The 80-20 Rule – The Pareto Principle for More Profits

The 80-20 Rule

by Shamsul
The 80-20 Rule
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The 80-20 Rule: The Pareto Principle


The Pareto Principle is also called the Pareto Effect or 80-20 rule. The founder of this rule was Vilfredo Pareto, an Italian inventor. He was an engineer, sociologist, and economist so he proposed the Pareto Principle. His study dealt with the distribution of Italy’s national wealth. According to his research, 20 % or one-fifth of Italian citizens had approximately 80 % of the assets of the state. He proposed that banks should pay attention to this 20% of people to make more profit. On the other hand, the banks would at that juncture offer 80 % of the populace with merely a fifth of their time used up.


What is the 80-20 rule?

This rule indicates the uneven distribution and shortage of balance between return and resource input. We have summed up the rule as follows,

  • Sales:

Only 20 % of consumers or goods generate 80 % of sales.

  • Storage:

20 % of the goods occupy 80 % of the space.

  • Internet:

80 % of online traffic data is consumed on 20 % of websites.

  • Road traffic:

Only 20 % of the roads are utilized for 80 % of the traffic.

  • Phone calls:

80 % of phone calls are made with 20 % of the existing contacts.

Moreover, the 80-20 rule is basically famous for its use in the time management process. It is a method of completing 80 % of the work in just 20 % of the time. In short, it helps to perform a long task in a minimum period of time.


Definition of the Pareto Principle:

The simple definition of the Pareto principle is to gain 80 % of the result just by investing 20 % of time or effort. For achieving the remaining 20 % result, 80 % effort or time is required. Due to this reason, it is also known as the 80-20 rule.


Advantages and Purpose of the Pareto Principle:

The purpose of the Pareto method is very clear from the above definition. It is a method of achieving something bigger by investing minimum effort or time. Sometimes, we invested so much time in a low-priority task. You can achieve something bigger with proper time management and identifying the right chances. In short, the Pareto method helps you work more purposefully and efficiently. This is an effective method to achieve something within a given deadline. This method helps to keep your focus on the right track and boosts your mind to achieve a task in the given time. The Pareto principle or the 80-20 rule is mostly used with other time management frameworks or tools like the Eisenhower principle.


Disadvantages and Dangers of the Pareto Principle:

There are various mistakes that often happened in association with the Pareto principle. It is a common misconception that you can achieve 80 % of the result with the usual time and effort. There is no need to fix 20 % time or effort. Honestly speaking, it makes no sense. On the other hand, 100 % result would be obtained with 20 % effort. There is a huge difference between income and expense. You can’t add them together. You need to do 100 % expenditure in order to achieve 100 % return. So, this thing often leads to over-optimistic assumptions.

However, if you completely understand this method then you will find out that 80 % of the result is just achieved by 20 % of the effort. Nevertheless, there are plenty of tasks that don’t add openly to the actual goal. It is a disadvantage of the Pareto method that it brings negligence. If a task is structured, designed, and concentrated in the right way then you can obtain 80 % of the result with 20 % of the effort, otherwise it can lead to negligence.


Importance and Use of the 80-20 Rule:

You can apply the 80-20 rule in different ways. You can use it as time management for your private life, work, or studies. It helps to identify which task can produce better results so you can easily prioritize your tasks. It also helps to identify which task or work should be completed first.


When can the Pareto principle be applied?

It can be applied to vast areas or fields of life such as in school, education, work, or everyday life. However, the 80-20 rule can be applied to practical life such as work where you have to meet deadlines. On the other, you can implement this rule in your private life to complete everyday tasks more efficiently and easily.


Examples of the Pareto Principle from Everyday Use:

If you are expecting unexpected guests at your home then you need some time to make it tidy. If it usually takes 2 to 3 hours then you can apply the Pareto principle to get quick results. With this rule, you can complete household tasks within an hour or a half. It helps to prioritize your tasks and tells which task should be completed first. For example, if your house is messy with clothes then you must tackle them. Put the dirty dishes in the dishwasher and clean the tables. Moreover, you must concentrate on the bathrooms because it is mostly visited by guests.


The 80-20 Rule and the Yerkes – Dodson Curve:

Dodson curve deals with the connection between productivity and input. It is named after John Dodson and Robert Yerkes. Their study has shown that commitment can increase productivity. But, this thing is only true in some particular aspects otherwise the productivity level will go down. It is also referred to as the Yerkes-Dodson apex.

It is a U-shaped curve that shows if you invest effort and time constantly then your productivity level increased. After reaching at a specific point, productivity decreases. Stress and performance drop are the real cause of this drop. It leads to some terrible results. Just like the 80-20 rule, the Yerkes-Dodson explains that only a particular amount of effort causes the highest productivity. Higher percentages of time or effort, conversely, do not result from much in relation to production.


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