The Pareto Rule or the 80/20 rule was discovered by Vilfredo Pareto. He found out that approximately 80% of the land in Italy was owned by 20% of the population. He also found the rule applied in other contexts.
Joseph Ford once said, “God plays dice with the Universe. But they’re loaded dice. And the main objective is to find out what rules they were loaded and how we can use them for our own ends.”
Now one of the rules of the universe is the Pareto Rule.
In a nutshell: 20% of your effort produces 80% of the results. This also means that 80% of your effort creates only 20% of your results.
In current times, the Pareto Rule can be used for personal productivity and even in business. For example, in many circumstances, 80% of the revenues of a business come from 20% of their customers. In our own personal life, 80% of what we wear daily is basically 20% of our clothes. The rest of our clothes we use infrequently.
So how can we tap into this powerful mental model? How can we maximize the power of the Pareto Rule? The 80/20 rule has the potential to really jumpstart your life.
Applying the Pareto Rule to your Personal Life
For example, losing weight is one of the most common goals of people. Instead of rushing too fast and suddenly getting a gym membership, it would be good to reflect first and apply the Pareto rule. You can ask yourself, “What is it in my diet that I am taking regularly that is impacting my health negatively the most?” You can also ask yourself this: “Which exercise or movement can I perform with the most ease that can boost my health tremendously?”
By asking these questions, things are kept simple and effective. So your first action would be to eliminate the food or drink (e.g. softdrinks) from your diet. Sudden fasting and change of diets are generally unsustainable. But baby steps like eliminating one food or drink from your diet will be easier to sustain.
It’s the same with the exercise. Going to the gym takes money and significant amounts of discipline. It literally has to become a habit for it to be effective. So maybe you can take a quick walk daily with your dog if you have. This can be a low effort way to lose weight because it doesn’t seem too much work to bring your dog out for a walk.
The point is that they are low-effort strategies that yield massive payoffs. They are easy to maintain and in the long run will allow you to reach your goal of losing weight.
If we talk about happiness because all of us want to be happy, we can ask ourselves: “Which 20% off the causes give me 80% of my unhappiness?” So we scrap or eliminate those causes as soon as possible.
“Which 20% of the causes give me 80% of my happiness?” So we do more of those causes. That’s how powerful the Pareto Rule can be. It can literally lead us to the path of happiness, which leads to the path of success.
Audit your life. Make a list of the most important actions you take. These actions are the ones you should focus on because they make the most of the difference.
Aside from beliefs, you should also edit your beliefs. Reflect: “Which 20% of your beliefs cause 80% of your misery?” Time to eliminate or replace those beliefs with more positive and uplifting beliefs.
Even friendships are not all equal. Which 20% of your friends do you enjoy the most time with? Therefore spend more time with them. Some ‘friends’ cause you pain? Then time cut them from your life. Determine whether these relationships nurture you or drain you.
The Pareto Rule is also perfect to apply in decluttering your home. The truth is that we only use 20% of what we own on a regular basis. The rest are just things we used in the past or those that we think might be useful in the future. As such, it’s time to get rid of these stuff as they occupy space and gather dust. You can either throw it away, lessen that 80% or donate it to those that people that will really use those things regularly. Ask yourself: “Which 20% of your possessions give you the most value?”
It’s really useful to do regular spring cleaning so that you will only have things in your home that you actually use and need. There will be fewer instances of figuring out where your things are. Eliminate the clutter!
You can also choose to declutter your computer. Go through your computer applications. Which ones do you rarely use or provide little value to you? Time to uninstall them so that your computer can run more efficiently. Get rid of the trash. Same thing with your desktop. Optimize it.
The Pareto Rule forces us to prioritize. It means choosing the important over the trivial because the important is what will generate for us the most significant results. We enjoy ticking items off our to-do list but what’s more important is that we’re ticking off the most important tasks for the day. That’s why Brian Tracy tells us to eat our frogs first thing in the morning. Eliminate in your to-do-list the most important tasks first before proceeding to the lesser important tasks.
Your productivity will definitely skyrocket if you apply the Pareto Rule. One of the things that you can for things that are necessary but will not give the most value for your time is to automate them. For example, paying bills are necessarily but is time-consuming. So one thing you can do is automate them. You can enroll them in your banking account so that your savings account is auto-debited when the bill arrives and is charged to your account. In this way, you save precious minutes monthly of doing it manually.
You can also automate your savings. You can have your payroll account automatically deduct a certain amount every month to your savings account. In this way, you build up savings automatically and generate funds that you can use for future investments such as stock investments. Automation is a powerful tool to get the necessary things but less important things done.
Your investments can also benefit from the Pareto Rule. For example, instead of diversifying your portfolio, choose your stocks carefully and watch it grow. Build on your winners. Add on to them because they make the most return for you. Sell the losers in your portfolio. That’s the power of focus. That’s getting the most bang out of your money.
