UNDERSTANDING THE PARETO PRINCIPLE (THE 80/20 RULE)

The Pareto principle states that for many outcomes, roughly 80% of consequences come from 20% of causes (the “vital few”). Other names for this principle are the 80/20 rule, the law of the vital few, or the principle of factor sparsity.

Management consultant Joseph Juran developed the concept in the context of quality control and improvement, naming it after Italian economist Vilfredo Pareto, who noted the 80/20 connection while at the University of Lausanne in 1896. In his first work, Cours d’économie politique, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population. The Pareto principle is only tangentially related to Pareto efficiency. More generally, the Pareto Principle is the observation (not law) that most things in life are not distributed evenly. It can mean all of the following things:

The Uneven Distribution

What does it mean when we say that things aren’t distributed evenly? The key point is that each unit of work (or time) doesn’t contribute the same amount. In a perfect world, every employee would contribute the same amount, every bug would be equally important, every feature would be equally loved by users. Planning would be so easy. But that isn’t always the case.

The 80/20 principle observes that most things have an unequal distribution. Out of 5 things, perhaps 1 will be good. That good thing/idea/person will result in majority of the impact of the group. Of course, this ratio can change. It could be 80/20, 90/10, or 90/20 (the numbers don’t have to add to 100 even). The key point is that most things are not 1:1, where each unit of input (effort, time, labour) contributes exactly the same amount of output.

The Upside of the 80/20 Principle

When applied to life and work, the 80/20 Rule can help separate the vital few from the trivial many. For example, business owners may discover the majority of revenue comes from a handful of important clients. The 80/20 Rule would recommend that the most effective course of action would be to focus exclusively on serving these clients (and on finding others like them) and either stop serving others or let the majority of customers gradually fade away because they account for a small portion of the bottom line.

The 80/20 Rule is like a form of judo for life and work. By finding precisely the right area to apply pressure, we can get more results with less effort.

An Everyday Example – Home Cleaning 

Let us say we are cleaning our house. Some people might approach this by distributing their effort evenly across a variety of tasks, including dusting, vacuuming, and mopping each room. But this probably is not very efficient — it would take many hours to get everything done. The Pareto Principle tells us that 80% of how clean our house appears comes down to 20% of our cleaning efforts. Again, we don’t need to work out exactly what 20% of our cleaning looks like. But we do need to ask questions like:

We might conclude that giving the house a quick vacuum, clearing away the bulk of the clutter, and dusting down the main surfaces makes a huge difference. Or perhaps we figure that visitors will spend most of their time in the living room and dining room, so we will focus on them and only give other rooms a cursory clean? But giving every mirror a perfect polish and removing every speck of dust from the house might not make such a big difference to the overall result. 

The Downside of the 80/20 Principle

We get one, precious life. How do we decide the best way to spend our time? Productivity concepts will often suggest that we focus on being effective rather than being efficient.

Efficiency is about getting more things done. Effectiveness is about getting the right things done. In other words, making progress is not just about being productive. It’s about being productive on the right things. But how do we decide what the right things are? The 80/20 Rule states that, in any particular domain, a small number of things account for the majority of the results. The point is that the majority of the results are driven by a minority of causes. There is a downside to the 80/20 principle, and it is often overlooked. To understand this pitfall, here is a story.

A Story: Audrey Hepburn- A New Path

Audrey Hepburn was an icon. Rising to fame in the 1950s, she was one of the greatest actresses of her era. In 1953, Hepburn became the first actress to win an Academy Award, a Golden Globe Award, and a BAFTA Award for a single performance- her leading role in the romantic comedy Roman Holiday. Even today, over half a century later, she remains one of just 15 people to earn an “EGOT” by winning all four major entertainment awards: Emmy, Grammy, Oscar, and Tony. By the 1960s, she was averaging more than one new film per year and, by everyone’s estimation, she was on a trajectory to be a movie star for decades to come.

But then something funny happened- she stopped acting. Despite being in her 30s and at the height of her popularity, Hepburn basically stopped appearing in films after 1967. She would perform in television shows or movies just five times during the rest of her life. Instead, she switched careers. She spent the next 25 years working tirelessly for UNICEF, the arm of the United Nations that provides food and healthcare to children in war-torn countries. She performed volunteer work throughout Africa, South America, and Asia.

Hepburn’s first act was on stage. Her next act was one of service. In December 1992, she was awarded the Presidential Medal of Freedom for her efforts, which is the highest civilian award of the United States.

The Shortcoming of the 80/20 principle:

For a moment, let us all Imagine it is 1967. Audrey Hepburn is in the prime of her career and trying to decide how to spend her time. If she uses the 80/20 Rule as part of her decision-making process, she will discover a clear answer- do more romantic comedies. Many of Hepburn’s best films were romantic comedies. They attracted large audiences, earned her awards, and were an obvious path to greater fame and fortune. Romantic comedies were effective for Audrey Hepburn.

In fact, even if we take into account her desire to help children through UNICEF, an 80/20 analysis might have revealed that starring in more romantic comedies was still the best option because she could have maximized her earning power and donated the additional earnings to UNICEF.

