Pareto Principle and the entreprenuer
Wilfredo Pareto, the great Italian economist is probably the most referenced man in today’s commercial life. Known for his famous Pareto principle which says that 80% of the output depends only on 20% of the factors of production. For example, if you observe your daily life as a businessman, it is those 2 or 3 critical tasks which really make it or break it for your business. For example, being watchful about sales, monitoring the quality of your goods and overseeing accounts receivables. Your list might be different from mine, but essentially, you will concur with me that it is those few critical tasks which will typically make or break it for your business.
The Pareto principle can essentially be applied to almost any area of your life. For example, you will observe that recurring conflicts and issues in your life arise from your doing (or not doing!) certain critical tasks.
The Pareto principle I have noticed is applicable in almost all areas of our life, from personal to professional. For example, only 20% of your friends could be counted as your real friends, the kinds who will help you in times of need. Or, how about this: Observe your thinking, you will notice that your life will be dictated by the 20% of thoughts that have formed a repetitive pattern in your mind. Or that typically only 20% of your attention is focused on the job at hand, while working. Or my personal favorite: all the major issues in our life arise from the 20% of all problems on the table.
What Pareto probably meant was that to every idea, act or problem, there is a crux which determines the eventual output. If you can identify that crux and give your 100% to it, your chances of doing well increase manifold. If you are attending university, there is always that one week of classes when the most important chapter is taught. And if by a stroke of Murphy’s law (by the way, Murphy’s law somehow always runs contrary to Pareto principle) you get the measles in that one week, you can rest assured the rest of the semester will be an uphill climb.
So whether it is sales, project management or inter-personal relationships, weed out the 80% that adds limited value and focus your thoughts on the 20% that does. You will save yourself precious time that can then be devoted to other 20% that add the 80% joy to your life, like spending time with your family or taking that much needed vacation.
