Do and Think

Are you familiar with the Pareto principle?

The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity)[1][2] states that, for many events, roughly 80% of the effects come from 20% of the causes.[3] Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who noted the 80/20 connection while at the University of Lausanne in 1896, as published in his first work, Cours d’économie politique. Essentially, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.

It is an axiom of business management that “80% of sales come from 20% of clients”.[4] Richard Koch authored the book, The 80/20 Principle, which illustrated some practical applications of the Pareto principle in business management and life.[5]

This philosophy, interestingly, can be applied to many different areas of life.

I tend to think about the heuristic in the following way – a small minority dominate the majority. 

A small minority of the “investments I make” in life will provide the majority of return. A small minority of my friends will have the biggest impact on my life. Etc. etc.

You can also think of it like this: “If I get better at identifying the minority, I can do less work and get most of the reward.” In other words, if I make more calculated decisions, I can waste less time on work that provides no return.

I think, generally, this is a clever and useful “life-principle.” Spend time on things that you gain utility from (fun, money, enjoyment, etc.). And then cut out all the work you do that does not provide a return. Do not doing boring activities. Do not do hard things that do not provide a return.

The big assumption here is that “attempting to make more calculated decisions” is a worthwhile adventure. The assumption is that you can feasibly know what to cut out versus what to actually invest in. I would like to think it is possible to make this trade-off with at least some accuracy. I think we all would like to think this is possible. I think you could make a great argument about how we all can make very calculated decisions – but it all comes down to how accurately,

And that extent is what I think about. How much planning is really worth it? How much reward do we get for rounding to 5 decimals instead of 2. If I can do 2 decimals, and execute and learn at 10x the pace of you, but then you round to 5, who will win?

Also published on Medium.