Track your expenses. You can compare the amount you spent on it and how much utility or value they gave to you. Choose to spend only on those things that provide great value for you. For example, you might discover you don’t really have much time to watch TV. So cut off that cable TV subscription. You’ll save money and eliminate a useless expense for you.
Look at your habits. Which habits are contributing most to your life? Which habits do you think can make a tremendous impact in your life? Work on building those habits into your systems.
You can even apply the Pareto Rule if you’re learning a language. For example, you don’t need to know every word in the language to start using it. You can focus on the most common words, or the core words and build your proficiency with it. By focusing on these most important words, you can start conversing with others in the language and in the process get more confident and better at the language. That’s the power of the Pareto Rule: focusing on getting the maximum impact.
Career applications of the Pareto Rule
In your own career or business, find out the activities that generate the most results and focus on those. Of course, there are unavoidable admin related tasks that have to get done, but the key is most of your time should be devoted to activities that produce the most impact for you, e.g. sales, visibility, referrals, etc.
As an entrepreneur, your time is extremely valuable. Do a time audit. Are you spending your time on high-value tasks or your time is spent on the low-value activities? We should really focus on exceptional productivity rather than boost average efforts.
Tim Ferris once said, “Believe it or not, it is not only possible to accomplish more by doing less, it is mandatory.”
Focus on strengths
The Pareto Rule tells us to focus on our strengths instead of dwelling on our weaknesses. This is because by focusing on our strengths (20%), it will generate strong and effective results in our lives (80%). This means outsourcing tasks that you’re not good at so that you can focus on the activities that you’re naturally good at.
Richard Koch, the author of the Pareto Principle, said, “Strive for excellence in a few things, rather than good performance in many things.”
For example, if you’re not good with accounting and financial matters, then you should hire a bookkeeper or an accountant to do that for you. If you don’t have a knack for design, then get a graphic designer.
In a way, the Pareto Rule is all about self-awareness. It means knowing your strengths and weaknesses. It means understanding how your life and business works.
Look at your skill set. Which 20% of your skills are generating the most revenue and value for you? Focus on those. Hone it. Get even better so you can build more revenue and value for yourself and others.
Email, for example, is a major time sucker for a lot of us. The notifications are on and we get distracted by them. Instead of mono-tasking, we end up multi-tasking which is very inefficient and a time waster. As such we should focus on controlling our email. We should a rule that we should only check it three times, e.g. once in the morning, during lunch and before ending the day. If we do this, our productivity will skyrocket because we are less distracted. That’s the Pareto Rule in action.
Business application of the Pareto Rule
If you’re running a business, the Pareto Rule is wonderful to apply and can help your business thrive.
For example, 20% of your employees are superstars. They generate 80% of the value of your business. Think about the things you should do to treat them well and make sure they don’t leave.
On the other hand, 20% of your employees cause 80% of the workplace problems. Time to send them the pink slip!
80% of the complaints are likely to come from just 20% of your customers. It is time to drop these customers because they just give headaches for you. If the relationship can’t be improved, it’s not worth having them as customers because they are low-value customers and you are spending precious time and resources to appease them. These kinds of customers will kill your profit margins. Choose your customers carefully. Screen them beforehand if possible so that it will provide mutual benefits.
You will also have clients that bring in 80% of your revenues. Make sure you treat them like VIPs! Now it gets interesting here. You should want to study this 20 % of your clients that rake in the most money for you so that you can find more customers like them. Understand their characteristics. For example, what traffic channels did they find you on? What content did they engage in with you? Armed with this information, you can optimize, enhance and promote that content and channels more. You can also perform a demographic and psychographic study on them because if you do that you can target them better with your marketing efforts.
You can also analyze your product sales. 80% of your sales are likely to be driven by 20% of your products. Then that means that you should push these products more. Enhance them more, promote them heavily. Strike while the iron is hot!
It is the same thing with your content marketing. Which articles or posts are generating most of your traffic? Promote them more. Improve on them. Create more content that resonates with your customers. It’s the same thing with your social media. Which platforms do you get the most engagement? Where are your customers really hanging out? Then focus your efforts there rather than being scattered throughout the social media landscape. That’s applying the Pareto Rule.
When you work on your business projects, there are risks involved. Not all risks are created equal so focus on the top risks that have the most potential to make damage for your business. Create a contingency plan to address those risks. Of course, you don’t ignore the other risks but work on the top risks firsts before addressing the other risks.
Your business will have core activities that generate 80% of the value and revenues of your company. Focus on those core activities. Outsource the other activities that don’t provide the highest impact to your bottom line. Things that you can outsource to other firms or freelancers that do them well include social media management, client support, emails, graphic design, web design, cold calling, general administration and accounts, and bookkeeping.
Raymond Hull once said, “He who trims himself to suit everyone will soon whittle himself away.”
So take the time to study your life and find out what to focus on to make the greatest impact.
The Pareto Rule is really about efficiency, effectiveness, focus and doing what matters. It’s shunning busywork as opposed to focusing on the things that really matters.
You can download the one-pager Pareto Rule checklist to help remind yourself daily to apply it!