed independently every day from the news. For example, according to a study by RBC magazine, about 7% of travel agencies served 70% of clients last year. Or this example: at the Sochi Olympics in 2014, about 85% of the funds were spent on 13.3% of all buildings.
1.7. Social psychology also shows the exact following of proportions. In psychotherapy sessions, 17% of people in a group perform about 77% of all activity. At the same time, about 13% of psychotherapists see 64% of all those who seek psychological help.
1.8. Thus, the 80/20 principle is called the Great Idea by many. He talks about the need for activity, but this activity must be reasonable and based on two laws:
Focus (concentrating on less leads to more);
Progress (you can create more with less).
The principle works! This is surprising and intriguing: you can get great results without much action. How to do it?
Part two. How to change according to the 80/20 principle
2.1. How to switch to the 80/20 lifestyle? The application of the principle can be roughly divided into two parts: 80/20 Analysis and 80/20 Thinking.
The first is responsible for summing up results and results, which is also important for maintaining motivation and planning next steps.
Thinking is about building the worldview of a person who wants to make the most of the years of life allotted to him.
2.2. What can you recommend when switching to the 80/20 lifestyle:
Keep it simple - it will be better (identify the key 20% of your activities and simplify them).
Think outside the box (give at least half an hour a day to your imagination).
Think strategically (set a goal and achieve it),
Live in pleasure (hedonism stimulates self-development and leads to good results).
Think reflectively (look at yourself in any state, be flexible).
Be constantly updated (new is the only constant).
2.3. At work you can use the principle in the following areas:
Do what you like.
Manage your time.
Make important decisions efficiently, spending your allotted 80% of time on them.
Pay more attention to your best clients.
Pay attention to successful people (most likely, they enjoy themselves, rather than get tired and waste extra energy).
How to improve the time management skill that is critical to implementing the principle? There are a few simple steps:
Understand that reward does not depend on the effort put in.
Don’t blame yourself for making moderate efforts at work (the results for you and more diligent workers are the same!).
Free yourself from other people's obligations.
Use time outside of generally accepted conventions (be original).
Focus on those 20% of your time that produce 80% of the final product.
Focus on this 20% and use it effectively.
Get rid of the remaining 80%.
2.4. Living according to the 80/20 principle: define your dream (the ultimate goal), plan the path and implement your plan (take action).
Start by understanding: what you want from life, where you want to be and what kind of life you want to achieve.
Have you decided? Then carefully answer the questions:
Does the goal reflect your personality?
Does it excite you?
Does she take your skills and talents into account?
Hint: you need to identify the most important 20% of character traits and skills in your life. To do this, you can write down 30–40 general characteristics and put them in order of importance. Be honest, don't exaggerate or understate - your future is at stake!
2.5. There are many paths to your goal. Serious analytical work is needed: from dozens of ways to achieve what you want, you need to choose the shortest one. It will turn out to be the most successful for the present and future!
Why should you choose the shortest route? Remember: to be successful you need to be lazy and smart.
This is proven by the table of Manstein's ambitions.
“Stars” are the main capital of any group of people (especially in business). They are the ones who bring in millions and bring progress with them. Strive to be them in your goals, ways and actions. And instead of the word “lazy” you can use the word “relaxed”.
One of the most successful US presidents of the twentieth century, Ronald Reagan, belonged to this type. A former actor, he had flexibility, and the ability to focus on just one or two critical issues allowed him to find more in less.
2.6. The 80/20 action has one important property: immediacy. It underlies the result obtained.
Do you want to build a house (goal)? We decided to save every 10% of our salary (the easy way). Then open a savings account (go for it!) now!
Hint: You don't have to take a big step forward. If you want to lose a lot of weight, start with small efforts - walking around the house every day. Effective? Carry on! No? Then other measures can be used without unnecessary stress!
2.7. Create a personal 80/20 happiness plan for yourself. To do this, fill out a simple table and follow it:
2.8. Have you transitioned to the 80/20 lifestyle? Now you need to resist and make its components your habit.
Use happiness habits for every day:
Sports and physical activity;
Productive mental load;
Spiritual or creative activity, meditation;
Social activities (good deeds);
Pleasant time with a friend;
Giving yourself pleasure;
Congratulating yourself on your achievement.
There are two ways to maintain a state of happiness for a long time:
Determine those moments when you are most satisfied - stretch these periods.
Identify those moments when you are least satisfied - reduce these periods.