Of course, that’s all well and good if she wanted to continue acting. But she didn’t want to be an actress. She wanted to serve. And no reasonable analysis of the highest and best use of her time in 1967 would have suggested that volunteering for UNICEF was the most effective use of her time. This is the downside of the 80/20 Rule: A new path will never look like the most effective option in the beginning.

Optimizing for the Past or the Future

Let us look at another example. Jeff Bezos, the founder of Amazon, worked on Wall Street and climbed the corporate ladder to become senior vice-president of a hedge fund before leaving it all in 1994 to start the company. If Bezos had applied the 80/20 Rule in 1993 in an attempt to discover the most effective areas to focus on in his career, it is virtually impossible to imagine that founding an internet company would have been on the list. At that point in time, there is no doubt that the most effective path—whether measured by financial gain, social status, or otherwise—would have been the one where he continued his career in finance.

The 80/20 Rule is calculated and determined by our recent effectiveness. Whatever seems like the “highest value” use of time in any given moment will be dependent on our previous skills and current opportunities. The 80/20 Rule will help us find the useful things in our past and get more of them in the future. But if we don’t want our future to be more of the past, then we need a different approach. The downside of being effective is that we often optimize for our past rather than for our future.

The Way Forward

Given enough practice and enough time, the thing that previously seemed ineffective can become very effective. We get good at what we practice. When Audrey Hepburn dialed down her acting career in 1967, volunteering didn’t seem nearly as effective. But three decades later, she received the Presidential Medal of Freedom—a remarkable feat she is unlikely to have accomplished by acting in more romantic comedies.

The process of learning a new skill or starting a new company or taking on a new adventure of any sort will often appear to be an ineffective use of time at first. Compared to the other things you already know how to do, the new thing will seem like a waste of time. It will never win the 80/20 analysis. But that doesn’t mean it’s the wrong decision.

Content Curated By: Dr Shoury Kuttappa

THE LONG VIEW (OR) BIG PICTURE THINKING – CHAPTER 02

***Continued from Chapter 01 (Covered previously: What Is Big Picture Thinking, Importance Of Big Picture Thinking, Detail Oriented Or A Big Picture Thinker- The Difference)

Link to Chapter 01:

THE LONG VIEW (OR) BIG PICTURE THINKING – CHAPTER 01

Identifying the Different Approaches – Approach Indicators

No matter which field we belong to – an aspiring entrepreneur, someone who’s putting together a dream team, or polishing our leadership skills, big picture thinking can help open up, innovative and unexpected creative paths, ideas and solutions.

Detail-Oriented Approach Indicators

• We prefer tweaking an existing plan than creating one from scratch
• We think over issues in such great detail that we sometimes miss the bigger picture
• We end up putting down or highlighting almost all notes
• We work towards high-quality work in most areas of our life and struggle with perfectionist tendencies
• We’re organized and/or like routine

Big Picture Approach Indicators

• We can easily spot patterns in problems
• We have a low tolerance for busywork, tedious errands, and routine
• We are good at figuring out an overview of strategies to get something done
• We get bored when we have to deal with the tiny details of a project
• People view us as incredibly creative and we like to come up with original ideas
• We don’t obsess over little details and therefore, solve problems fairly quickly

The Balance: Big Picture & Detailed Orientation- Components in Business

Strategies Towards a Big Picture Focus

A) Identify habits that limit our big picture thinking ability:. . . Our natural preferences often prevent us from blue sky thinking. So, the first step: break bad habits. Here’s a 3-step framework:

B) See things from a different lens: . . . Diving into big picture questions helps us connect the dots from our actions/tasks to the big goal. In this book, The Magic of Thinking Big, David J. Schwartz calls this, “see what can be, not just what is.” A good starting point is to ask ourselves, ‘what am I trying to achieve?’ Some big picture questions may be:

C) Think big by looking up: . . . The super basic rundown is that whenever we are focusing on the big picture, look up. And look down when not seeing the big picture.

A nice example of chunking reasoning is to think of transport. We can start with a motor car. If We chunk down, We might go to wheel, then rim, then rubber, then tread and even road. If We chunk up, We might go to transport, then to travel, then to vacation, then to wellbeing, etc.”

D)  Use bulleted lists to think big: . . . This is a trick many of use on a regular basis – making a bulleted list of the big picture and then adding sub-bullets to each pillar step. We can then step back and look at what can be added or removed from the sub-bullet pointers to keep the needle moving forward.

So why did this work? Because bullet points give us the visuals on the big picture. It’s challenging to connect the dots when we can’t see them. It’s also tough to translate the big picture if we don’t have it in front of us. What’s more, bullet points are easy to access and revise anytime. This, in turn, provides clarity.

E) Start journaling / mind mapping: . . . When we put our internal prattle on paper, we can easily spot where we are flailing or how it can be shaped to fit the bigger picture. To begin with, note down the big picture, followed by the small details pestering us. The trick is to make sure that it represents not only the big picture, but that it represents the detail, or actionable elements as well. Then record our thoughts to see if they deviate from the big picture plan. 

