The Secret to Success by Achieving More with Less
Life gets busy. Has The 80/20 Principle been gathering dust on your bookshelf? Instead, pick up the key ideas now.
Have you ever felt like the proverbial hamster on a wheel? You feel like you are running furiously, yet stay in the same place. Perhaps your results are not growing proportionately to the additional work you put in.
The 80/20 Principle is the idea that 80 percent of all our results in business and life stem from 20 percent of our efforts. The 80/20 principle argues that little of what we spend our time on actually counts. By focusing on the aspects that matter, we can unlock the enormous potential of the magic 20 percent. With the 80/20 Principle, you can elevate your effectiveness in your job, career, business, and life.
The 80/20 Principle places a strong emphasis on the importance of prioritization in achieving peak results.
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“This book explores the nonlinear world, discusses the mathematical and historical support for the 80/20 Principle, and offers practical applications of the same. Read it and use it”– Tim Ferriss, author of The 4-Hour Workweek
About Richard Koch
Richard Koch is an entrepreneur and former management consultant. He is also a writer of several books on applying the Pareto principle (80/20 rule) in all walks of life. Richard’s investments include Filofax, Plymouth Gin, the Great Little Trading Company, and Betfair. Previously, he was a consultant at Boston Consulting Group and later a partner at Bain and Company. After his consulting career, he started a management consulting firm, L.E.K. Consulting, with Jim Lawrence and Iain Evans.
StoryShot #1: 80/20 Thinking Emphasizes Self-Reflection and Thought Before Action
Spotting the Important Features
80/20 thinking is the art of spotting the most important facets of our environment and circumstances. Practitioners of this principle are reflective, unconventional, hedonistic, strategic, and nonlinear. To think in this way, adopt an extreme form of ambition to want to change everything for the better. However, this approach should not descend into arrogance. Instead, 80/20 thinking is best adopted and practiced in a relaxed and confident manner.
Maintaining a Reflective Approach
The modern way of thinking emphasizes rushed action instead of reflection. This type of thinking neglects the preciousness of quiet contemplation. Don’t take action until you have effectively reflected on your thoughts and insights. Once you have narrowed down your potential options, you can chart your action plan. This approach will foster impressive results while requiring less energy and resources.
80/20 Thinking Is Unconventional
80/20 thinking is about taking non-standard approaches to solving a problem. You can challenge ideas and discover where conventional wisdom is wrong. In areas where ‘traditional’ practices are wrong, try to do things differently based on unconventional wisdom.
The Nonlinear Nature of 80/20 Thinking
Conventional thinking uses a linear mental model. Linear models can be inaccurate and destructive. We fall back on linear models, as they are simple. However, this thinking has limited benefits and is not conducive to conceiving radical ideas that change the world. Scientists and historians eschew linear thinking. We should follow suit and do the same. Examine nonlinear relationships that others neglect. Only a few decisions truly matter. But those decisions are transformational and exponential to success.
StoryShot #2: 80/20 Happiness Is Actively Seeking Out Happiness Today Instead of Waiting for a Future Day
Society equates happiness with having and spending money. However, money and happiness get spent and saved in very different ways. Money has the potential for compound interest. You can save and invest money, and it will multiply through compound interest. The same is not valid for happiness. You cannot save today’s happiness to spend tomorrow. Avoiding happiness will lead to atrophy. If you do not exercise regularly, your muscles will gradually get weaker. Your ability to generate happiness follows the same principle. Adopters of 80/20 happiness understand what creates happiness and actively pursue happiness generators. This is how you can build compound interest in happiness. You should not save your happiness. Instead, spend your happiness and actively seek it today to reap benefits tomorrow.
80% of our achievements and happiness occur in 20% of our time. However, we can heavily expand these peaks by seeking more happiness. The most effective way of doing this is by recognizing the factors that cause happiness and making decisions accordingly.
StoryShot #3: Your Success Depends on Being Able to Find and Stick to Your Strengths
Everybody has the potential to achieve something significant in their lives. However, outsized efforts are not necessarily the key to this success. Instead, you need to find the right thing to achieve. You will be more productive in specific areas than others. Do not dilute your effectiveness by focusing on areas where you are less productive or skillful. You should also avoid engaging in areas that others suggest for you. Your success will come from choosing the areas you want to engage with.
A good example is Apple’s Steve Jobs, who famously said “I hire smart people and get out of their way”. Jobs understood that he wasn’t an expert at every aspect of the business. So he spent his time focused on what he knew best and hired people he trusted to get the job done.
StoryShot #4: 80% of Your Investing Success Comes From 20% of Your Investments
Typically, only 20% or less of your investments drive 80% of your wealth growth. This rule mainly applies to long-term portfolios. As an investor, conduct careful research to find your top picks for the long term. Once you have identified these stocks, back them and monitor them closely. These successful investments should remain in the portfolio to compound. Taking profits quickly is counter-productive. Hold on to these sound investments as long as they still perform well and have room for growth. Once you have identified and picked a winning stock, there is no reason to get out of the investment as long as it rewards you.
Warren Buffett is a great example of the 80-20 rule in investing. As of September 2022, seven investments made up 80% of his portfolio of 52 securities.
StoryShot #5: 20% of Your Relationships Will Drive 80% of Your Success and Happiness
Society places significant importance on having a vast network of allies and relationships. However, you can do without an extensive Rolodex to be successful. Instead, you need to ensure you have the right relationships. These relationships will depend on the stage of your life and your current environment. The best relationships advance your mutual interests, regardless of external factors.
Not all your relationships are of equal importance. 20% of your relationships will constitute 80% of value towards your interests. Focus most of your attention on nurturing the alliances you have identified as the most important. These alliances will be crucial to your success, as you can only go so far alone.
We rate this timeless book 4.5/5.
This article was first published in July 2021. It was updated and fully revised in Dec 2022.
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