The 80/20 Principle: The Secret to Achieving More with Less

by Richard Koch

The 80/20 Principle tells us that in any population, some things are likely to be much more important than others. A good benchmark or hypothesis is that 80 percent of results or outputs flow from 20 percent of causes, and sometimes from a much smaller proportion of powerful forces.

it is very rarely true that 50 percent of causes lead to 50 percent of results. The universe is predictably unbalanced. Few things really matter.

The pattern underlying the 80/20 Principle was discovered in 1897, about 100 years ago, by Italian economist Vilfredo Pareto (1848–1923).

WHY THE 80/20 PRINCIPLE IS SO IMPORTANT The reason that the 80/20 Principle is so valuable is that it is counterintuitive. We tend to expect that all causes will have roughly the same significance. That all customers are equally valuable. That every bit of business, every product, and every dollar of sales revenue is as good as any other. That all employees in a particular category have roughly equivalent value. That each day or week or year we spend has the same significance. That all our friends have roughly equal value to us. That all inquiries or phone calls should be treated in the same way. That one university is as good as another. That all problems have a large number of causes, so that it is not worth isolating a few key causes. That all opportunities are of roughly equal value, so that we treat them all equally.

The 80/20 Principle asserts that when two sets of data, relating to causes and results, can be examined and analyzed, the most likely result is that there will be a pattern of imbalance.

The overriding message of this book is that our daily lives can be greatly improved by using the 80/20 Principle. Each individual can be more effective and happier. Each profit-seeking corporation can become very much more profitable.

At the heart of this progress is a process of substitution. Resources that have weak effects in any particular use are not used, or are used sparingly. Resources that have powerful effects are used as much as possible. Every resource is ideally used where it has the greatest value. Wherever possible, weak resources are developed so that they can mimic the behavior of the stronger resources.

The 80/20 Principle, like chaos theory, is based around the idea of nonlinearity. A great deal of what happens is unimportant and can be disregarded. Yet there are always a few forces that have an influence way beyond their numbers. These are the forces that must be identified and watched. If they are forces for good, we should multiply them. If they are forces we don’t like, we need to think very carefully about how to neutralize them.

We can see positive feedback loops operating in many areas, explaining how it is that we typically end up with 80/20 rather than 50/50 relationships between populations. For example, the rich get richer, not just (or mainly) because of superior abilities, but because riches beget riches.

Eighty percent of the results come from 20 percent of the causes. A few things are important; most are not.

the distinction between 80/20 Analysis and 80/20 Thinking, both of which are useful methods derived from the 80/20 Principle. 80/20 Analysis is a systematic, quantitative method of comparing causes and effects. 80/20 Thinking is a broader, less precise, and more intuitive procedure, comprising the mental models and habits that enable us to hypothesize what are the important causes of anything important in our lives, to identify these causes, and to make sharp improvements in our position by redeploying our resources accordingly.

The common view is that we are short of time. My application of the 80/20 Principle suggests the reverse: that we are actually awash with time and profligate in its abuse.

There is enormous scope for improvement, by rearranging and redirecting both nature and our own lives. Improving on nature, refusing to accept the status quo, is the route of all progress: evolutionary, scientific, social, and personal. George Bernard Shaw put it well: “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.”

Joseph Ford comments: “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.”16

To apply the 80/20 Principle you have to have two sets of data, both adding up to 100 percent, and one measuring a variable quantity owned, exhibited, or caused by the people or things making up the other 100 percent.

When you are working, find out what the book is saying much faster than you would by reading it through. Read the conclusion, then the introduction, then the conclusion again, then dip lightly into any interesting bits.” What he was really saying was that 80 percent of the value of a book can be found in 20 percent or fewer of its pages and absorbed in 20 percent of the time most people would take to read it through.