F) Schedule in some thinking time: . . . Often, when we rush to make a decision, we end up feeling sorry about it. When this happens, it’s usually for one of three reasons:

If we find ourselves nodding yes to any or all of these points, pencil in some uninterrupted, thinking time to our schedule. This space is crucial to making better decisions that rely on the big picture. We will also be able to rate our priorities better – what matters in the big picture, how it contributes to the big picture and so on. This will help us to stop hustling so hard, and ditch the shiny object syndrome.

Self Reflection- The Key

If we pause and contemplate how we are doing, we can make small tweaks that help us stay consistently productive. Some pointers to reflect on may be:

When we are busy executing any tasks in our lives for far too long, it’s easy to forget the details or the big picture depending on the type of thinker we are. For instance, as a big picture thinker, we may be excited by how our old and new ideas are connecting and work on outlining them, forgetting that the ideas have to be structured by many crucial details to work in the long term. The details person on the other hand might be buried in unending to-do-lists, feeling secure in the routines only to be disrupted by an enormous transition they didn’t anticipate.

Content Curated By: Dr Shoury Kuttappa

ORGANIZED PEOPLE: SIMPLE BEHAVIOURS

Organized people are not born; they’re built. The people who emerge as ‘organized’ use a variety of tools and methods to accomplish their goals and priorities in life. Their systems become habits.

They Seek Out Tools

From kitchen timers to smartphone technology, organized people find tools that can help them make the most of their day, week, and year. They use mobile phone apps with pop-up reminders, for example. They also use timers to help visualize the passage of time. And they break down tasks into smaller chunks and take short non-work-related breaks in between, which increases their overall productivity.

They Set Priorities

Following a to-do list is like their primary source of organization. Instead of having an overwhelming number of commitments and little idea where to start, organized people have a clear sense of what is important. They know what their goals are, what needs to be done when, and what can be put off. They start the day with a clear plan of their ‘most important things,’ and they review their plan throughout the day and adjust as necessary.

They Have Less Stuff

The golden rule of organization is to have as little as possible to organize. They figure out what the core of their professional and personal missions are and eliminate all else. They will still have stuff to organize, but they have made the job doable. They know how to filter relevant information.

They Choose Simple Solutions

When organizing systems are complex, they often go unused. Organized people use simple tools that make an easy job of putting things away. For example, baskets hold receipts that need to be filed, bills that need to be paid, and books that are waiting to be read. A hook by the door makes it convenient to hang up a coat. And bowls and trays near an entryway will keep keys and wallets in one place.

“Your solution is far too simple for a real expert…”

They Practice Maintenance

Organization requires continual upkeep. Organized people will take a few moments each day to put things back in their proper places. They might archive an email, for example, or put away papers. The tiny amount of time it takes to do this is vastly less than the time it takes to look for something that was not put away properly.

They Regularly Purge

Situations change and formerly useful things become unnecessary. Instead of letting clutter sneak up on them, organized people periodically purge. They clear out their files when the drawer starts to get full, for example, and they toss the notes for the project that was cancelled.

They Project Themselves into The Future

Using a two-person mind-set–present self and future self–can help us stay organized. That motivates us to do those favors for our future self. Organized people also think into the future when they add activities to their calendars. They ask: ‘What could I do before, during, or after this appointment to improve it?’. If they need to prepare for it, bring something to it, or follow up after it, they schedule it now and put it on their task list.

They read/address mails/emails daily

Here is the deal: it does not matter at what time of the day we check our inbox. What matters is that we have a dedicated timeslot each day, let us say, half an hour, for reading and answering all our emails. Organised people know that the cluttered-up inbox will not go anywhere unless it is handled appropriately. There should absolutely be no space at all for clutter on our desk.

They have specific routines and rituals set for the start and end of every day

Staying organized is not all about being uptight. We should always spare some time out for things that make us who we are. Organised people are not prisoners of their routine. Read a book, watch a movie, hit the gym. Again, it is not about being a prisoner of our routine when we can always cut some time out for ourselves. Once we are done with our day, then would be a good time to plan for the coming day. Every day needs its own unique to-do list.

They leave room for last minute changes

Suppose, we are doing just fine with our daily routine and are almost half-way through, when it out of nowhere, a friend calls up for an urgent meeting. Did we leave enough room for this sudden readjustment in our to-do list? Organised people know that staying organized is mainly all about preparing yourself to face turmoil, whenever it shows up. Do not be afraid of tackling mishaps head on, deal with the elephant in the room first.

They never leave anything undone

This is the holy grail of staying organized. They do not leave any task half done. Leaving unfinished business is the hallmark of a disorganized person.

They are not perfectionists

Not everything can be just the way we want it. Sometimes, “good enough” really is enough to get by. So know where the most feasible option would suffice, and forget about making things perfect.

Being organized is not just something we adapt to. Slowly as we dwell in our organized lifestyle, we tend to start taking it more as a mindset rather than a way of living. For instance, we begin living our life in an organized manner, with each and everything in our routine well thought out. And then comes a time where our systems and our rituals are actually morphed into our routine, and our mind adapts to them as habits. If we actually happen to get to this stage, we have officially become an organized person.

Content Curated By: Dr Shoury Kuttappa