Wouldn’t it be nice if there were a way to earn and accomplish far more while working only a fraction of the hours you work now? Turns out there is a little-known, rarely-exploited, economic principle that can help you do just that.

The prevailing assumption about work, organizations, and life in general is that there is a one-for-one correlation between effort and reward. We often assume that 50 percent of our inputs will lead to 50 percent of our outputs. This book hopes to illuminate a principle that has shaped our modern world in ways that most people, even businessmen looking to optimize results, have missed. This principle is the key to greater success in work, business, life, and play. The 80/20 Principle (also known as the Pareto Principle, Principle of Least of Effort, or Principle of Imbalance) reveals how we can do far more with much less effort. The 80/20 Principle is the maxim that 80 percent of output or outcomes is the result of 20 percent of related input or causes.

Over a century ago, the Italian economist Vilfredo Pareto successfully contested this assumption—in theory anyway. It started when he was researching England’s income distribution in the late 1800s. He found that the majority of money was in the hands of a minority of individuals. While this may not seem profound to modern ears, it was the start of something groundbreaking for that time. More significantly, though, was what he found as he researched other countries’ income structures. He discovered a discernible numerical pattern to this lopsided distribution: 80 percent of wealth belonged to 20 percent of the population, 65 percent belonged to 10 percent, and 50 percent of the wealth was in the hands of five percent of the population. The astounding thing here is not the percentages—but that the lopsidedness could be accurately anticipated. These proportions were consistent across all countries where data concerning wealth was available.

Pareto had a hard time making this idea accessible to people, so the 80/20 Principle was largely ignored during the twentieth century. Thus, the potential for wealth creation that his Principle illuminates has remained largely untapped.

The 80/20 Principle matters because a tiny minority of inputs yields the vast majority of results, but it’s also important because it shows in economic terms what most of us probably realize: We waste huge amounts of time. There’s a whole 80 percent of effort that yields negligible results. This is not intended to induce self-pity or frustration, but it is a rallying call to stop squandering gobs of time. There is great potential for leveraging the 80/20 Principle. When an organization discovers which efforts are yielding the best results, it will typically reallocate resources from failing projects to successful ones, or try to remake the failing projects using successful ones as the model. Entrepreneurs typically adopt the former strategy of ruthlessly cutting what’s not working. Computer system engineers, educators, and pastors tend to adopt the latter approach of improving an inefficient system. Both can be effective, but the best way to handle things is a combination of both: investing in the few things that work fabulously well, and pruning back the waste that can’t be readily salvaged. 

Why add to productivity when you can multiply it? Nature has dealt us a hand that will abide by the 80/20 Principle, but now that we’ve discovered the pattern, we have the opportunity to build upon that foundation and improve ourselves.

So how do we apply this lens to our various spheres of life? How do we begin to see the world through an 80/20 lens?

There are two 80/20 tools at your disposal to help you navigate decisions big and small. The first is 80/20 Analysis. This is a more empirical, quantitative process to discern precisely where the 20 percent is that’s yielding the biggest results. It’s highly valuable because it provides an accurate report of what is working and what isn’t.

The downside of 80/20 Analysis is that it’s time-consuming. And because we can’t pause to collect data for every single decision in life, we must rely on 80/20 Thinking to help us with decision-making. 80/20 Thinking involves more qualitative, intuition-based insights. A person arrives at conclusions based on experience and events without waiting for formal tests. These are informed, but hazier assessments of what is working and what needs to be adjusted. Decisions can be made faster because the empirical tests are bypassed, but 80/20 Thinking can get you into trouble on occasion for the same reason.

Both 80/20 Analysis and Thinking are extremely valuable. They will help you find the few key activities that are leading to huge returns, and separate the quality wheat from the irrelevant chaff. Learning which situations all for Analysis and which require Thinking is a vital skill to be developed.

Ever since the Industrial Revolution, companies have been increasing in size. Until the late 1800s, most companies were local, regional, or national. The majority of revenue was derived from in-country transactions. During the 1900s, the world saw the rise of multinational corporations. Then came conglomerates—businesses owning collections of corporations that included numerous industries and diverse products. For most of the twentieth century, this trend toward burgeoning company structures continued. During the end of the twentieth century, however, there was a reversal of this trend. Fortune 500 companies accounted for 60 percent of the United States’ GDP in 1979; but in the 1990s, they only accounted for about 40 percent.

There is an ongoing debate about what the ideal business size is. This recent development doesn’t prove that small is best, as some would suggest. More important than company size is company simplicity.

What often happens is that larger corporations add unnecessary complexity, yet big isn’t bad. It can be a tremendous advantage. It is complexity, not enormity, that hampers productivity and growth.  

