What is the Pareto principle and where does it apply?

Recently, in psychology, in economics, in the field of self-development, as well as in other areas of human life, the Pareto law has gained great popularity. This rule allows a person to spend a minimum amount of effort, but get the maximum result. At the same time, this formula works both in the forward and reverse directions, therefore, often devoting a huge amount of time and effort to a particular task, we get a very small effective return.

What is it and how to apply the rule in real life? How did the Pareto principle come about? Who is the author of this law? Read more about this in our material.

What it is?

The Pareto principle is a law that will help you establish the level of effectiveness of what you are doing. Often the Pareto principle is also called the 20/80 rule. If you try to explain the Pareto law in simple words, then its essence is that 20% of your efforts bring 80% of the result and vice versa: 80% of the efforts give only 20% of the final result. This theory allows you to give preference to the most effective resources that will bring the greatest result, thereby not wasting your energy and time. The Pareto efficiency system is very popular in psychology.

The author of this law is an Italian economist. He identifies several sources and modes of manifestation of the principle. Let’s consider some of them:

  • This principle has shown itself quite effectively in practical work due to the fact that a fairly large number of factors are just ordinaryamong them there are only a few important for our life;
  • a significant part of the forces applied to solve the problem does not give us the desired result;
  • the visible part of life is not always completebecause often there are a large number of details and moments hidden from a person;
  • usually our plans do not correspond to realitybecause regardless of what we planned, in the end, in most cases, we get a different result;
  • a large amount of our activity does not lead to a direct result, but is just a waste of time.


The Pareto principle has a serious scientific justification, and is not just built on conjectures and reflections.


Story


The 20/80 effect was named after the author of this law, the Italian scientist Vilfredo Pareto (1848–1923). By his occupation, he was an economist, so the invention of the formula was accompanied by the derivation of coefficients, the construction of graphs and histograms. The principle, popular to this day, was noticed in the process of studying the financial and economic situation of the inhabitants of England at that time. In the course of his research, economist Vilfredo Pareto noticed that all the country’s money (as well as other material goods) among the citizens of England is distributed rather unevenly. Moreover, such a bias occurs in such a way that most of the money is in the possession of a smaller number of people and vice versa: a smaller amount of material wealth is distributed among the majority of the people. Thus, the base ratio is not equivalent.

If you go into the details of Pareto’s research, it can be noted that he discovered 2 main criteria.

  • Only 20% of all material wealth belongs to 80% of people, while 10% of the population accounts for 65%, and 5% — 50% of wealth. This distribution suggests that the country’s economic system is heterogeneous.
  • The second criterion, identified by Pareto, says that such a situation is typical not only for the economy of England. The 20/80 principle can be applied in any country and in any given period of time. And also the law is relevant not only for the economy, but also for other areas of activity.

Based on such a complex and large-scale work that was done by the scientist, a special graph was modeled and built called «indifference curves». The main purpose of this graph is to show how many items a person can give up in order to buy one well-defined item.

And also Vilfredo Pareto invented an innovative factor that helps determine the level of human well-being. It lies in the fact that in itself an increase in financial and material wealth is a rather positive phenomenon, since in this case some people are in gain, but at the same time one cannot call losers. In order to achieve an optimal economic (or any other) state, it is necessary to achieve a situation where the redistribution of material wealth can improve the condition of one particular person, but at the same time this fact will not negatively affect the condition of another.

Application and examples


To date, the Pareto law has been successfully used to solve a particular problem, to make decisions in various areas of human life: in sales, in management, in trade, in time management, in the economy. One way or another, but the law assumes its unquestioning implementation. Consider ways to improve your own life using the Pareto law.

Language learning

Learning a new language is the goal of quite a lot of people. At the same time, for many, it may seem unattainable, even though knowledge of a foreign language can advance a person both in professional and personal life. If we turn to statistics, we must understand that on average one language contains about 1 million words. Accordingly, it is rather difficult to study such amount of new information.

However, if we are guided by the Pareto principle, we can conclude that knowledge of absolutely all the words of a particular language is not necessary. It is important to know only a few hundred or thousands of basic words that are used more often than others. Thus, the task of learning a foreign language becomes much easier. And if you master such a small amount of words (20% of the total), you will be able to communicate at a fairly high level with native speakers.

On the other hand, learning just a million words is a rather unproductive exercise, since, with a high degree of probability, you will not use most of them. You will only waste a lot of energy and strength on activities that will not bring you much benefit.

Personal effectiveness


Everyone tries to become the best version of themselves: read a lot of books, plan their day correctly, successfully achieve goals. However, we often set impossible goals for ourselves, and in the course of self-improvement attempts, we experience a feeling of burnout, as a result, we refuse to achieve goals at all. At the same time, if you know the Pareto principle and skillfully apply it, you can avoid such situations. For example, Instead of reading 10 books a month, set yourself the goal of reading just one. Thus, you will get rid of unnecessary stress and gain much more knowledge than if you tried to read everything at once.

