The 80:20 principle is an extremely useful way of thinking about the vital few things that matter the most.
It is not a mathematical formula and there is no hard and fast way to define it. The Principle predicts that, in many types of situations, a large majority of effects are due to a small proportion of causes. The actual figure varies considerably, but a ratio of 80:20 is about average and quite common.
Alfredo Pareto, a nineteenth century Italian economist, studied the distribution of land ownership in Italy and found out that 80% of the land in the country was owned by 20% of the people. Subsequently more observers saw this ‘lopsidedness’ in a number of different situations and the phenomenon was named the Pareto Principle in memory of Alfredo.
The author, Richard Koch, popularised the idea of the Pareto Principle in his 1997 book The 80/20 Principle. Whilst the book is largely about using the principle in business and investment Koch does talk about how the principle works in general life and how to use it to maximise any value in life.
Whilst the exact proportions will differ, in daily life you often find:
- 20% of the people you know will provide 80% of your companionship
- 20% of your time will provide 80% of your enjoyment
- 20% of your problems cause 80% of your stress and anxiety
- You wear 20% of your clothes 80% of the time
- You listen to 20% of your music 80% of the time
- You use 80% of your stuff only 20% of the time
Koch uses two very potent terms to describe the two different sets of causes. The 20% of causes that produce the 80% of effects is called the Vital Few and the 80% of causes that produces only 20% of the effects is called the Trivial Many.
The Vital Few
The principle predicts that 80% of your well-being is caused by 20% of your actions, relationships, possessions, time and resources. Most people focus too much energy on the Trivial Many when they should be maximising their energy on those Vital Few things. The questions to ask are:
- What are the Vital Few things in my life that provide the most well-being?
- How can I focus my energy and attention on those ways that make me happier and my life a richer experience?
The Trivial Many
The mindset of our society seems to be ‘More with More’. The problem with this is the law of diminishing returns. Each time you do more it has less and less effect. At some point the benefit you receive is less than the time, energy and resources you put into it. This More with More mindset also loses the sense of what is vital and what is trivial. We can stretch and stress ourselves trying to maximise everything but we will be worse off in the end. Ask yourself:
- Am I really getting more results by putting in more effort or am I really getting less?
- How can I reduce the energy I put into activities that do not bring as much value?
When you conserve the time, energy and resources from activities that are not important, you end up having more energy to put into what’s important.
The are many, many examples of the 80/20 principle in action. The table below shows how lopsided the ownership wealth in the world is.
|Distribution of world GDP, 1989|
|Quintile of population||Income|
Source: United Nations Human Development Report 1992