What can we learn about efficiency from Vilfredo Pareto, an Italian economist that died over 85 years ago? He is know for a prolific work coined the Pareto principle aka the 80/20 rule and/or the law of the vital few.
What Pareto had observed was that 80% of the wealth in Italy was controlled by 20% of the population. He also observed that this imbalance in the distribution of wealth was similar in a variety of other countries as well.
It was further observed that this skewed distribution can be viewed in subsets of the income range, for instance, out of the top 10 wealthiest men in the world, the top 3 had more wealth than the 7 under them combined.
In summary, the law can further be defined as 80% of the outputs result from 20% of the inputs, 80% of the consequences flow from 20% of the causes and/or 80% of the results come from 20% of the effort and time you put into them.
What I find so intriguing is that not only can the Pareto rule be applied to economics but almost every area of our lives including the mundane.
For instance, we may wear 20% of our wardrobe 80% of the time, 20% of our investments yield 80% of our portfolios growth, we spend 80% of the time with 20% of our friends and acquaintances and the list goes on and on.
In fact, the distribution can be more heavily skewed such as 90/10, 95/5 even 99/1. If we look at the principles of attraction marketing, which I promote here on this blog, Pareto’s law is in complete alignment.
We need to be giving value 80% of the time and asking for something in return a mere 20% of the time. Again, this can even be more heavily skewed such as 90/10 which is not uncommon.
This 80/20 rule was heavily endorsed in the best selling book by Timothy Ferriss titled The 4 Hour Work Week which will shake the very foundation of your thinking about life and business.
The book embraces the notion that one should focus one’s attention on the 20% activities that contribute to 80% of income. Makes sense right? Strangely enough, we often find ourselves engaged in activity as opposed to productivity, simply filling the void of time by tricking ourselves into thinking we are actually being productive.
Tim even went as far as recommending firing 20% of those “high maintenance” customers who take up the majority of one’s time and cause the most trouble and re-channeling the energy back to the customers who are the least maintenance and bring the most revenue.
The end result was an increase in revenue and more free time by deepening the relationship with his best customers and focusing more on their needs specifically.
If you haven’t read this book then I highly recommend you pick it up right now:
Speaking of efficiency, I personally prefer the CD version so I can listen to the material while working out which is a better use of my time, so I included a link to the CD version below:
What we can infer is that the Pareto Principle is a natural phenomenon. In order to become a conscious creator of all things fruitful in your life, you simply must become a student of the laws of nature and not fight against but work with them.
We can’t do this until we become aware of them. That said, can you begin to imagine the profound changes this way of conscious thinking can have on your life and business? Pareto’s law teaches us to first observe and then funnel all of our energy into those areas of our life that brings the maximum result.
Further more, we can stop pouring time and energy in those activities and/or individuals that suck up all our time and bring no or little benefit or result! The goal then is to find those activities that bring the greatest amount of happiness or when applied to business, simply put, the most results (often defined in terms of dollars).
If we take the time to really investigate and breakdown areas of our life, we will undoubtedly notice the 80/20 ratio applied to many facets of what we do. It becomes a process of discovery, where we uncover what works for us in life and business and what doesn’t. We then eliminate what isn’t working and focus on what is with the goal of increasing our bottom line, be it happiness or profit.
Applying this principle is nothing short of an experiment in lifestyle design. We learn to work smarter TODAY to find greater fulfillment both NOW and TOMORROW.
Maximize your strengths by focusing on what you are good at. Put your energy into that which yields the most results, the fruit of which will bring the greatest rewards. Get out there and start creating YOUR 80/20 lifestyle leading to greater realization of both your goals and dreams!
This is potentially life changing information, so please share it with your Twitter followers and Facebook friends. If you really like the piece please submit it to Digg, Delicious and/or StumbleUpon as well. Also, don’t forget to leave me a comment below and let me know what you think and start creating an 80/20 lifestyle for yourself today!
Your Partner In Success,
Fredric, You give so much value when you write your blog post’s. I use to do the 20/80 rule, I had it backwards. Now I’m working on the 80/20.
Thank you for sharing this gold!
.-= Daryl Whicker´s last blog ..Child Internet Filter =-.
@Daryl Whicker,
Hi Daryl,
I think we all at some point used to or even still do use the 20/80 rule! It definitely takes doing things the wrong way some times to have the vision to see what’s right and what’s working for you in your life.
It really does come down to simply having the awareness that enables you to shift from simply spinning your wheels, to actually being productive while simultaneously freeing up more time.
Here’s to living the 80/20 lifestyle!
~Fredric
Great post Fredric! I like how you pointed out that the 80-20 rule can be applied to just about everything… right down to your wardrobe! This is especially relevant to my life right now, as I’ve been trying to always maintain the way of conscious thinking that you mentioned. Found a bit of success so far! :)
Thanks for the post,
Garrett
.-= Garrett Miller´s last blog ..Twitter – Autoresponder (Web) 2.0 =-.
Hi Garrett,
Keep up the good work my friend. If conscious thinking is a part of your game plan now, just imagine what you will be able to achieve in the years to come. It really is interesting to observe this rule functioning so blatantly in just about every area of our lives.
Think of the all excess and inefficiency we can eliminate just by maintaining this “conscious” way of thinking. The results can be nothing less than profound.
~Fredric
wow, way cool, thank you fredric, great 2 see all this info in one post and the links to tim ferris’ work…..
rich scheffron (or is it eben pagan?) also talks about how there are activities where we take stuff IN and put stuff OUT… input / output…. ideally, successful biz solves people’s problems so reading and consuming is not always lucrative, unless it leads to productive output….
i’m so happy now to have a clearer focus n discrimination with my life, and i’m loving life!
abundant blessings
Devi
SoulJuiceTV.com (just birthed today)
@Devi SoulJuice,
Hi Devi,
Congratulations on the new blog..I’m SUPER excited for you and wish you the greatest success as a result of your blogging efforts!
Tim Ferriss’ work is outstanding and was the motivation behind this post. It’s essential we focus our energy on what works.
That said, having the clarity to identify our strengths and eliminate our inefficiencies is what enables us to fulfill that vision and have the discrimination that you speak of. Cheers!
~Fredric
Fredric, this post should help a lot of people indeed. And yes you are right about the 80/20 rule and Pareto rule be applied to economics. I enjoy your writing and have found great peace and value from them my friend :>)
Freddie,
The 80/20 principle is the foundation true and massive success my friend! It is unfortunate that more folks don’t realize this.
If you concentrate your efforts on those things that produce the greatest results then you have a recipe for some really great things to happen in your life.
Thanks for bringing this truth to light.
Keep rockin,
John
.-= John Chatman´s last blog ..The Fast Track of Life =-.