The Pareto Principle

It is an idea discovered by an Italian economist. It says that power and wealth is distributed like a reversed hockey stick where a small percentage of the population (20%) owns majority of the wealth (80%). 

The Pareto Principle could also be observed in almost every industry:

• In software, 80% of the errors and crashes in a system would be eliminated by fixing the top 20% of the most reported bugs.
• In sports, 20% of athletes participate in 80% of the big games
• In business, 20% of the products bring in 80% of the revenue.

It is hard to accept the truth that there are inequalities everywhere. But depending on how you see it, the rule could help us filter out unnecessary data, better channel our resources, and make better decision in work and life.

• Pick one goal for your business to improve focus and decision-making.
• Optimise the first item in a funnel that has cascading effect to the entire funnel
• Work hard to understand the 20% of your customer.
• Create high margin products that bring 80% of all profits.
• When assessing risk, recognise not all risks are equal.

In Pareto Principle, the winner takes almost all. The-Winner-Take-All effect happens isn’t because winners are better, smarter, and stronger than everyone else. In fact, most of us started at about the same place. But that tiny little advantage can take a person a long way by compounding effect over time.

Don’t be discouraged even you are being left behind, as long as you are making a progress, you are already making a difference.

Phase I: Self-analysis
Reflect on where your current focuses are. How do these impact you in different areas in life?

Phase II: Identify the 20 Percent
Link those good or bad results to the source of your activities.

Phase III: Focus on the Fat Tail
Eliminate or at least, minimize destructive routines and focus your time and energy on the top 20% habits that lead to good progress