The costs of complexity are usually hidden and built into the structure, but they are real and hurt company growth. Big or small, the key is simplicity,

Managers are just now coming around to this conclusion. A study of 39 medium-sized German companies found that the unique factor that differentiated the successful from the less-than-successful was simplicity.

Simplicity in business means finding the 20 percent of customers who account for 80 percent of profit, the 20 percent of products that account for 80 percent of sales, and the 20 percent of efforts that bring in 80 percent of rewards.

It’s vital not just to think in terms of 80/20, but to act on 80/20 Thinking. We must learn to reject the erroneous 50/50 intuition that comes so naturally to us. As is hopefully clear by now, input and output very rarely follow a neat one-to-one correspondence. Expect the 80/20 pattern to show up. There are going to be those few resources, employees, products, and activities that lead to the best results and biggest profit.

When you spot these trends, act on them. Cut 80 percent of the lard that isn’t yielding significant profit. Whatever the advice—whether conventional wisdom or accepted norms—that urges keeping the 80 percent of effort leading to 20 percent of sales, block it out!  Be brutal about cutting it wherever you find it.

Don’t lose sight of the effective inputs that lead to big-time growth. When you find a 20 percent activity, make it your bread and butter, your all-in-all, and exploit it. Become its expert, advocate, and loyal devotee. Take stock of your position, your capital, your friends and allies, your influence and connections to influencers. Throw everything you can at that 20 percent and watch it multiply.

Any new resources should go toward the 20 percent idea. Any new innovations should be incorporated into that 20 percent project that’s producing 80 percent of profit. There’s little value in improving the products for which there is very little demand. You’d be expending massive amounts of energy, manpower, and mental power in the wrong places.

80/20 Thinking and Acting go hand-in-hand. Ideally, they form a mutually reinforcing relationship, a dialogue in which thinking informs action informs thinking.

To be truly free requires some serious 80/20 thought. The key ideas that come from honest and thorough 80/20 reflections will change the course of your life if you let them. But it must be your thinking that leads to these key insights. It’s far more likely that thoughts originating from a personal synthesis will stick, and that you will take ownership of them. You don’t need many, just an effective few.

People who get the most out of the 80/20 Principle tend to begin with serious self-reflection, but that isn’t the only valuable factor. These people also develop the knack for thinking outside the box. 80/20 Thinking wars against status quos and blindly-accepted norms that lead to squandered resources and subpar results. A corollary of saying “no” to the conventional is an optimistic view toward progress.

80/20 Thinking is hedonistic, or pleasure-oriented. People who successfully employ 80/20 Thinking invariably view life as something to be enjoyed, and recognize most achievements as an outcome of interest and concern with long-term happiness. This may seem self-evident to some, but it is apparent that countless people fail to grasp some of life’s most basic principles.

80/20 Thinking is clearly ambitious, but it also maintains a laidback confidence. The frantic, anxious, overworked state isn’t a badge of honor. It’s a completely unnecessary situation. Money isn’t that hard to get ahold of and, once you have even a small surplus, it’s not difficult to multiply. 80/20 Thinking is confident and collected.

Both the super-busy and super-lazy are in need of a time revolution. The 80/20 Principle can help us do that. The key is not to manage time better, but to think about time in a completely different way.

Time management is a term that originated in Denmark. It was developed as a way help busy bosses squeeze the most out of a day. The bedrock assumption is that time is a scarce commodity to be maximized. The message seems to resonate, as time management is now a $1 billion industry. But this philosophy is flawed to the core!

The truth is that there’s plenty of time, but we just happen to be really good at squandering the vast majority of it. Time management assumes that we already know how best to spend our time, but the 80/20 Principle shows us very clearly that it’s not so. Most of our productivity is not the result of going hard all the time. The 80/20 Principle shows us that’s not how productivity happens, but that peak productivity occurs in a roughly 20 percent period.

Don’t let the naysayers convince you that you can’t always get what you want. You absolutely can, but first you must figure out what you want out of life.

General lifestyle is the best place to begin. Take stock of the people with whom you live and surround yourself, the place you live, the hours you work, and the job you work. Is each of these a good fit? Does your environment propel you towards what you want in life? Do you have a sense of control? Do you feel at home in your home? Do you have the space to meditate and be creative? Are you traveling too much? Not enough? Do you make enough money that you don’t have to fret about finances? Are you able to spend quality time with loved ones and friends? Is there enough time to help others and causes that are important to you?

Figure out what kind of lifestyle you want. Oftentimes, this exercise itself illuminates values and preferences that people have but don’t think about. If your lifestyle isn’t helping you realize your full potential, what are you going to do about that?

These insights are just an introduction. If you're ready to dive deeper, pick up a copy of The 80/20 Principle here. And since we get a commission on every sale, your purchase will help keep this newsletter free.