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

by Richard Koch

DAILY HAPPINESS HABITS

1 Exercise 2 Mental stimulation 3 Spiritual/artistic stimulation/meditation 4 Doing a good turn 5 Taking a pleasure break with a friend 6 Giving yourself a treat 7 Congratulating yourself

seven shortcuts to a happy life.

1 Maximize your control 2 Set attainable goals 3 Be flexible 4 Have a close relationship with your partner 5 Have a few happy friends 6 Have a few close professional alliances 7 Evolve your ideal lifestyle

If there is a trade-off between achievement and happiness, choose happiness.

16 YOUR HIDDEN FRIEND

our subconscious friend, which can be our greatest ally, if we learn to appreciate and program it properly.

The subconscious is much bigger, comprising an estimated 92 percent of total brain size.

THREE CARDINAL USES OF THE SUBCONSCIOUS

Creative solutions

Attaining personal goals

Serenity

PART FOUR THE 80/20 FUTURE

17 SUCCESS THROUGH 80/20 NETWORKS

1 One increasingly dominant reason why the 80/20 Principle works is the power of networks. 2 Networks also operate in line with the principle. In any given market or category, a very small proportion of networks will hold sway over a large proportion of activity or business in that market or category. 3 Networks and their members like market share concentration and monopoly, because this provides the greatest depth and reach of the network. Bigger networks are better networks. The bigger network matches supply and demand more efficiently and quickly, because it has more permutations of possible member matches and more data about each member’s predilections. 4 Having two or three networks with roughly equal size in the same category is unstable, because it is not in the interests of network members. They are best served by a near-monopoly, until innovation creates a new category—which itself will also inevitably lurch toward a few main networks, or one. 5 The influence of networks has soared since the 1970s, and especially since the invention and proliferation of online transactions. Networks are becoming more prevalent and providing an ever-growing proportion of commercial and social activity. This means that the old 80/20 benchmark is rapidly becoming too conservative as a way of describing the principle. Networks are not just increasing the incidence of the principle and making it pretty much ubiquitous, but also increasing the extremity of the principle.

18 WHEN 80/20 BECOMES 90/10

1 The trend toward a higher proportion of activity—especially highly remunerative activity—within networks. 2 The trend within network markets from 80/20 to 90/10 and even more warped degrees of concentration. 3 Within any particular network or network-based firm there will be a trend over time for the terms of trade to slide in favor of the network monopolist or near-monopolist. Over time, customers—both consumers and other businesses—will pay more, and those that dominate the network will make even larger fortunes.

PRACTICAL ADVICE FOR THRIVING IN THE NEW WORLD

Spend time searching for new networks and platforms that have just got going. Make it a hobby and devote a few hours a week to it; and • Once you have joined a new network business, think like an owner. You could well become a fractional owner, through stock options and possible direct investment even of a small sum. A very small fraction of the firm could make you rich. Ensure that you do something that speeds up the firm’s growth. Aim to be a winner in the new company, someone who is listened to and respected. • If you are an investor, consider focusing on incipient network businesses. Get in early before the value of the platform is obvious, before people realize how valuable it could become.

19 YOUR PLACE IN THE 80/20 PRINCIPLE

Your 80/20 future is completely uncharted territory; it is challenging, thrilling, and exhilarating. It is uncharted because it exists in your own mind, and the minds of your closest friends and colleagues—and nowhere else.

HINT 1: ONLY WORK IN NETWORKS

HINT 2: SMALL SIZE, VERY HIGH GROWTH

Join a company with fewer than a hundred employees increasing revenues by at least 30 percent a year—ideally fewer than twenty employees and at least doubling each year.

HINT 3: ONLY WORK FOR AN 80/20 BOSS

They look to their people for a few valuable outputs. They pay no attention to inputs such as time and sweat.

They encourage you to focus on what delivers the greatest results with the least effort.

HINT 4: FIND YOUR 80/20 IDEA

something that explodes because it delivers a fantastic result for a modest outlay of energy.

HINT 5: BECOME JOYFULLY, USEFULLY UNIQUE

What we must do is find tasks we love doing, which other people really appreciate and are willing to pay for, either in money, or in admiration, or in love.

Keep this motto in front of you—BECOME UNIQUE USEFULLY AND JOYFULLY.

20 THE TWO DIMENSIONS OF THE PRINCIPLE

Good to Great by Jim Collins has one chapter—Chapter 4, “The Hedgehog Concept”—that’s a shimmering application of the 80/20 Principle.

if you could spend your time and vigor on what counts most for you, what would be the division of work and play? And how would the two relate?

Progress always comes from a small minority of people and organized resources who demonstrate that previously accepted ceilings of performance can become floors for everyone.