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Fundamental techniques

Self Study – Book 2 (1)

Posted by Dinesh Chandar On 9:08 PM

Book:
80/20 Principle: The Secret of achieving more with less

Subject Area: Productivity & Effectiveness

Post number: 5

English version:

 

Principle of Least effort - The 80/20 Principle – Pareto principle – Law of the vital few: Names are different, but the principle is the same! It basically states that for a majority of the events – both corporate and personal – 80% of the results come from 20% of the effort.

The greatest myth in the world is to believe in equality. If you still do, Good luck. The universe itself is imbalanced. 99.9999% of matter is found in .00001% space. (Clusted un stars and planets.. the remaining space virtually contain no matter). 82.7% of the worlds income goes to the richest 20% (Survey 1989). 80% of a company’s profit comes from 20% of the products/customers/segment etc;

This law also applies on a personal level. 80% of your disputes with your better half come from 20% of cuaases. Why do psychologist emphasize on the first 20 years of life more while a typical human life span is around 100? Why do the early 20 years have an unequal impact and importance on the rest?

This also applies to Machines. The IC engine (Internal Combustion) wastes 80% of the fuel for combustion and uses the remaining 20% to power the actual drive! Computers are made faster by tuning it to run the most frequently run 20% of the code (e.g.: RISC).

While the ratio 80:20 is note literal (though it is in most cases), the imbalance does exist in some form. 60:40, 99.9:0.1 etc;

The initial discovery of this principle was made in wealth distribution by an Italian economist Pareto. He found that 80% of the wealth was accumulated by 20% of the population. He was surprised to validate his theory across countries across time.  He proposed the systematic and predictable lack of balance as the Pareto Principle.

So why is this law of so much importance? Because it is counter intuitive. Counter educational. We have all been taught that equal efforts should reap equal benefits. But that obviously is not the case. Not all customers are equal. Not all products are equal. Not each day we spend has the same significance. (Think of the day you spent on your public examination vs. your last Sunday when you were rolling in the bed.. Now which one had a greater impact in your life?)

The Point we miss is called feedback loop. In real life, everything is connected. Positive and negative feedback loops run amok. A day started with spilt milk leads to more and more stress. A slight initial advantage disproportionally affects the outcome.

What this means is that, Resources with major effects should be utilized more. Intermediate resources should be pressed to be more productive and weak resources are developed so that they mimic the action of stronger resources.

The Pareto theory, after all plugs-in with the Chaos theory – There is imbalance. But predictable imbalance.  Same as the Chaos theory that says certain characteristic patterns re-occur – albeit with infinite and unpredictable variety!




p.s: Please note this is just a short condensed review / my thoughts of the book and is not intended to infringe on any rights or anything like that. For a complete understanding of the subject, I strongly recommend to buy the book yourself or rent it out from a library and read it.

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