Part three. Results from applying the 80/20 principle
3.1. Peace. Are you already feeling good about yourself and relaxed? This is a good sign: you have a good approach to solving problems!
Signs by which you can distinguish those who are successful in their business: ambition, enjoyment of work, your own formula for success. At each point, we must not forget about relaxation, which will lead you the shortest path to your happiness!
3.2. Let's return to the experiment from the first part (section 1.4). From the compiled lists, 1/5 of the most important characters remain. You need to keep an eye on them: hold on to your friends, manage the talents of your colleagues, predict the actions of the enemy, etc. Treasure such high-quality connections, let others go without regret.
In friendship you need to look at 5 characteristics: mutual joy of communication, respect, joint activities, mutual usefulness and trust. All criteria coincide - a person has every chance of being among the closest ones.
3.3. Family happiness. Living 80/20 will lead to situations:
More time will be devoted to your loved one, children (80% of free time during the week!).
Adults and children in the family circle will be in a good mood (minimum number of quarrels).
Discipline within the family will be maintained, and love will be cultivated (in the course of distinguishing between certain rules of behavior and free time for pleasure), etc.
Children constantly ask for attention. They show: 80% or more of the time should be devoted to caring for those closest to us. By constantly showing your love, you contribute to the child's development in an upward spiral.
3.4. Professional happiness. Once you've achieved your ideal 80/20 position, it doesn't take much to maintain it. The key is to focus on less to achieve more. And to do this, you should periodically select the three most important values for you during work:
High pay.
Creativity and diversity.
Nice surroundings.
Decent boss.
Prestige.
Safety.
Comfortable conditions.
Great colleagues.
Nice extra benefits.
3.5. Finally, don't forget the components of a happy life in general according to the 80/20 principle:
Maximum expansion of your sphere of influence.
Setting achievable goals.
Flexibility.
Close relationship with life partner.
A few happy friends.
A stable state of happiness.
Remember that you are the master of your life. There is no need to always work hard or worry about every detail. With a few key decisions, you can achieve 90 percent or more personal happiness!
Conclusion
The 80/20 principle is relevant and universal. It can be used in both career and personal life. Several conclusions can be drawn:
Imbalance plays an important role in the universe. The “50 to 50” proportion is a myth. However, we need to use this imbalance for the better and understand: little gives a lot (and vice versa).
The simpler you make your life, the easier it is to do the small things that will lead to big results. Less leads to more, and in less you can discover more.
You must always be open to new things, whether it be innovation in a product or free time. However, you should not look at friends and family from this point of view: quality is important there, not quantity.
Don't be ashamed of working a little. If all companies are focused on results, and you work with the same success as your diligent colleague, then what is the problem?
Happiness can be built through mastering 80/20 Analysis (the ability to understand the essence of what is happening) and 80/20 Thinking (a worldview according to the principle).
The 80/20 Life plan consists of three steps: determining the ultimate Goal, choosing the simplest Path and immediate Action.
There are certain happiness habits: actions that, when performed day after day, make you satisfied with yourself, your environment and your life.
In contact with
The Pareto principle is one of the most famous and even hackneyed laws of time management. However, despite its obviousness and effectiveness, many people do not use it or do so at an unacceptably superficial level. In his book “The 80/20 Principle,” Richard Koch carefully studied the experience of practical application of this pattern in life and business. Read the summary of the most important thoughts of this work.
80/20 analysis
The method is based on the statistical identification of the Pareto pattern in all areas of life. With its help, we will find those factors that have a greater influence on the result. You will need 2 sets of data: data about the object of study (for example, your friends) and a certain parameter correlated with the object (in our example, beer consumption). And if standard statistical analyzes reveal some average values (or their distribution), then 80/20 analysis is aimed at finding extremes, the most prominent parameters.
You ask your friends how much beer they drink during the week, and then rank the data in descending order. From the first friend (45 glasses of beer per week) to the last (0 glasses). You then calculate the percentage. In our case, 20% of friends drink 70% of the beer.
How can you use the results of the analysis?
The first area of application is to focus on the top 20% of assets. If 20% of your brewery's customers drink 80% of the beer, you should try to satisfy their needs first. If 80% of your pleasure comes from running rather than gymnastics, pay more attention to the first type of activity.
The second area is to think about how to improve the effectiveness of the remaining 80%. Offer low-alcohol beer to light-drinking customers. Think about how you can get more pleasure from gymnastics, if you have to do it.
