# The Pareto Principle: The Power of Less

08.03.2019

Episode #3 of the course Mental models: How to make better decisions by John Robin

Welcome back!

There are so many mental models, it’s tempting to want to cover all of them. But we only have eight more days together, so I’m going to go over the most important.

In fact, that’s exactly what today’s mental model is all about. Using the Pareto Principle, you’ll learn why focusing on a small selection of the most important is key to getting the highest overall results.

What Is the Pareto Principle and Why Is It True?

This mental model started the same way all discoveries do: noticing something. Specifically, the Italian economist, Vilfredo Pareto, noticed that in Italy, 80% of the land was owned by 20% of the population.

The next steps involve the scientific method because Vilfredo Pareto believed in and used this mental model, as did those who came after him. It turns out that this distribution of 80% results from 20% resources was found everywhere, especially in economics and business.

In the 1992 Human Development Report, it was found that in 1989, the world’s richest 20% have 82.7% of the world’s wealth. The Dunedin Multidisciplinary Health and Development Study found that 80% of crimes are committed by 20% of criminals. There are many other examples, and though they aren’t always exactly 80/20, the ratio is quite close.

A mental model began to take shape: For any system of resources (people, time, money), we expect peak results if we invest in the top 20%. Some principle is at work, but what is it?

Mathematically, this principle relates to the power distribution law. In any system of resources, the most effective ones will have the highest results, especially if there’s incentive. In the case of wealth, people who have the greatest aptitude to get wealthy will accumulate the most. The remainder of people have less to acquire because the frontrunners beat them to it.

But it goes so much further than money. In fact, you can use it in your personal day!

Applying the Pareto Principle

Think of your time as a resource. In each day, you have 24 hours. You can apply the Pareto Principle by seeing that, of those hours, to get top results, you’ll want to spend 4.8 hours (20%) on your most important work. In one week, you have 168 hours. Applying the Pareto Principle, you’ll want to spend 33.6 hours (20%) on your most important work.

Think of your to-do as a resource. It’s often an overwhelming list of things you need to do to get results. Apply the Pareto Principle by circling 20% of the most important tasks. Do those. Ignore the rest. You’re using the Pareto Principle now to understand how to approach work and how your effectiveness can skyrocket.

The power of this mental model is that you can set boundaries on what you think you have to do with your time. This is especially true if you’re self-employed or an entrepreneur, where the number of things to do is never-ending and there is never a sense of being done for the day. It’s tempting to think you should just put in a 16-hour day until you crash, then keep going and going until you succeed.

But with the Pareto Principle, you can see that this is a bad way to spend your time. Instead of just “working hard,” you can now strategically analyze the top, most important work you need to be doing, and set a limit on that. And the principle promises that this seemingly small window of time can net high results: 80%!

And the best part? You have permission to spend the remaining 80% of your day—a whopping 20.2 hours—doing whatever you want, including getting a night of good sleep so you make better decisions and have more focus each day when you work.

Takeaway

The Pareto Principle is a mental model that helps us seek top-performing efforts and focus on a selection of those to get the best results. Applying it to your life, you can gain the benefit of wasting less time, especially on low-return endeavors that overall get you less.

Homework:

Step 1: Do the exercise mentioned above, listing 25 things you think you have to get done today or this week.

Step 2: Circle the top five most important.

Step 3: Do those and ignore everything else.

Step 4: Repeat this every time you finish your five. Completely rewrite your new list of 25 each time. Pay attention to what (if any) tasks you ignored before they show up again or how they change. You’ll likely notice that by not allowing yourself to do them, they weren’t so important after all.

Tomorrow, we’ll talk about the power of simplification, by way of another pivotal mental model: Occam’s Razor.

Recommended book

The 80/20 Principle by Richard Koch

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