Hey! Randy

Life is Unbalanced

Posted by heyrandy on November 8, 2011

The 80/20 Principle Richard Koch Currency Doubleday, 1998

Life is not fair. This cliché is known by all. It is fought against by many. All fighters lose. Koch explains why: Alfredo Pareto. Pareto was an 18th century economist who discovered that the bulk of a nation’s wealth was held by a minority of its population and that it was held in a fixed ratio: 20% of the population typically holds 80% of the wealth.

This ratio is true in almost every area. 20% of you house’s living space gets 80% of the use. 80% of your driving is to 20% of the places you go. 20% of your friends will give you 80% of your enjoyment. The list is endless.

Koch’s thesis is that you cannot fight successfully the principle, but you can use it. Things will always be out of balance. It is your job to work this imbalance to your advantage. How do you do this?

Changing your nation’s wealth to ownership ratio is beyond your ability. But if you look into your own life you can use the imbalance principle to be more effective, happier, and richer. First you must realize that all things are not equal. Twice as much effort does not result in twice as much effect. Sometimes it results in more, sometimes less. You have to use your knowledge of the 80/20 principle to put your effort where it is most effective. Twice as many sales calls do not result in twice as many sales. Twice as many sales do not result in twice the profits.

The ratio is not always 80/20, but it is seldom 50/50 for long. Koch says to concentrate on the “vital few.” By this he means those customers, employees, or friends who do the most and are the best. The other 80% must be accorded the attention due them. In business it may mean closing plants, ending product production, or outsourcing less critical areas.

I applied the 80/20 principle to the book: I read only 20% of it. I am sure I got the vital 80%.

Clean up your life. Simplify your work. Evaluate your finances. Use the 80?20 principle to help. You have to. 20% of your adversaries will.

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