Pareto's Principle

Most people these days are aware of Pareto's principle. You may know it as the 80-20 rule. Simply put it means that 80% of effect is from 20% of the causes.

Vilfredo Pareto came across this when he worked out that roughly 80% of property in Italy was owned by 20% of the people... and then that 80% of the peas in his garden were in 20% of the pods... typical economist, he couldn't just enjoy the garden!

So I occasionally share Pareto's obsession. It started with some business interpretations (untested!);

• 80% of your income will come from 20% of your clients.
• 80% of referrals will come from 20% of your clients.
• 20% of your clients take up 80% of your time. (Ruthlessly get rid of this 20% and regain 80% of your time? I like Tim Ferris's concept in 4 Hour Wk, but do the number in your own business before you get rid of clients!)

So the next logic step for my curious mind is to take that equation to other observations.

• 80% of the icecream will be eaten by 20% of your household
• Under the Christmas tree 80% of gifts will be bought by 20% of people
• At a dinner party or backyard bbq 20% of your guests will drink 80% of the drinks
• 20% of your home will need 80% of cleaning
• 20% of your clothes will be worn 80% of the time

So next time you notice an 80-20 principle in progress, or you read a business paper that refers to it, thank Pareto for his simple observation.