Business Philosophy

The 80/20 Rule

Today, I revisited the 80/20 rule. The first time I came across the concept of 80/20 was around 2 to 3 years ago. I was exiting a library when I noticed amongst a pile of other books, a blue book with 80/20 written on its cover with big white fonts. For some very odd reason it really caught my attention. I had not heard about the concept before. I could not take the book because it was still in the process of getting checked in, so I took a picture of it on my phone. Some days later I went and got the book. I skimmed through and it I was amazed at the simplicity of this rule. I don't know why it's there but it's there and I like simple things that work, even if it is an approximation.

At the time when I was first introduced to this principle I did notice things in my own business and in my life in general and I thought, "Oh this is pretty cool". I even remember talking about it with a few friends and business associates. After some time I forgot about it.

Today I downloaded The Philosopher's Notes Volume 1, which by the way is amazing I think. It is basically Cliff Notes or Coles Notes for the top 100 personal growth books. This in itself is 80/20 at it's best. I skimmed through a few books and all the big ideas are condensed into 6 pages, which is amazing! The first book or note I read was on The 80/20 principle.

The principle states, quite simply, that 20% of efforts lead to 80% of results. This is everywhere. Let me give you a few examples. According to the 80/20 principle, 80% of your income in business comes from 20% of your clients, 80% of your time gets spent on 20% of your tasks or the 20% of the people that you know. 20% of your products or services yields 80% of the profit. At the same time 80% of your cost also come from 20% of the total number of expenses, 80% of your time spent on debugging is spent on 20% of bugs, 80% of crimes are committed by 20% of the criminals, 20% of roads get 80% of the traffic and I could basically go on and on about this.

So what does this all imply? Assuming the 80/20 principle holds, to make more profit, be more effective and efficient and to be generally more happy in life, you should focus your energy on the top 20% of everything that yields 80% of the good stuff. Focus on the top 20% of your products, 20% of your clients, do the top 20% of the things that make you happy, spend more time with the top 20% of the people that give you more joy and happiness. Also you may want to fire the 20% of your clients that give you the 80% of the headaches, reduce or stop production on the 20% of the products and services that results in 80% of the waste, and etc…

Of course I'm not suggesting a mechanical trimming of the 20% of things and people that give you 80% of the trouble and solely focusing on the 20% that gives you the good stuff. I wish life was really that simple. You do need to study and make decisions on a case by case basis, but this 80/20 is a fast way to have a short cut analysis of business and life in general.

Take out your notebook(I mean the one with a screen and keyboard) and jot down 80/20s in your personal, business or work life.