Practical application of the principle in business
The 80/20 principle shows itself very clearly in business. It can be used both to study its performance (using 80/20 analysis) and to practically improve results.
Where do you make the most money?
The first thing you should do is determine what in your business brings in the most money. To do this, analyze the following 3 parameters:
- Product– analyze which brand or group has the highest profitability, while requiring a minimum of costs and actions for their sales. In the process, you will also discover those products that make almost no profit or are even unprofitable.
- Clients– analyze who buys your products and how. Please note that some clients, although they pay large amounts, can be expensive to service. Others (usually wholesalers) are picky and buy more. You must determine which type brings you more net income. Also try changing your approach to working with other customers.
- Competition segments– analyze groups of products that have their competitors in certain parameters from other companies. This will allow you to significantly improve your market strategy and allow you to take a fresh look at how you deal with competitors.
Simplify
One of the explanations for the Pareto principle is the simplicity or complexity of certain components of the system. Some products are easy to manufacture, do not require much promotional effort, and do not require complex service. They are the ones that most often provide the greatest profitability. And if you are looking for what to do with the 80% that brings in 20% of your income, the answer may be: simplify.
Deal with key clients
The modern obsession with customer service largely contradicts the 80/20 principle. Satisfying 100% of the needs of 100% of clients leads to the fact that the complexity of the process and its cost increase significantly. Which inevitably leads to a decrease in income. However, there are ways to achieve what you want much easier and faster:
Focus on the perfect quality of the top 20% of profitable products;
focus on retaining and meeting the needs of the 20% of customers who generate 80% of the profits.
Sales
Sales success depends on the performance of the individual salesperson and the overall organization of the sales department. Subject these factors to an 80/20 analysis. Surely you will find the same ratio. Try the following tips to improve your situation:
- encourage the best sellers so that they never leave you;
- hire more of the same type of salesperson;
- analyze the factors that contribute to high sales (time, special techniques, etc.), target other sellers to use them;
- focus your efforts on selling the top 20% of products;
- Focus sales efforts on meeting the needs of your most valuable customers.
Making decisions
Until the mid-20th century, business was driven largely by intuition. Over the past 50 years, armed with mathematics and economics, he has skewed heavily toward an analytical, linear approach that often gets bogged down in minutiae. The 80/20 principle allows you to find a balance between these approaches. Arm yourself with the following 5 rules:
- few decisions are important;
- often important decisions have no alternative; sometimes you just need to recognize the need for change;
- use 80% of the data, do 80% of the analysis in 20% of the time, but act as if you are 100% done;
- if something doesn't work, it's better to give it up sooner rather than later;
- if something works, multiply your bets.
Project management
We have already talked about the harm of complexity - this is precisely what company management structures often do. The 80/20 principle helps optimize this process:
- simplify the goal - or at least break a complex project into several stages;
- set impossible time frames - this way the team will only deal with really important things;
- Plan more – the more time you spend on a project, the more attention you need to pay to planning;
- Introduce the product after final development - 80% of key problems have their roots in the preparation and production process.
Pareto principle in life
Understanding the impact of a few actions on serious results allows you to achieve a lot in your life. Work less, earn more and with more pleasure. Isn't this what all people dream about? You can achieve this using 80/20 Thinking.
Thinking 80 20
80/20 analysis works well in fields such as business and economics, which often deal with quantitative data. However, in other areas of life it is much more practical to use 80/20 Thinking. We will not count, we will learn to highlight the main factors of success and ignore the unimportant ones. In other words, we will learn to see the forest for the trees. Your task is to look for those 20% in everything that determine 80% of success.
Here are some principles to help you apply this thinking:
- focus on productivity, not intensity;
- look for opportunities to quickly achieve results rather than perform a procedure;
- be selective about new opportunities;
- strive for excellence in a few things rather than mediocrity in many things;
- delegate unproductive activities.
Time
By applying 80/20 thinking, we can notice some very interesting patterns in the world. We achieve most of our successes in a short time. Most of our happiness comes from a few moments. Most of life is completely unproductive and unfulfilling.
Using 80/20 thinking can greatly improve this situation. Classic time management tries to squeeze hours into minutes. We will concentrate only on the highest priority tasks. Now we will not look for time - we will try to use it effectively. Analyze your daily activities and determine the most productive and most useless activities. Invest in the former and get rid of the latter.
