SidSavara.com: The Problem with The Pareto Principle
Eric Hamm
· 1 year ago
Another excellent article, Ali! Thanks for sharing her with us again, Sid.
I generally go with my gut when it comes to getting rid of clients. I can usually pretty quickly determine if a client is going to be a worthwhile recourse of income or just a waste of time. The 80/20 rule just tries to make this principle more concrete. But like you said, this can't be applied to everything, all the time. Eric.
Ali Hale
· 1 year ago
Thanks Eric. Yep, I agree that most of us apply Pareto-like reasoning automatically. After all, it's just common sense not to take on a client who'll be a lot of hassle for not much money!
Richard
· 1 year ago
if clients C and D require you to produce less and so on, you can look at replacing them (unless they are just enough to fill the free time). When working with the 80/20 rule you should always look at the people that generate the low end of your income and try to find someone that will give more work so you can eventually get rid of the low performers.
Ali Hale
· 1 year ago
Good point, Richard, but as you say, they fit nicely into the time available for me! I'd have to replace them both with a single client, and probably cut something else as well.
Jeremy Day
· 1 year ago
Hi Ali,
I think the Pareto Principle is a just a good idea taken too far. And it should only apply to the macro level rather than the micro level. Great way to put it all together Ali!
Cheers, Jeremy
Ali Hale
· 1 year ago
Good point about the macro rather than micro level -- I agree that part of the problem with Pareto for very small businesses like my one-gal-and-a-laptop outfit is that it's actually quite easy to remove inefficiencies! It's only when you get into macro-economic situations that the 80/20 statistics work out.
the sassy kathy
· 1 year ago
hi there! just wanted to say thanks for your comment. and cinnamon oreo ice cream? TO DIE FOR. i HIGHLY recommend tracking some down - or crafting your own - or anything else necessary to get your hands on some of that goodness :)
J.J.
· 1 year ago
I agree to what you're saying now. I'm facing the reverse-80/20 Paretto's law: 80% of time spent generate little income 20% ;P
Vincent
· 1 year ago
Hey Ali,
I am a believer of 80/20 rule but not to a extreme level. I do agree with you that the pareto principle can't be applied to everything that we do. But it does a good work in helping us to do more valuable task . Thanks for sharing.
Cheers Vincent Personal Development Blogger
Evan
· 1 year ago
Hi Ali,
I've never taken the figures terribly seriously.
I rely on a different principle: work smarter, not harder.
Ned
· 1 year ago
Well, first of all, I commend you for questioning an idea that is often taken at face value.
The way I understand it, the 80/20 rule is a means of prioritizing. The principle behind it is that all activities are not equally valuable and if you chart your activities, a smaller number will be more valuable. And that what establishes greater value of an activity is its long-term benefit.
In terms of your freelance writing, we might state that the most valuable activity would be: to get paid the most amount of money for the shortest period of time with the greatest residual income. I did a quick chart of these three variables relating to your freelance business. After looking at the numbers, I simplified the activities into blogging and magazine article writing because the magazine article was the only variable. In terms of time, money and residual income all of the blog articles prioritize the same.
The magazine article is in the middle of your income, at the bottom of your 'time spent', but it is at the top your residual income. The reason it is at the top is that one published article gains you credibility and notoriety which exponentially increase your clientele and income per article. So all that time writing queries is actually worth thousands of dollars more than any single article you could write.
If you spent the majority of your time querying magazines instead of writing you would starve to death. But the effort you put into getting published increases the value of your writing over-all. It is this basic dynamic that the 80/20 rule points out.
But, then, most of us do not give it this much consideration. I hadn't until I read your article. ;)
Stephen Hopson
· 1 year ago
Sid:
I found this self analysis to be very interesting because we all know how much the 80/20 rule has been hyper-marketed these days. You've taken this principle and truly tried it on your own to see if it applied to you or not. And it didn't.
You just inspired me to think about whether the 80/20 rule applies to my life or not. Thanks for the inspiration!
Jim Littlefield
· 1 year ago
Sid, In general I believe having a large sample of data tends to validate the 80/20 rule. I was first introduced to the concept when I developed a maintenance management system for a nuclear power plant. I looked at a lot of maintenance data and it held pretty true.
Next when I was in sales for what became a very large software company the 80/20 played out in the sales organization as well; particularly as it grew. Twenty percent of the the people brought in 80% of the business. Which was pretty shocking when you think about it.