You will remember information from one read book much better, and you will be able to apply the acquired knowledge in practice.

Food

Many people dream of starting to eat right, go on a diet or stop snacking late at night, but not everyone succeeds. The whole point is that most people try to adjust their diet at the same time: give up everything sweet, starchy and fatty. Such drastic measures often cause disruptions. At the same time, if you wisely approach the process of changing your diet, using the Pareto principle, you can achieve your goal in the shortest possible time and without much effort. So, you only need to change your diet by 20%.

It is important to determine which foods you will stop using. So, supporters of the Paleo diet often refuse dairy and flour products, vegetarians — from meat, you can still refuse sweet or fatty, and so on. In this case, you do not have to go on strict and restrictive detox diets or spend a lot of money on expensive products.


Change just 20% of your diet and you will get 80% of the desired result.


Sport


The Pareto principle is also suitable for those who want to include regular exercise in their lives. However, in order to get in shape, lose weight and build muscle mass, it is not necessary to work out every day, spend money on subscriptions to the fitness room, and lift heavy weights. Just like with other areas of life, in sports, you need to change only 20% to achieve maximum results. For example, instead of doing an hour-long daily workout, you can do a light 20-minute jog.

In this way, with a very small amount of energy and effort, you can get an impressive result. At the same time, sports are recommended to be combined with a revision of your diet according to the principle described above.

In addition, you should not expect noticeable results immediately — for this you need to wait at least a month. However, after 30 days you will notice impressive changes and you will want to apply the Pareto principle in every area of ​​your life.

own business

Starting your own business is a rather difficult task that requires a lot of time, money, energy and personal effort. However, even giving all the best at 100%, it is far from always possible to notice the desired result. That is why experienced businessmen advise beginners to pay attention to the Pareto law, which is becoming more and more popular in the business sphere.

If you follow all his principles, then to get 80% of the result you will need to make only 20% of the effort and vice versa: 80% of your efforts will bring you only 20% of the result. Using the Pareto law, you will save yourself from unnecessary work, respectively, from unnecessary stress, and free up a lot of time for things that bring you pleasure (hobbies and hobbies, recreation, communication with family, walks with friends, travel).

Entrepreneurs who have already applied the Pareto law in business report great success. So, only 20% of leads bring 80% of sales and only 20% of content bring 80% of traffic to the site. Pareto’s law is applicable in many areas of human life. It is very popular among those people who want to increase their efficiency and productivity, while not spending a lot of effort and energy.


Difficulties in using the principle


The most basic difficulty in the process of using the Pareto principle is the determination of those very 20% of cases that will lead to 80% of the result. For example, if you run your own blog and are trying to attract a large number of visitors to your site, then the question remains which 20% of topics should be given maximum attention, and which issues can be excluded from coverage. If you apply the rule in sports, then how do you know which exercises will make your body stronger and more muscular: squats, push-ups or pull-ups?

Unfortunately, neither the Italian economist Vilfredo Pareto nor the formula invented by him give a direct and understandable answer to this question. It turns out that the application of the Pareto law is a kind of roulette, since you can understand its effectiveness only by trial and error. At the same time, it is important to think over all your steps in advance and strategically plan your plan of action. This is especially true for those people who plan to apply the principle in the process of developing their own business.

The thing is that reckless actions and refusal to do 80% of the work can lead to major problems in your company or even to its collapse and bankruptcy.

Can it not work?

Despite the fact that the Pareto principle is very popular, and has already proved its effectiveness and veracity more than once, there are still skeptics who do not believe in the operation of the theorem. Let’s talk about whether there can be such a situation when the Pareto principle will not work.

Without further ado, let’s say right away that such a situation can arise, and in some cases the Pareto principle will not work. But this fact in no way diminishes the importance of the discovery of the Italian economist or its significance. The thing is that even despite the fact that the Pareto principle applies to all areas of human life, it will not always act absolutely identical. For example, differences can be observed in business, sports, self-development. In this regard, when planning their actions, scientists advise not only to be guided by the Pareto principle, but also to take into account other, more tangible data (for example, statistical information).

By itself, the Pareto law is a rather controversial and controversial theorem. On the one hand, there are a large number of those people who assure that the formula really works and can lead you to the best possible result. However, on the other hand, very often one can come across opinions that the Pareto law is real nonsense and fiction, that it is not applicable in real life.


One way or another, you can try to independently apply a similar formula in your personal life (in the field of self-development, dietetics, sports or business) and see for yourself in its effectiveness by your own example, having formed your own unbiased opinion about it.


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