“The 80/20 Rule is one of the most helpful of all concepts of time and life management.” – Brian Tracy
“I want you to go further. I want you to take Pareto’s Principle to an extreme. I want you to go small by identifying the 20 percent, and then I want you to go even smaller by finding the vital few of the vital few.” – Gary Keller
What happens when you take the principle behind one of the most powerful frameworks of the past century and apply it repeatedly?
You go not just from good to great, but from great to exceptional.
Pareto’s Principle, commonly known as 80/20, is the idea that 80% of outcomes are created by 20% of inputs. It was widely popularized by Tim Ferriss in The 4-Hour Work Week, and continues to be the foundation of Tim’s award-winning work to this day. It’s strong stuff.
At the heart of 80/20 is an observation from its founder and namesake, Italian economist Vilfredo Pareto, who wrote about it in 1895. “Pareto noticed that people in his society seemed to divide naturally into what he called the ‘vital few,’ the top 20 percent in terms of money and influence, and the ‘trivial many,’ the bottom 80 percent,” explains Brian Tracy, personal-development expert and CEO of Brian Tracy International. “He later discovered that virtually all economic activity was subject to this Pareto Principle as well. For example, this rule says that 20 percent of your activities will account for 80 percent of your results… 20 percent of your tasks will account for 80 percent of the value of what you do, and so on.”
By identifying the 20% of tasks that are most important, and letting go of everything else, you free up invaluable energy and time for a minimal cost. Since we’re all fighting the same clock, and since time affluence has been proven to be a better predictor of well-being than financial affluence, that’s an incredible trade.
And there’s more.
The Next Level: Pareto Squared (Or Cubed, Or…)
Learning to apply Pareto’s principle and doing a simple 80/20 analysis* just once can be incredibly powerful. But the real magic isn’t the ability to get to 80% with minimal effort. The true potential of Pareto’s principle is unleashed when you begin to apply it over and over and over again. *[Instructions below]
When we’re able to consistently get 80% of the gains with 20% of the effort, that proficiency becomes our new normal. What we’re capable of creating increases. Use Pareto-effective 20 percents in five different domains (20% x 5 = 100%), and you could end up with an overall output 4x greater. (80% x 5 = 400%)
Alternatively, if the first 80/20 gets us 80% of the way there, by applying 80/20 to the remaining 20% of potential output, we can get to 96%. (80% of 20% is 16%.)
Or, by applying 80/20 to the inputs, we can identify the vital few of the vital few: the 4% of inputs (20% of 20%) that are potentially creating 64% of the output (80% of 80%). Do it again, and we get the 0.8% that generates 51.2%.
In other words, the better we get at identifying THE most important and highest leverage tasks, actions, people, etc., the higher our overall output will grow. We can go from 1x output (100:100), to 4x output (80:20), to 16x (64:4) to 64x (51.2:0.8). The leverage we get grows exponentially.
While these numbers aren’t quite so cut and dry in the real world, the general principle holds true. Apply this technique effectively to possessions, and you get minimalism. Apply it effectively to where you spend your time, and you get happiness. Apply it effectively to your own learning and personal-growth, and you develop superpowers. More on that below.
Let’s get out of theory and explore what it means in practice.
Four Ways to Apply Next Level Pareto
I like to apply this next level of Pareto’s Principle in four ways.
1. Drilling Down
First, by continuing to drill down until finding the one (or two) most important thing(s) to be focused on or practiced. “What Pareto started, you’ve got to finish,” emphasizes Gary Keller in his great book, The ONE Thing. “You can actually take 20 percent of the 20 percent of the 20 percent and continue until you get to the single most important thing! No matter the task, mission, or goal. Big or small. Start with as large a list as you want, but develop the mindset that you will whittle your way from there to the critical few and not stop until you end with the essential ONE. The imperative ONE. The ONE Thing.”
The “drill down” concept is why I’m consistently simplifying with two questions:
- What’s the ONE thing I can START doing that would have the biggest positive impact?
- What’s the ONE thing I can STOP doing that would have the biggest positive impact?
It’s also why I encourage people to take one idea from any piece of content and put it into practice. Typically, whatever idea comes to mind first is the one that resonated most, and often has the biggest potential impact.
