The Pareto Principle

Expectation is the root of all discontent

When cliches become real

Dark Light

The Pareto Principle states that approximately 80% of the effects come from 20% of the causes. It is a ratio that has stood the test of time since it’s initial proposition in 1896 across all number of fields and disciplines. While it’s validity is often unquestioned, it however is often overlooked in the decision making process.

The primary implication of this principle is that you don’t need to be perfect in order to hit a home-run. The first example that comes to mind is the movie Moneyball. It is about a baseball team hamstrung by their budget deciding to build a team of ball-players based purely on what they do on the pitch versus reputation and perceived greatness. In other words, they focussed in on what statistics made great players great, and purchased players who were overlooked but maintained parity on the chosen statistics. The effect on the pitch in terms of games won ended up being proportional to getting a star player, the only difference being that they paid 80+% less in wages and transfer fees.

It also applies to the little things as well in our personal lives. Instead of doing the laundry everyday for example, it would probably make sense to do batch-laundry days to save on time overall. The same applies for cooking and cleaning as well from a time-saved perspective. The practically of this, however, is another issue entirely. The point is that the Pareto principle lives everywhere. There is so much extraneous friction when doing these everyday activities that we often overlook how inefficiently we do them sometimes.

The Pareto Principle is something that we could probably benefit from more by keeping it front of mind. Whether you are going out to exercise or working on a new painting, there is always value in knowing which 20% will net you the majority of the value.

Related Posts