The 80/20 Rule: 80% of People Get It 20% Wrong

The 80/20 Rule has popped a lot for me over the past 8 years or so. The first place I learned of it was from Tim Ferriss' The Four Hour Work Week. (This book changed my life.)

Here's how he phrases it...which I think makes the most sense. I have definitely heard a few paraphrases of this that aren't quite right. If you stick to these examples and apply directly from here, you will get it. I lifted this from his blog:

  • Hyperactivity vs. Productivity — 80/20 and Pareto’s Law: 

Being busy is not the same as being productive. Forget about the start-up overwork ethic that people wear as a badge of honor–get analytical. The 80/20 principle, also known as Pareto’s Law, dictates that 80% of your desired outcomes are the result of 20% of your activities or inputs. Once per week, stop putting out fires for an afternoon and run the numbers to ensure you’re placing effort in high-yield areas: What 20% of customers/products/regions are producing 80% of the profit? What are the factors that could account for this? Invest in duplicating your few strong areas instead of fixing all of your weaknesses.

  • The Customer is Not Always Right — “Fire” High-Maintenance Customers: 

Not all customers are created equal. Apply the 80/20 principle to time consumption: What 20% of people are consuming 80% of your time? Put high-maintenance, low-profit customers on auto-pilot–process orders but don’t pursue them or check up on them–and “fire” high-maintenance, high-profit customers by sending a memo detailing how a change in business model requires a few new policies: how often and how to communicate, standardized pricing and order process, etc. Indicate that, for those clients whose needs are incompatible with these new policies, you are happy to introduce other providers. “But what if my largest customer consumes all of my time?” Recognize that 1) without time, you cannot scale your company (and, oftentimes, life) beyond that customer, and 2) people, even good people, will unknowingly abuse your time to the extent that you let them. Set good rules for all involved to minimize back-and-forth and meaningless communication.

Where people start to water the power of this down is when they just start chopping everything things into 80/20 blocks instead of creating a relationship between desired outcomes and inputs. Like, I spend 80% of my time with 20% of my friends...That's not a helpful insight... It could mean you wish you could spend time with a wider variety of friends or that you could spend more time outside of your social realm, just doesn't give you a look at a way to optimize your time.

Instead, the relationship is more like this - "I get 80% of my enjoyment from 20% of my time spent with friends". This means you can cut out 80% of the people in your schedule and still have 80% of the enjoyment. You have to factor in a variable that has some sort of meaning to you like happiness, profits, efficiency, <insert desired outcome here> and relate it to an input (time, energy, stress, etc). [and I realize this is a ruthless example!!]

Other ways to apply it to your life: 
You get 80% of the enjoyment out of 20% of the clothes you wear.
You get 80% of the enjoyment out of 20% of the recipes you make.

What are the 80/20 rules in your life or business? How has this principle helped you? Let me know in the comments!