2. Over Time
The second way to apply it is by performing the 80/20 analysis repeatedly. This can be done in all areas of life. By identifying patterns and refining thoughts, actions, and behaviors over time, massive gains begin to accumulate. Many people miss this step, but it’s an important part of what Tim Ferriss recommends and personally practices. “On a regular schedule you’ll sit and do that 80/20 analysis,” says Tim. (emphasis mine). “Ask yourself what’s the 20% of my life that’s getting me the 80% impact, and how do I stop doing the rest.” Then look at “the 20% most negative things that are consuming the most time, and try to eliminate those.”
This type of regular analysis is particularly valuable at the end of the year. By prioritizing year over year, we can get better and better. “I did a very good job in 2016, much more so than in 2014 or 2015,” explained Tim during while highlighting lessons from 2016. “What did this mean? It means I had a lot more in the positive category because I’d identified patterns in the past.” [Template for the yearly review is below.]
3. Exponential Personal Growth
Another way to apply higher level 80/20 is to the people and teachers we surround ourselves with. As Jim Rohn famously stated, “You are the average of the five people you spend the most time with.” Those people should average us up as high as possible.
So, it make sense to study people who masterfully use Pareto’s Principle to identify and communicate the critical few insights and ideas from a wide range of sources. They’re performing the first (or second) degree selection of the best material, which then increases the quality of inputs coming in. Two of my favorite teachers (Brian Johnson, along with Tim Ferriss) fit squarely in this category. Recently I’ve been experiencing similar gains from Ryan Hawk’s phenomenal Learning Leader Show.
Collectively, in this way, I’ve been able to learn the best of the best from hundreds, if not thousands, of equally brilliant teachers. When I come across a person or idea that deeply resonates – or is featured in multiple sources – I’ll do a deep dive into their work. People like Ryan Holiday, Cal Newport, Steven Pressfield, Jocko Willink, and many more. And, of course, I still follow my own intellectual curiosity, and the recommendations of trusted friends.
Featuring the best of the best is also practice I also strive to follow in my own work.
4. Seeking Understanding.
This is similar to a combination of the 1st (Drilling Down) and the 3rd (Exponential Personal Growth). Whenever we want to deeply grow in our understanding of a concept, idea, philosophy, news event, etc., we should try to find the purest and most well-regarded sources. It’s also a good idea to look for the critical few ideas that are present across disciplines.
For example, on the spiritual side of things, I might study Buddhism via both the Sutras and the Dalai Lama, or Christianity both through Jesus’s actual teachings and the Archbishop Desmond Tutu. In addition, I’ll pay most attention to, and put the most effort into practicing, beliefs and recommendations that are expressed in both (ex: be loving).
On the news side, information from most minute-to-minute updates falls under the trivial many. Big enough events make it through the noise, at which point it’s ideal to search for and cross-reference different contradictory sources.
A Sample 80/20 Analysis In Multiple Levels
- What 20% of activities, experiences, or people are producing 80% or more of my most positive emotions?*
- What 20% of activities, experiences, or people are producing 80% or more of my negative emotions?*
*See Tim’s Yearly Review exercise below.
- What 20% of my effort is creating 80% of my results?
- What 20% of my customers are driving 80% of my profits?
Look at your answers to the questions above and attempt to identify patterns that go across multiple domains. Are there one or two behaviors or insights that are most important to focus on?
Additionally, try asking the following questions:
- What’s the #1 habit, action, or experience that, if I started doing it, would have the biggest positive impact? (+1)
- What’s the #1 habit, action, or experience that, if I stopped doing it, would have the biggest positive impact? (-1)
- What one action can I take that would make everything else irrelevant?
Bonus: Tim Ferriss’s Yearly Review Exercise.
- Take out your calendar from last year and get ready to go through it day by day. This doesn’t have to take a very long time – less than an hour.
- Divide a piece of paper, or your journal, into two columns. Put a plus sign (+) on top of one column, and a negative sign (-) on top of the other.
- Begin going through your calendar, thinking about everything through the lens of the following two questions:
- What 20% of activities, experiences, or people produced 80% or more of the most positive emotions I experienced this year? The things that I want more of.
- What 20% of activities, experiences, or people produced 80% or more of the negative emotions I experienced? The things that I want to remove from, or at least minimize in, my life.
- Place activities, experiences, and people into the the two categories. Then, taking those, look at each list and try to spot patterns, or commonalities.
- Once you have these patterns spotted, after doing the positive 80/20 analysis and negative 80/20 analysis, start putting things into the calendar. If it is not in the calendar, it is not real. Make sure you create time for more of the positive activities, experiences, and people.