Decision Making Tool: The Pareto Principle

Learn and practice using the Pareto principle with exercises.

What is the Pareto principle?

The concept in one sentence:
A few things account for most of the results.

The concept in one quote:

The Pareto principle is like a form of judo for life and work. By finding precisely the right area to apply pressure, you can get more results with less effort.

James Clear

The concept in one image:

How I use it?
I use the Pareto principle to prioritize my work tasks. I focus on tasks that will have a high impact on my primary goals or metrics.


Examples

Example 1

What is the Pareto principle also known as?

  • Occam's Razor

  • Inversion

  • 80/20 rule

  • Hanlon's Razor

Answer

The 80/20 rule where approximately 80% of the results come from 20% of the actions (or inputs).

Example 2

What is an advantage of the Pareto principle?

Answer

Knowing the principle can help you find the actions (or inputs) that matter most.


Exercises

This week’s exercises require some research.

Exercise 1

What's another name for the Pareto principle?

  • The Law of Attraction

  • The Law of the Vital Few

  • The Law of the Minimum

Exercise 2

Does this table represent an example of the Pareto principle?

  • Yes

  • No

Exercise 3

Is the Pareto principle, a law of nature?

  • Yes

  • No

Exercise 4

Does the Pareto principle apply to the transmission and spread of COVID19? (A small percentage spreading it to most)

  • Yes

  • No

Exercise 5

You bought a dictionary to learn a foreign language.

Can you come up with a learning strategy that uses the Pareto principle?

Exercise 6

What is the origin of the Pareto principle?

Exercise 7

The point of the Pareto principle is to recognize that most things in life are not distributed evenly.

Is this statement correct?

  • Yes

  • No

Exercise 8

Can you think of an area in your life where the Pareto principle is true?

Exercise 9

Can you think of an industry where the Pareto principle is true?

Exercise 10

Can you think of a disadvantage of using the Pareto principle?


Answers

Exercise 1

The Law of the Vital Few where a few things carry most of the weight.

Exercise 2

Yes, the richest 20% accounted for most of the income.

Exercise 3

No, the Pareto principle is merely an observation, not a law. Although broadly applied, it does not apply to every scenario.

Exercise 4

Yes, According to the scientific journal Nature: "Most individuals did not infect anybody else, but 15% of people accounted for 80% of secondary infections—an indication that super-spreading played a major part in transmissions."
Nature - Superspreading drives the COVID pandemic

Exercise 5

A learning strategy could be to focus on the most frequently used words in that particular language. A small percentage of words is likely to account for the majority of usage in written and oral conversations.

Exercise 6

According to Wikipedia: Italian economist Vilfredo Pareto, who showed that approximately 80% of the land in Italy was owned by 20% of the population. (1896)

Exercise 7

Yes, in a lot of things, the minority is responsible for the majority.

Exercise 8

Some personal example from my life:

  • Relationships—I spend most of my time with a small number of people.

  • Apps—I spend most of my time on a small number of apps.

Exercise 9

Industry example:

  • Investment or Venture Capital where most of their returns come from a small percentage of their portfolio.

Exercise 10

The Pareto principle optimizes for the past and ignores the future.
For example, a low-paying customer today may become your biggest paying customer tomorrow. The Pareto principle doesn’t take that into account.


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