Now I am involved with a leading direct sales company in the personal development industry. One of the reasons I decided to move forward was seeing the 80/20 play out here as well. Twenty percent of the people make 80% of the sales. To me it helped validate it as a viable opportunity. But since the commission structure is not multi-level marketing (MLM) that may play a part as well.
What did surprise me though was looking at other MLM "business opportunity" income disclosure statements. They are often hard to find but the 80/20 is NOT common at all in the ones I have reviewed.
Based on my own experiences, I believe someone should ask a lot more questions if they don't see 80/20 rule playing out. Not to say it's always true; but look for why it not. There may be something there that warrants further investigation.
Sid Savara
· 1 year ago
Hi Jim,
I agree that often the rule is held - I think the point Ali is making here, quite validly, is that the more efficient we are the less likely it is the 80/20 rule holds true. For individuals, we may be searching for a mythical 20% that just isn't there.
Perhaps in larger groups, it is more pronounced also because individual differences and abilities are so large. I have read many times that the best software developers outperform their counterparts 10:1 or even 100:1. This seems remarkable, but I can remember working in college in groups as well as on software teams where I, one person was responsible for basically all the work that was completed.
You make very valid points, and I think your presence here certainly adds to the discussion! I don't have experience with MLM, but intuitively I am surprised the 80/20 rule does not hold - I know many people on the lower levels don't always make a profit, and a few that work very very very hard seem to reap a large portion of the rewards. Perhaps that is just what I've seen however, and as you point out, may not be supported by the data.
LifeMadeGreat | Juliet
· 1 year ago
Hi
I work part-time as a researcher. The company is BIG into the 80/20 principle. For me, it just doesn't work. If I am researching a topic, I usually find that golden piece of information in the last 20% of my work. I think that my seniors frown somewhat on my style, but for me I simply can't produce something where I doubt that I have the full story.
Juliet
Mike King
· 1 year ago
Not to pick on you Juliet, but for research, don't you generally stop researching when you find that golden piece of information? That makes it always in the last 20% of the work. I'm not so sure the principle could apply here because of this.
I would suggest however, that if you were able to find the best info in the first 20% of the work, you likely would be able to apply the principle. Problem is with research until you have more to compare to and understand, that other 80% of context is needed to recognize it.
Tammy
· 1 year ago
Excellent article.... thank you!
Christoffer Torris Olsen
· 10 months ago
There is a point to be made though. The Pareto Principle isn't necessarily something that holds true, although it often is (in varying proportions).
But it can be used as something to seek for. Imagine that you use the Pareto principle as a goal as well as a measurement tool. You *want* 20% of your input to produce 80% of your output. You want one customer out of five to pay you 80% of your wage working one full day a week. Often, making these adjustments isn't as hard as you'd first think.
Logically, if you follow this for some time, you'd end up incredibly effective (and also broke – cutting off your income in increments doesn't really help ;) ). But that's beside the point. You'd have to use the Pareto principle in seeking the Pareto principle in order to make it be efficient and not a time-waster :)
Sid Savara
· 10 months ago
Hi Christoffer,
Definitely can't argue with the logic of what you point out - it's a constant struggle I have myself, wondering if what I am doing is efficient or if I should be expending energy working in a different direction =)
Arun K
· 3 months ago
This is just so true! I once got into big trouble in my office when I did not agree to the 80/20 principle and (worse) when I actually provided data to prove that my team's productivity was not in line with Paretto. Nett result - Was seen as some kind of a rebel. I did not learn anything from this excercise! A few months later I presented my case against the bell curve theory! Some people never learn. PS : Sid - I like the way u think.
Sid Savara
· 3 months ago
Hi Arun, Thanks for your comment! I loved this article too. I just want to clarify that it was written by Ali Hale, a fantastic staff writer on SidSavara.com. I thoroughly enjoyed it and support everything she wrote in it, but I can't take credit for it being my own work =)
All Comments
I generally go with my gut when it comes to getting rid of clients. I can usually pretty quickly determine if a client is going to be a worthwhile recourse of income or just a waste of time. The 80/20 rule just tries to make this principle more concrete. But like you said, this can't be applied to everything, all the time. Eric.
I think the Pareto Principle is a just a good idea taken too far. And it should only apply to the macro level rather than the micro level. Great way to put it all together Ali!
Cheers,
Jeremy
I am a believer of 80/20 rule but not to a extreme level. I do agree with you that the pareto principle can't be applied to everything that we do. But it does a good work in helping us to do more valuable task . Thanks for sharing.
Cheers
Vincent
Personal Development Blogger
I've never taken the figures terribly seriously.
