This post contains my personal notes about the big ideas in Richard
80/20 Principle. My book notes are different from many of the book
summaries you’ll find on the web. Instead of following the structure of
the book in question, we’ll isolate and examine the key ideas and themes
that make the book useful. Along the way, I’ll tell you how I actually
apply the ideas. Enjoy!
Would you like to learn how to get more done with less effort, eliminate
wasteful activities, and sell more to your best customers? Richard
80/20 Principle will show you how to ensure your efforts produce the
best possible results.
About Richard Koch
Richard Koch is the author of the Personal MBA-recommended book
80/20 Principle. For more information about Richard Koch’s work,
Here are 10 big ideas from Richard Koch’s
80/20 Principle …
1: A minority of inputs lead to a majority of outputs.
Think of all of the clothes you own. Think of how often you wear each of
them. It’s very likely that you have a few favorites that you wear over
Now consider the contacts you have in your address book or cell phone.
It’s very likely that a small group of contacts represent most of the
time you spend on the long time.
2: A minority of causes create a majority of effects.
Think of the decisions you’ve made over the course of your life. You
make hundreds (thousands?) of decisions every day, but where you find
yourself now can be traced back to just a few critical choices that have
led to your present state.
The same goes for things like investments - most of the returns a
portfolio generates comes from a few critical decisions to purchase or
sell certain securities. Most of the losses a portfolio generates also
come from a few small decisions.
3: A minority of efforts lead to a majority of results.
Think of everything you’ve accomplished in your education and career so
far. It’s very likely that the skills you need to do your job well are a
small fraction of what you know and what you can do well, but they
produce the majority of your income.
Even the projects you’re working on follow the same principle: the vast
majority of the value of any project lies in just a few critically
important tasks. The rest of the tasks involved don’t matter nearly as
much to the end result.
4: There are many names for this common phenomenon: The 80/20 Principle, Pareto’s Law, Zipf’s Principle of Least Effort, Juran’s Law of the Vital Few
The 80/20 Principle has been articulated in all sorts of ways by many
different people, but the central idea is the same: a few things matter
a lot, and most things matter very little. Personally, I prefer to refer
to this concept as
5: The Critical Few - identify and build upon the 20% of efforts that produce 80% of the results.
If you want to improve your effectiveness at anything, focus only on
what matters most. It doesn’t matter if you’re conducting business,
working on a personal project, trying to get into a competitive
position, or finding a romantic partner, or strengthening a personal
relationship. There are a few things that matter a lot, and much that
doesn’t matter at all.
If you intentionally set out to study what matters most, you can
tremendously improve your effectiveness. You’ll spend less time, less
money, and less effort - and get better results at the same time.
6: Most of what we do is low value - eliminate or reduce the 80% of efforts that produce poor results.
The flip-side is also true: in every endeavor, there are many ways to
waste your time and resources. You only have so much energy to use, so
it pays to use it wisely. If something is only marginally useful,
delegate or delete it.
This advice is sometimes difficult to put into practice, because it
requires what Tim Ferriss (author of The
4-Hour Workweek ) calls,
art of letting bad things happen." If it’s largely a waste of time
to answer every last e-mail or tie up every loose end, that doesn’t mean
you won’t experience repercussions from skipping them. On the balance,
you’ll come out ahead, but it’s easy to not feel that way in the moment.
By making some hard decisions about what to focus on and what to delete,
you’ll free up huge amounts of productive time and energy to focus on
what will really get you where you want to go.
That’s why I advise my clients to create a “not-to-do" list - by
deciding in advance what’s not worth their time and energy, it becomes
much easier to say no to low-value tasks and requests when they’re
presented to you.
is often a the best (and easiest) way to improve your performance.
6: In business, focus on the products and customer that make you the most money, and minimize or eliminate the rest.
All people are created equal, but all customers are not. Some customers
will feel like gifts sent from heaven - they’ll be excited, considerate,
and will enthusiastically purchase everything you offer. Other customers
will feel like they were sent from hell - they’ll buy what you’re
selling, but they’ll never be happy, they’ll clog you will complaints,
and they’ll demand special treatment or exceptions to your business
Here’s the rule: discover who your best customers are, and focus on
doing everything you can to give them the best experience and service
possible. Also discover who your worst customers are, and fire them -
they represent a huge
Cost in terms of time and effort. By politely inviting bad customers
to not do business with you anymore, you free yourself to focus on
customers who will actually help you meet your business goals. (Side
note: if anyone asks you for a refund, don’t fight them - grant their
request immediately, and be happy doing it. They are not your best
8: In life, focus on the activities that produce the majority of life satisfaction.
The 80/20 Principle also extends to your life satisfaction - a few
things will contribute the most to your overall happiness and inner
peace. Those are the things that you should build your life around: for
me, they’re spending time with family and friends, having deep
conversations with people, sharing what I know with others, doing fun
experiments, and reading everything that piques my interest. If I want
to lead a happy life, that’s how I should spend most of my time.
A wide body of research indicates that daily experiences contribute far
more to your overall happiness and life satisfaction than possessions
do. That means you’re far better off investing in a trip around the
world with friends than a huge house or luxury car.
On the flip side, you should ruthlessly eliminate things that don’t
contribute to your happiness or life satisfaction. The classic example
for most people is commuting: very few people love the feeling of
sitting in a car or train for 1-3 hours every day. If you eliminate your
commute by moving very close to where you work you both eliminate a
source of dissatisfaction AND free up more time and energy to do things
you find far more rewarding. That decision can be a net positive, even
if it’s more expensive.
9: A minority of decisions will produce the majority of your results: choice of work, debts, investments, relationships.
There are a few specific decisions it pays to take special care before
making: what you do for a living, borrowing money, contractual
commitments, and who you spend the most time with - particularly the
transition from romantic partner to marriage or civil union.
Think of these decisions as inflection points - you’re making a
commitment that’s very difficult (not impossible, but difficult) to
reverse or change. They also effect how you will be spending your time
and energy on a very fundamental level, such that they can drastically
alter your income, priorities, and life satisfaction.
Accordingly, it pays to spend a disproportionate amount of time and
energy making sure these decisions are made well, and you put yourself
in the best position you can in the process. For example, purchasing a
home is one of the biggest financial decisions people make, so if you
want to buy a house, don’t do it quickly or lightly. Do your research,
understand the complete financial picture, create a masterful budget,
improve your credit, and negotiate hard with the bank if you’re taking
on debt. What can look like small improvements can end up producing huge
results: negotiating 1% off of your interest rate can save you hundreds
of thousands of dollars on a 30-year mortgage, so it pays to push as
hard as you can.
10: More effort does not equal more reward - focus only on what is crucial, and ignore the rest.
Here’s the ultimate lesson, and it’s an important one: YOU ARE NOT
REWARDED FOR EFFORT. People ultimately doesn’t care how long you spend
doing something - it cares far more about how important and meaningful
your work is.
You can spend 50 years digging a pit in the Sahara desert, and no one
will care a bit. Spend those 50 years doing something like curing
cancer, and EVERYONE will care.
Whatever you decide to do, spend some time at the beginning
the goal - what appears to be critically important to master, and what
appears to be a waste of time?
You’ll certainly have an incomplete list until you actually get started
and start learning as you go, but establishing your “focus-on" and
“Not-To-Do" lists from the outset can save you huge amounts of time and
effort in the long run.