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Have you ever noticed that just a handful of people you follow on social media are responsible for most of what pops up in your feed? Or that a small number of the people you know who drive cars seem to be involved in a disproportionate share of car accidents? If so, you may be witnessing the Pareto Principle at work.
The Pareto Principle is a concept in business and economics that states that 80% of outcomes are driven by 20% of causes. Sometimes, it's referred to as the 80/20 rule. Understanding the Pareto Principle can help you set priorities, make informed decisions, and better understand the world. In this article, we'll cover the basics of the Pareto Principle and give some real-world examples.
The Pareto Principle, also known as the 80/20 rule, is a phenomenon in which 80% of outcomes are driven by 20% of causes. It's named after Italian economist and sociologist Vilfredo Pareto, who observed in the early 1900s that 80% of Italy's land was owned by 20% of the population. He witnessed a similar pattern in his garden, where just 20% of pea pods contained 80% of the peas.
The Pareto principle was later popularized by Joseph Duran, a U.S. management consultant. Since then, it's become a popular concept among those promoting time management and productivity hacks.
The breakdown of 80% and 20% varies somewhat. Sometimes, the split may be 70/30 or 90/10, for example. However, the concept you should know is that a surprisingly small number of causes can have a disproportionate effect on outcomes.
Some commonly observed examples of the 80/20 principle include:
The 80/20 rule has several practical applications in business and life in general. Here are some ways you can apply this principle to business -- but remember, of course, that the 80/20 breakdown isn't always precise.
One big misconception about the 80/20 rule is that you can obtain 80% of your results with just 20% of the effort. Unfortunately, that's not the case.
Even if a small amount of causes drive a large number of results, that doesn't mean you can work on Mondays and sleep in Tuesday through Friday. Some tasks, like answering emails and handling basic administrative tasks, may not be big revenue generators, but they're necessary to have a functioning business.
It also may take significant time and experimentation to determine which projects and clients will produce big results. You may need to invest significant resources before you realize that a particular effort simply isn't worthwhile.
