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Pareto Principle


Named after an Italian economist who showed that 80% of the land in Italy was owned by 20% of the population, the Pareto principle states that 80% of effects come from 20% of the causes. That is why it is also known as the 80/20 rule or the law of the vital few.

Originally developed to look at the distribution of income and wealth, it has also become a principle of efficiency. If you focus on the 20% vital few, you will get 80% of the result you want or need.

At work it can be applied to staff (80% of the work is done by 20% of the employees) or to customers (80% of your sales come from 20% of your customers) or even profit (80% of your profit comes from 20% of your products or certain services). 

There is lots of debate about whether or not you can use this broadly without first verifying it statistically. So it is best to do the math and see if this is a principle you can use.

What is well accepted is that you can use it as a rule of thumb for efficiency sake. Spend your time on the 20% that is most vital first and see if it gets you up to 80% of the output. If not, adjust. But if so, then it gets you there faster and more efficiently even if you decide you want to do the work to get the last 20% to get you to 100%.

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