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The Pareto Principle, the 80/20 rule

The Pareto Principle, the 80/20 rule

The Pareto principle, also known as the 80/20 rule, is a theory that 80% of the consequences of a situation or system is determined by 20% of the causes.

Content

  • 1 What does the Pareto Principle establish?
  • 2 Origin of the Pareto Principle
  • 3 Applications of the Pareto principle
  • 4 Usefulness of the Pareto Principle in mental health

What does the Pareto Principle establish?

The Pareto Principle was described by the economist and sociologist Vilfredo Pareto, which specifies an unequal relationship between inputs and outputs. The principle states that 20% of what goes into or is invested is responsible for 80% of the results obtained. In other words, 80% of the consequences derive from 20% of the causes; This is also known as the "Pareto rule" or the "80/20 rule."

More generally, The Pareto Principle is observation (not law) that most things in life are not distributed evenly. For example:

  • 20% of the consequences derive from 80% of the causes
  • 20% of workers produce 80% of the results
  • 20% of customers create 80% of revenue
  • 20% of software errors cause 80% of software failures.
  • 20% of investors keep 80% of the profits obtained on the stock exchange, and this in turn has its origin in 20% of the values ​​of an individual portfolio.
  • And so on…

The principle does not stipulate that all situations are going to show exactly this relationship, it refers to a typical distribution. In general, the principle can be interpreted as a minority of causes derive in most of the results.

Origin of the Pareto Principle

In 1906, Pareto observed that 20% of the population in Italy owned 80% of the wealth. He also realized that this relationship can be found in many areas of the physical world, so he theorized that it could indicate a natural law.

In the 1940s, Pareto's theory was formulated by the Dr. Joseph Juran, an American engineer widely recognized for his contributions in the QA. It was Dr. Juran who decided to call the 80/20 ratio "The Pareto Principle." According to him, applying the Pareto Principle in the metrics of a business, will help us separate the "little vital" things (80% of the causes) from the "very useful" (20% that generate the greatest result or impact ).

Pareto principle applications

The Pareto principle assumes that the more frequently an action occurs, the greater the impact it has on the result.

In parallel, this principle also describes the “Pareto efficiency” which is a balance in the distribution of resources in such a way that, within a given system, an individual or entity cannot obtain a benefit without worsening the situation of any other person or entity, and this is known as a Pareto improvement. In accordance with this concept, it is desirable to continue making Pareto improvements until it is no longer possible because one benefit to one individual would worsen another or others. When additional Pareto improvements cannot be made, it is said that the Pareto efficiency.

Another application of the Pareto principle is the 96 minute rule, which argues that intellectual workers must devote themselves to their most important tasks during that period of time each day to improve productivity.

Usefulness of the Pareto Principle in mental health

This is actually a principle applicable to many areas of life, not only to work and business, we can extrapolate it to the economy, politics, but also to our thoughts and attitudes.

Meditate a little on the following:

  • What 20% of the things in my life produce 80% of my happiness?
  • What 20% of the things in my life are responsible for 80% of my problems and unhappiness?

How much time do you waste thinking the worst? Feeling scared? Looking for the tragic side of events? Remember that perseverance in thoughts, whether good or bad, will have a huge influence on how we feel.

As the principle says, we can conclude that with only 20% of our effort we can achieve 80% results.

There are people who think that what counts is the amount of hours invested in something, such as when someone becomes obsessed thinking about a problem and believes that thinking about it will make the best decision to solve it. But in reality these ideas end up being ours mind traps. Quality is much more important than quantity, we must choose better the words with which we speak, our thoughts, our habits, our relationships, our work, our environment ... A small step can be the beginning of everything.

Let's try focus our energies on the things that are really going to bring us something. Sometimes we waste too much time on whims, goals, relationships or jobs that generate 80% of our unhappiness. You have to be wise and brave enough to know when to retire, there are things that are not worth being forced.

For example, do not invest 80% of your money on clothes that you will use rarely. Look for those that you will really use. Dedicate your quality time to those people who make you feel good, not to those who bring you nothing or almost nothing, etc.

Let us carefully choose people and things that produce 80% of our happinessLet us learn to control our impulses a little better, to replace our negative thoughts that only make us feel bad.

Apply the 80/20 rule in your personal life, in your studies, your work ...