Take a look at this awesome video of an artist drawing a car in Microsoft Paint. A Fun, Non-Math Example, PleaseĮverything is nice and rosy in the abstract. By the end, you are spending lots of time on the minor details. This is related to the law of diminishing returns: each additional hour of effort, each extra worker is adding less “oomph” to the final result. In economics terms, there is diminishing marginal benefit. The point is to realize that you can often focus your effort on the 20% that makes a difference, instead of the 80% that doesn’t add much. Knowing this, if…Ģ0% of workers contribute 80% of results: Focus on rewarding these employees.Ģ0% of bugs contribute 80% of crashes: Focus on fixing these bugs first.Ģ0% of customers contribute 80% of revenue: Focus on satisfying these customers. The Pareto Principle helps you realize that the majority of results come from a minority of inputs. The key point is that most things are not 1/1, where each unit of “input” (effort, time, labor) contributes exactly the same amount of output. It could be 80/20, 90/10, or 90/20 (remember, the numbers don’t have to add to 100!). We’d like life to be like the red line, where every piece contributes equally, but that doesn’t always happen. That cool thing/idea/person will result in majority of the impact of the group (the green line). Out of 5 things, perhaps 1 will be “cool”. The 80/20 rule observes that most things have an unequal distribution. In a perfect world, every employee would contribute the same amount, every bug would be equally important, every feature would be equally loved by users. What does it mean when we say “things aren’t distributed evenly”? The key point is that each unit of work (or time) doesn’t contribute the same amount. The key point is that most things in life (effort, reward, output) are not distributed evenly – some contribute more than others. Remember that the 80/20 rule is a rough guide about typical distributions.Īlso recognize that the numbers don’t have to be “20%” and “80%” exactly. In that case, 20% of the workers did 100% of the work. Think about it - in a group of 100 workers, 20 could do all the work while the other 80 goof off. 20% of the features cause 80% of the usageīut be careful when using this idea! First, there’s a common misconception that the numbers 20 and 80 must add to 100 - they don’t!Ģ0% of the workers could create 10% of the result.20% of the bugs cause 80% of the crashes.20% of the customers create 80% of the revenue.20% of the workers produce 80% of the result.20% of the input creates 80% of the result.More generally, the Pareto Principle is the observation (not law) that most things in life are not distributed evenly. Originally, the Pareto Principle referred to the observation that 80% of Italy’s wealth belonged to only 20% of the population.
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