Job
Work is part of life, period. The 80/20 principle allows you to find a balance between work and rest, and work with more pleasure and enthusiasm. Everything is extremely simple. If you are happy outside of work, you should devote less time to it or change it altogether. If work brings you true happiness, work harder, but try to increase the value of other activities.
In the modern world there are plenty of opportunities to be anyone and monetize almost all your abilities and talents - take advantage of it.
Money
The logic of the Pareto principle is very good in the field of making money. Let's think: minimum effort gives maximum results. What efforts are having the greatest impact? Most likely, those that you do with pleasure are those that you like. Moreover, they most likely turn out to be of the highest quality. Conclusion? Make money doing what you love to do.
You don't have to work hard to increase your capital. Investing is an area that perfectly illustrates the 80/20 principle. Minimal effort in sourcing assets can ultimately yield incredible profits. Invest as soon as you have “free money”.
Relationships
In the social sphere of our lives, the Pareto principle puts forward three fundamental statements:
- 80% of the value of all relationships lies in the last 20%;
- 80% of the value of a relationship lies in the 20% that were formed first;
- We devote much less than 80% of the time to the 20% of our most important relationships.
Psychologists say that the number of strong, deep connections we can form with other people is limited. We can make a few friends - the rest will remain nothing more than friends. Only 1-2 sexual partners will always stand above the rest in our hierarchy of values.
All this suggests that you need to focus on the quality of existing relationships, and not on acquiring new connections. Spend more time and energy for those closest to you. Spend 80% of your time on them.
Professional relationships
Exceptional heights are almost never achieved alone. You will need help one way or another. And therefore it is very important to be able to build relationships with a variety of people. The Pareto principle will help with this too.
Just as in personal relationships, the list of key allies is small. Make it up and invest in maintaining this particular relationship. Consider the following factors:
Mutual agreeableness is the foundation of a good relationship. However, we often have to communicate with not very pleasant people. Reconsider their value. You may be spending too much effort and time on them.
Overall Experience is the best way to achieve intimacy. Use tough times to your advantage by forming relationships with people who are going through the same thing as you.
Mutual benefit. You don't just have to respond to other people's requests. Sometimes you need to take the initiative. Don't be petty, but remember that the benefits should be mutual.
Confidence– if the pleasure of communication is the foundation, experience and benefit are the building blocks, then trust is the cement that holds everything together. Remember that without it, any relationship is meaningless. Don't waste time on them if your partner is dishonest, but never give them reason to doubt you.
Summary
The 80/20 principle is one of the fundamental laws of business and life in general. With its help you can achieve incredible success. Apply 80/20 thinking in business and 80/20 thinking in social life to identify the most effective actions. Concentrate on completing them - and thus multiply your results many times over. Remember to look for opportunities to improve the productivity of the other 80%.
80% of results come from only 20% of the causes—a principle reminiscent of the saying “Less is more.”
The book will teach you how to choose and use the most effective actions and methods, the number of which is relatively small, so that your achievements perfectly correspond to your goals, plans, and dreams.
Preface
If you knew that you could enjoy all the great and wonderful benefits life has to offer with less effort and less expense, would you be interested?
If you could work two days a week and get more results and pay than you currently get for a full week, would you be interested?
If you could find a simple solution to your problems by following a principle that always turns out to be true, would you be interested?
If this principle applied not only to making money, finding success and achieving well-being, but also to the more important things in life - the people you love and care about, as well as happiness and realizing your potential - you would be interested ?
Of course I would be interested. And you can really change your life by using the 80/20 principle.
Living by the 80/20 principle changes the way we perceive the world around us and habitual behavior, but it is much simpler and easier to follow than you might expect.
If we understand how the world works - even if it doesn't work at all in the way we imagine - we can adapt to it and get much more of what we want, and with less energy. That is, by doing less, we can achieve more.
This book is about activity, but about less activity.
This is an extremely practical book, but at the same time quite unusual: it is dedicated to describing the results of being less active, not more. As has been proven time and time again, it is impossible to radically change your life without changing the way you act. Everything we do to achieve happiness far exceeds what is necessary; many of our efforts are wasted. In general, there is only so much we can do, just what makes us happy, and still completely transform our lives. We think and do more of the little things that matter, and we do them better and more energetically, but overall we do much less.
The difficult path to living according to the 80/20 principle
This lifestyle is based on a scientific law called the 80/20 principle, which has repeatedly proven its effectiveness in business and economics. According to this principle, 20 percent of the reasons or efforts made produce 80 percent of the results.