I rely on a different principle: work smarter, not harder.
The way I understand it, the 80/20 rule is a means of prioritizing. The principle behind it is that all activities are not equally valuable and if you chart your activities, a smaller number will be more valuable. And that what establishes greater value of an activity is its long-term benefit.
In terms of your freelance writing, we might state that the most valuable activity would be: to get paid the most amount of money for the shortest period of time with the greatest residual income. I did a quick chart of these three variables relating to your freelance business. After looking at the numbers, I simplified the activities into blogging and magazine article writing because the magazine article was the only variable. In terms of time, money and residual income all of the blog articles prioritize the same.
The magazine article is in the middle of your income, at the bottom of your 'time spent', but it is at the top your residual income. The reason it is at the top is that one published article gains you credibility and notoriety which exponentially increase your clientele and income per article. So all that time writing queries is actually worth thousands of dollars more than any single article you could write.
If you spent the majority of your time querying magazines instead of writing you would starve to death. But the effort you put into getting published increases the value of your writing over-all. It is this basic dynamic that the 80/20 rule points out.
But, then, most of us do not give it this much consideration. I hadn't until I read your article. ;)
I found this self analysis to be very interesting because we all know how much the 80/20 rule has been hyper-marketed these days. You've taken this principle and truly tried it on your own to see if it applied to you or not. And it didn't.
You just inspired me to think about whether the 80/20 rule applies to my life or not. Thanks for the inspiration!
Next when I was in sales for what became a very large software company the 80/20 played out in the sales organization as well; particularly as it grew. Twenty percent of the the people brought in 80% of the business. Which was pretty shocking when you think about it.
Now I am involved with a leading direct sales company in the personal development industry. One of the reasons I decided to move forward was seeing the 80/20 play out here as well. Twenty percent of the people make 80% of the sales. To me it helped validate it as a viable opportunity. But since the commission structure is not multi-level marketing (MLM) that may play a part as well.
What did surprise me though was looking at other MLM "business opportunity" income disclosure statements. They are often hard to find but the 80/20 is NOT common at all in the ones I have reviewed.
Based on my own experiences, I believe someone should ask a lot more questions if they don't see 80/20 rule playing out. Not to say it's always true; but look for why it not. There may be something there that warrants further investigation.
I agree that often the rule is held - I think the point Ali is making here,
quite validly, is that the more efficient we are the less likely it is the
80/20 rule holds true. For individuals, we may be searching for a mythical
20% that just isn't there.
Perhaps in larger groups, it is more pronounced also because individual
differences and abilities are so large. I have read many times that the
best software developers outperform their counterparts 10:1 or even 100:1.
This seems remarkable, but I can remember working in college in groups as
well as on software teams where I, one person was responsible for basically
all the work that was completed.
You make very valid points, and I think your presence here certainly adds to
the discussion! I don't have experience with MLM, but intuitively I am
surprised the 80/20 rule does not hold - I know many people on the lower
levels don't always make a profit, and a few that work very very very hard
seem to reap a large portion of the rewards. Perhaps that is just what I've
seen however, and as you point out, may not be supported by the data.
I work part-time as a researcher. The company is BIG into the 80/20 principle. For me, it just doesn't work. If I am researching a topic, I usually find that golden piece of information in the last 20% of my work. I think that my seniors frown somewhat on my style, but for me I simply can't produce something where I doubt that I have the full story.
Juliet
I would suggest however, that if you were able to find the best info in the first 20% of the work, you likely would be able to apply the principle. Problem is with research until you have more to compare to and understand, that other 80% of context is needed to recognize it.
But it can be used as something to seek for. Imagine that you use the Pareto principle as a goal as well as a measurement tool. You *want* 20% of your input to produce 80% of your output. You want one customer out of five to pay you 80% of your wage working one full day a week. Often, making these adjustments isn't as hard as you'd first think.
Logically, if you follow this for some time, you'd end up incredibly effective (and also broke – cutting off your income in increments doesn't really help ;) ). But that's beside the point. You'd have to use the Pareto principle in seeking the Pareto principle in order to make it be efficient and not a time-waster :)
Definitely can't argue with the logic of what you point out - it's a
constant struggle I have myself, wondering if what I am doing is efficient
or if I should be expending energy working in a different direction =)
PS : Sid - I like the way u think.
Thanks for your comment! I loved this article too. I just want to clarify
that it was written by Ali Hale, a fantastic staff writer on SidSavara.com.
I thoroughly enjoyed it and support everything she wrote in it, but I can't
take credit for it being my own work =)