Input and output are related. But have you noticed that there is an unequal and unbalanced relationship between the two? Have you experienced that a handful of activities are responsible for a bulk of your true satisfaction and happiness? If you think about it, a few critical past decisions in life are solely responsible for where you are today. A handful of your skills have produced most of the success in your career. This is certainly true for me, and I presume you are nodding your head in agreement as it applies to you as well.
Pareto Principle, named after Vilfredo Pareto, who first articulated that 80% of consequences come from 20% of the causes, captures the essence of this phenomenon.
When spending time with a company I was evaluating an investment in, it became apparent that, as intuitive and straightforward as this principle is, it is still not used as much in real life. The founder got his team together and figured out that the recent dip in their NPS (Net Promoter Score, a refection of customer satisfaction) resulted from 15 shortlisted factors. Team members were handed over responsibility for these 15, and off they went, everyone, trying to solve their assigned problems with equal enthusiasm. That’s where the lightbulb moment flashed, and I decided I had to write on this topic. If they understood the Pareto Principle, the first step would be to gather data and facts to identify the ‘vital few’ among these 15. The team’s focus would then be those few areas (20%) that would result in the most significant improvement (80%). After the group had achieved most improvements, they could address the rest (‘useful many’ i.e. balance 80%).
As I started writing this note, I realised the best way is by sharing real-life areas where you can apply this principle. So, here goes:
Investing World: If you take a deep dive into your portfolio, you will realise that most of the wealth creation has happened owing to the success of a few of your investments. The point is: we have to take the time out for some deep thinking and make the right decisions to ensure wealth generation. Warren Buffet is known to spend over 80% of his time reading, not investing. It would be best if you inculcated this discipline of focusing your energies in the right place, enabling you to make the right decisions that lead to long term wealth generation. Remember, it is not the number of investment decisions you make that create wealth; it is the handful of right ones.
Wealth: The wealthiest 10% of Indians owned 80% of the wealth in 2019. This percentage has only skewed more over the last 15 months of the pandemic. Another manifestation of the Pareto Principle is shared in The Credit Suisse Global Wealth Report 2021 that highlights the top 1.1% of world adults control 46% of global aggregate wealth.
Relationships: Think about those people with whom you spend most of your time? A handful, I’m sure, including some family and some dependable and dear friends. These are the same people who bring joy and happiness to your life. Just a handful of them even though you have lots of extended family members and hundreds of friends and acquaintances in your life. As you start focusing your energies on these vital few (20%) of your relations, you will enjoy 80% of your overall relationship satisfaction and happiness in life.
Typical workday: As you start your workday, there are simple things to do, and there are difficult things too. I presume you are using the “UI matrix” I wrote about earlier** to segregate the urgent and the important tasks ahead. After this, start working on the ‘vital few’ to get the most out of your time. Post that, begin addressing the ‘useful many’. Most people tend to spread out their time thinly instead of focusing on the most critical tasks.
Regarding personal time management, 80% of your work-related output could come from only 20% of your time at work. The 96-Minute Rule is a simple expression of Pareto for your workday (8 hours workday*20% = 96 minutes). Block out 96 minutes in your day for uninterrupted work as a commitment to yourself. Limit distractions by finding a quiet place or letting colleagues know that you need to be left alone. Get rid of all interruptions by switching notifications off on your devices and getting into privacy mode to avoid any calls or messages. Nothing except ‘Deep Work’. Following this takes your productivity to the next level in no time. (Ok, stop ruing the fact that your workday is much more than 8 hours.)
Allow me to now share some prevalent misconceptions about Pareto that you should be aware of:
Misconception 1: Pareto is not a law of nature. It is simply a practical principle or guide that you can use as it is relevant to nearly everything in life.
Misconception 2: The numbers don’t have to be “20%” and “80%” exactly. My iPhone’s ScreenTime shows that 10% of installed apps contribute ~80% of my usage. This is 80/10.
Misconception 3: The numbers don’t have to add up to 100. As seen in the point above (80/10), 70/20, 65/10, and 90/25 are equally good.
Misconception 4: As much as your focus should be on the vital 20% that delivers 80%, it doesn’t mean that you can neglect the other 80%. It may be true that 80% of a skyscraper gets built in 20% of the total time, but without the rest of the structure completed, you won’t be able to stay there.
As a high achiever, you will not have the time to handle 100% of the things that come your way. It would be impossible to do so. As an accomplished achiever, focus on the crucial 20%, delegate the rest, or let it go. Remember this thumb rule: when you seek top quality, you need all 100%. When you try to optimise your bang for the buck, focusing on the critical 20% is a huge time-saver.
Before you go, please think about your top priorities and goals, things that you genuinely want to accomplish. Now, answer these for yourself:
How much time do you invest in thinking about these goals and how to achieve them?
How much time do you invest in execution to ensure these get done?
Lastly, what’s the Pareto ratio that works for you? 80:20, 70:30, 75:10, 60:10.
Answering these will tell you a lot about your focus and where you should be spending your energies.