80/20 rule: The secret to productivity

Vilfredo Pareto was an Italian economist who while pursuing his studies on income distribution came across an interesting observation which he later published in his work “Cours d'économie politique".

He coined the observation as the Pareto Principle. He had essentially observed that 80% of the land in Italy was owned by 20% of the population. For a century, it stayed an academic postulate less known to the general public until Richard Koch wrote a book about it and gave it a more popular term: The 80/20 rule

The 80/20 states that roughly 80% of the effects come from 20% of the causes. And it is prevalent everywhere in our day to day life. For instance, 20% of the products are responsible for 80% of the revenue. 80% of total wealth is possessed by 20% of the population. 80% of the fatalities are due to 20% of diseases. 20% of the grocery is the ingredient for 80% of the food items. 80% of the total taxes are paid by 20% of the population and so on. The list, as evident is endless

Here is an example to cite. Lets look at this snap of Warren Buffett, One of the richest man alive on the planet.

As of 2019, Mr. Buffet was estimated to be worth 85 billion dollars at a ripe age of 88 years. Warren Buffet did not touch the billion mark till into his late 50s but since then has made 85 times of his wealth. 80% of his wealth was made in just last 20% of his age!

And what is more interesting about the principle is its iterative nature. Let's consider the case of the wealthiest men in the world, 20% of them hold 80% of the wealth. For the sake of simplicity, let's assume the total population is 100 and the total wealth is 100 billion dollars. According to the postulate, 20 of these people hold 80 billion dollars of wealth.

Again, 20% of these elites i.e 4 men hold 80% of the 80% wealth i.e. 64 billion dollars. Further, the 20%(20% of 20% of 20%) of the remaining possess 80% (80% of 80% of 80%) of the total wealth and so on.

While this law portrays the uneven distribution, it also points at an important aspect- the qualitative aspect of contribution. It shows that approximately 80% of the results are due to 20% of the efforts. I.e. a large extent of your contribution to work is localized to 20% of the total efforts that you put in.

So far so good, you got to know about a law that seems to be omnipresent. But you might have wondered, what’s in it for you?

Well as the adage goes, “If it can be measured, it can be managed”. When the rule says that 80% of the results are due to 20% of the effects, it also implies that the rest 20% of the results are due to 80% of the efforts -rather an inefficient work model.

Vilfredo Pareto, an Italian economist, while pursuing his studies came across an interesting observation which he later published in his work “Cours d'économie politique",9. He coined the observation as the Pareto Principle. He had essentially observed that 80% of the land in Italy was owned by 20% of the population. For a century, it stayed an academic postulate less known to the general public until Richard Koch wrote a book about it and gave it a more popular term: The 80/20 rule

The 80/20 states that roughly 80% of the effects come from 20% of the causes. And it is prevalent everywhere in our day to day life. For instance, 20% of the products are responsible for 80% of the revenue. 80% of total wealth is possessed by 20% of the population. 80% of the fatalities are due to 20% of diseases. 20% of the grocery is the ingredient for 80% of the food items. 80% of the total taxes are paid by 20% of the population and so on. The list, as evident is endless

And what is more interesting about the principle is its iterative nature. Let's consider the case of the wealthiest men in the world, 20% of them hold 80% of the wealth. For the sake of simplicity, let's assume the total population is 100 and the total wealth is 100 units. According to the rule, 20 of these people hold 80 units of wealth. Again, 20% of these elites i.e 4 men hold 80% of the 80% wealth i.e. 64 units. Further, the 20%(20% of 20% of 20%) of the remaining possess 80% (80% of 80% of 80%) of the total wealth and so on.

While this law portrays the uneven distribution, it also points at an important aspect- the qualitative aspect of contribution. It shows that approximately 80% of the results are due to 20% of the efforts. I.e. a large extent of your contribution to work is localized to 20% of the total efforts that you put in.

So far so good, you got to know about a law that seems to be omnipresent. But you might have wondered, what’s in it for you?

Well as the adage goes, “If it can be measured, it can be managed”. When the rule says that 80% of the results are due to 20% of the effects, it also implies that the rest 20% of the results are due to 80% of the efforts -rather an inefficient work model.

So next time, you are planning to improve your contributions and efficiency, out of the ‘n’ number of tasks that you have scheduled, evaluate the ones that are more important and relevant. Analyse the ones that have a deeper impact on the output and work upon them. The ones that are more labour intensive or more monotonous are the ones that take up a lot of time for little outputs. Strategize and bring in an efficient way to do it or better automate it if possible. If need be, develop the necessary skills and techniques to optimize your working hours and contribution. All it needs is a little planning and a little analysis. Try it out and make most of the day.

Hope this helps!!!