Towards the end of the 19th century, a group of economists from the University of Lausanne in Switzerland studied the social inequalities in Europe. Analysing the tax data of several European countries, they found out that in each of them about 20% of the population owned 80% of the wealth.
This discovery was a real springboard for the career of an economist, Vilfredo Pareto, who gave his name to a principle, the Pareto principle, also known as the law of 20-80.
Some examples of the application of this principle:
• to optimize production, some industries in Japan focus on 20% of the causes that generate 80% of production problems;
• customer services of most companies focus on 20% of customers who generate 80% of turnover;
• finance professionals agree that 20% of their investments represent 80% of the benefits.
What does this principle make us understand? The message of Pareto’s principle is that we need to focus on 20% of the actions that lead us to 80% of the results.
In practice, we must focus on high value-added actions because they are the ones that make us move forward.
This principle is very important because it deals with a precious resource: time.
To avoid being stuck on a goal and slowly losing sight of it, it would be beneficial to use this perspective (20-80).
However, how can we identify what are the essential things to our goal? Moreover, how to choose high valuable actions?
Try to answer these two questions for each action you have planned but are hesitating to take:
1. Is this action vital in moving me towards my goal?
2. Am I the only one who can do this action?
The first question allows you to separate essential actions from those that can wait.
The second allows you to identify what are the actions that others can do in your place and that, therefore, you can delegate.
Once this is done, you will know 20% of the actions you need to take to advance towards achieving your goal.
Now you could estimate the time required for each action but it is not ideal, because you would end up putting it on your “to-do-list” and you could continue to shift the priority order. Therefore, in the end you would have wasted some time.
Once again you have to ask yourself some questions:
1. What problems are stopping you from really moving forward with your goals?
2. What do you need to do to solve these problems?
3. What are the elements that allow you to understand if the problems have been solved?
You will be surprised to see how well these questions work. The 20-80 rule allows you to focus on actions that have a visible and direct impact. You will see that they will soon become a habit to you, and that you will use them every time you feel stuck with something.
Do you think that the Pareto’s principle is useful for progressing with your goals?