My earlier book, The 80/20 Principle, explains how to use this concept to increase company profits. I've also included a short section on how to use the 80/20 principle to achieve success, happiness and well-being. The possibility of applying the principle in personal life has given rise to many heated and controversial discussions. Some critics argued that this was a great idea, worthy of much attention, but that it would be completely useless outside of business. However, those readers who tried to implement it in reality wrote to me that it completely changed their lives.
The book “The 80/20 Principle” has been translated into 22 languages and sold more than 500 thousand copies. It was conceived as a book about business, published in publishing houses specializing in business literature, and in bookstores stood on the shelves reserved for books about business, but somehow it began to be used as a book in the “Self-Help” series. The idea turned out to be so effective that readers who tried it on themselves then shared it with friends, who in turn told their friends about it, extending this chain of word-of-mouth advertising to the size of a sensation.
(Richard Koch) (b. 1950), Richard Koch is a management consultant, businessman and author of excellent books on the principles of the Pareto law (80/20 rule) and its application in all areas of life.
Koch has extensive practical experience with this law and has used these concepts to profit from several of his own investments. Richard has invested in companies such as Plymouth Gin, Filofax, the Great Little Trading Company and Betfair and is the co-founder of consultancy L.E.K. Consulting
He was previously a consultant at the Boston Consulting Group and later at Bain before starting his own firm.
In his books on the 80/20 phenomenon, he discusses the basic principles of how the universe works and the process of evolution as described by Charles Darwin and as a special case the use of the 80/20 principle in business and work.
Richard Koch download books for free
The 80/20 principle
Eighty percent of results come from just twenty percent of causes—a principle that many people and organizations have succeeded in realizing is true. The book invites you to learn how to achieve more with less, that is, master the main secret of increasing labor efficiency.
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80% of results come from only 20% of the causes—a principle reminiscent of the saying “Less is more.” The book will teach you how to choose and use the most effective actions and methods, the number of which is relatively small, so that your achievements perfectly correspond to your goals, plans, and dreams.
Eighty percent of results come from just twenty percent of causes—a principle that many people and organizations have succeeded in realizing is true. The book invites you to learn how to achieve more with less, that is, master the main secret of increasing labor efficiency.
For a wide range of readers
Part one
Overture
The Universe is heterogeneous
What do we call the 80/20 Principle? This principle states that in any statistical population, some factors tend to have a much stronger influence than others. The starting point or working hypothesis is that 80% of the results or the resulting material product are the result of 20% of the causes and that sometimes the proportion of decisive forces can be much smaller.
Our speech illustrates this point very well. Sir Isaac Pitman, the inventor of shorthand, discovered that 2/3 of our everyday speech consists of only 700 of the most common words. Pitman showed that, together with their derivatives, these 700 words make up 80% of our ordinary vocabulary. Thus, 80% of the time we use less than 1% of all the words in a language (The New Oxford Edition of the Small Oxford English Dictionary contains more than half a million words). We could call this ratio the 80/1 Principle. We could also call this the 99/20 Principle, since 99% of our speech consists of less than 20% of words.
The 80/20 principle works well in an area such as the film industry. Recent studies have shown that 1.3% of movies earn 80% of the box office receipts, so in effect we have an 80/1 ratio.
Don't think that the 80/20 formula is accurate and universal. Sometimes the ratio between results and causes is closer to 70/30 than 80/20 or 80/1. However, it is extremely rare that 50% of the causes are responsible for 50% of the results. The universe is predictably unbalanced, and very few things are truly crucial in it.
Truly effective people and organizations succeed precisely because they harness the few truly important forces in their fields and make them work for them.
You can do the same..
The 80/20 Principle states that a small proportion of the causes, inputs, or efforts are responsible for a larger proportion of the results, output, or reward earned. For example, to get 80% of the results achieved at work, it takes you 20% of the total time spent. It turns out that in practice, 4/5 of the efforts you put in (a considerable share!) have almost nothing to do with the result you get. This, by the way, is at odds with what people usually expect.
Thus, the 80/20 Principle states that disparity is an inherent property of the relationship between causes and results, inputs and outputs, effort and rewards. The expression “80/20” describes this disproportion well: 20% of the invested funds are responsible for 80% of the return; 80% of effects come from 20% of causes, 20% of efforts produce 80% of results.