Business
A headline in the Guardian recently blared: “the Top 1% of England owns 50% of the land”. Another article I read said that only 4% of its total digital audience pays the New York Times for its content, and yet this was a very good profitable year for newspaper. What unites these stories? A concept known by some as the 80/20 Rule and in Economics as the Pareto Principle. You may not know these names, but you need to know this principle - because it’s tremendously important power law that is as true in business as it is in real life. People wear around 20% of their clothes 80% of the time. The most frequently used 20% of the words account for 80% of word usage. 20% of your friends give you 80% of your overall enjoyment. In a nutshell, 80% of the outputs result from 20% of the inputs. Now the distribution is not always exactly 80 / 20 (it can sometimes be 95 / 5), but it remains shockingly true that a very small percentage of activities that you perform lead to the majority of what you accomplish. In management consulting, this power law is also a process. You’ll often find teams attacking a problem by saying: “let’s 80-20 this”. By that, they mean what is a quick and dirty - but effective - way to get at the gist of the issue. In this episode of BTO, we break down the 80/20 Principle, explain in roots in Italian Economics, and give examples of how you can use this thinking tool for everyday issues. Join us as we discuss one of the most useful ways to emphasize impact over activity, and how to harness the Pareto Principle to improve your business and your life.