The Pareto Principle is a concept that everyone knows, but few act on. It is often knows as Pareto’s Law – the idea that 20% of the effort delivers 80% of the results. But what if we actually applied it? How could we transform our lives and turbocharge our productivity through using this simple, revolutionary concept? Richard Koch, in his groundbreaking book "The 80/20 Principle", has done just that.
Think about it. In your own home, 20% of your carpets will get 80% of the wear. On the streets, 20% of criminals cause 80% of the crime. In the shops, more than 20% of novels account for 80% of the sales. The revelation that the universe is predictably unbalanced was discovered by Italian economist Vilfredo Pareto in 1897, when he realised that 80% of the land in England was owned by 20% of the people. Curiously, this same pattern recurred across countries and throughout history, like a secret code across time and space.
Koch believes that our lives can be supercharged through judicious daily application of this principle. Basically, resources that have powerful effects should be used as much as possible. In Koch’s words, “the few things that work fantastically well should be identified, cultivated, nurtured and multiplied”.
Richard Koch is a highly successful businessman who made a fortune with Filofax in the Eighties and has gone on to build up chains of hotels, restaurants and online enterprises. This track record lends huge credibility to this book which cannot be dismissed as “just another” self-help book. In one amusing anecdote, Koch explains how he achieved a first class degree from Oxford purely by focusing on the essentials and developing profound knowledge about just a few key areas.
Koch goes on to apply 80/20 thinking to business, investments and even relationships. He is less convincing when he strays into the last two fields. Koch’s most counter-intuitive idea is that instead of diversifying investments, people should put all their financial eggs in the most lucrative basket – and watch it like a hawk. This may be fine for entrepreneurs and risk-takers, perhaps, but it hardly worked for the loyal shareholders of Lehman Brothers.
However these flaws should not detract from this captivating, incisive and revolutionary book. The Pareto rule is no crazy notion but a confirmed mathematical rule. I have used Pareto analysis myself in statistical analysis of business processes and it can be scarily accurate in many situations.
Koch believes in constructive laziness. He quotes the von Manstein matrix, devised by a legendary German general. There are four types of officers, he argues:
(1) Hard-working intelligent ones - These make excellent staff officers
(2) Hard-working and stupid – These people are a menace. Fire them at once!
(3) Lazy and stupid – Leave them alone, they do no harm
(4) Lazy and intelligent – These people are suited for the highest office
Koch’s motto could well be ”intelligent laziness”. He calls us just to do the things that add the highest value, and keep on doing them. This in short, requires a time revolution. There are echoes here of that old Tony Robbins message – if we keep on doing what we’ve been doing, we’ll keep on getting the results we’ve been getting.
The 80/20 way cuts like a knife through the irrelevant garbage that clogs up so many of our daily lives. Clarity is power, and Koch tells us to ruthlessly prune “80%” activities and just focus on the “vital few”. The final chapters provide some vital insights and strategies for living the 80/20 way.
In summary, this a challenging and exciting book, because it reveals just how much potential lies untapped in all of us. Even better, Richard Koch offers practical pointers to show how we can unleash that power.
(c) WestOcean 2009
