Title: The 80/20 Principle
Author: Richard Koch
Year Published 1998
Kind of Book: Self-help/Business strategy
How Strongly I would Recommend it: 8/10
My Impressions The 80/20 rule is such a powerful idea and applies to almost everything. This book helps you understand how and why it works and how you can practically apply it to all areas of your life. The book is a little repetitive and business heavy at times, but it is worth it to dissect such a powerful idea
Date Read Nov 2020
Practical Takeaways
Files in frequent use should not be filed
Adapt yourself to the world. Don't try to adapt the world to you-George Bernard Shaw
Never go to lectures. Read books instead (books can be read faster)
Never read a book cover to cover except for pleasure
Read the conclusion, then the introduction, then the conclusion again, then dip lightly into any interesting bits (80% of a books value is contained in 20% of its pages)
Choose your basket carefully, load all your eggs into it, and then watch it like a hawk
Sometimes gives the customer what they want, not just what they buy
Always ask which % of customers generate 80% of all profits
Always ask which % of products generate 80% of all profits
Constantly ask yourself, what is the 20% that is leading to 80% percent?
Look for the short cut, rather than run the full course
Be selective, not exhaustive
Strive for excellence in a few things, rather than good performance in many
Delegate as much as possible
Choose your career with extraordinary care
Choose your employers with extraordinary care
Employ others rather than being employed
Only do the thing you are best at doing and enjoy doing the most
For every aspect of your business ask if it adds value or provides essential support
Spot the few places where you are making great surpluses and maximize them
Spot the few places where you are losing and cut them out
Find out if anyone is providing the customer with a stripped down cheap version of the product. If not make it
Decide where your company has the greatest comparative advantage—outsource everything else
Resist the urge to make your product/brand/organization complex just because you are bored and want more intellectual stimulation
Do not tackle everything with equal effort
Aim for a simple business
Be customer centered for the few right customers
Keep in close contact with your top 20% customers. Send them a card or give them a call if it has been awhile
If core customers are deserting, sell the business as fast as you can or take whatever drastic step you need to win them back
If it ain't broke, make damn sure it doesn't break
Hire more of the type of salespeople who are doing well for you. Have them help recruit people like them
Think back to the best sales streak you had. Try to repeat those conditions
Separate important decisions from unimportant decisions. Remember that only 20% are important
Don't agonize over unimportant decisions.
Delegate all unimportant decisions if possible
If you can't decide which decision has a 51% chance of being correct, toss a coin to decide
For important decisions: gather 80% of the data and perform 80% of the relevant analyses in the first 20% of the time available, then make the decision 100% of the time and act decisively as if you were 100% confident that the decision is right
If what you have decided isn't working, change your mind early rather than late
When something is working well, double and redouble your bets
Impose an impossible time scale A: this will ensure that the project team does only the really high value tasks
Make a list of all of the parts of the negotiation you don't care about very much. At the end of a negotiation, throw in some of those for your opponent as a way to tip them over the edge
Be patient when negotiating
Keep the 'vital few' in the forefront of your brain
Make happiness a daily exercise (Happiness, like the mind, will atrophy if not exercised.)
Choose your business partners with great care
Make sure you love your work
Make a list of the things you love the most. See if you can find common characteristics between them
Make a list of the thing you hate the most. See if you can find common characteristics between them
Whenever you feel slightly ill, go to bed for a whole day-William Ewart Gladstone
Figure out the 20% of things that you hate doing the most. Find a way to delegate these or pay someone else to do them
Figure out the 20% of things that give you the most happiness and do those a lot more
Don't answer the telephone from unknown numbers
Stop doing things that have already taken twice as long as expected
If on average you are happier outside of work, change your job
If on average you are happiest when you're at work, change your nonwork life
Aim to love work and nonwork equally
Spend a disproportionate amount of time on the few relationships that mean the most to you
Fill your 'village theory' relationship slots with extreme care and not too early in life
Proactively help your allies
If you are in the early stages of your career, fill your ally slots carefully
Aim to have these 6 Business relationships
1-2 relationships with mentors, who are more senior than you
2-3 relationships with peers
1-2 relationships where you are the mentor
Choose your mentors carefully. Do not let them choose you
Make sure your mentor is as senior as possible
Do not neglect relationships where you are the mentor
Specialize in a small niche where you can be recognized as the leader
Become self-employed early in your career
Specialize your business (a business that does not specialize dies)
Invent your own niche
Work out a better career before you quit your current one
Know more about one area than anybody else does. Don't stop until you are sure you are the most expert in that niche. Then work out a way to marketize it
Concentrate on the 20% of activities you are best at
If you are emotional, avoid an analytical approach to investing
If your stocks are not beating the index, sell them
Buy stocks when everyone else is pessimistic
Do index tracking ie. buying only shares that are in the stock market index. You then only sell shares when they drop out of the index. You only buy new shares when they are first included in the index
Invest only up to 20% of your portfolio in emerging markets
If any share falls by 15% (of the price you paid), sell it. If you want to buy it back later, wait until it has stopped falling for a few weeks *this doesn't go for long term investing
Resist the temptation to take stock profits too early
Identify the times when you are happiest and expand them as much as possible
Identify the times when you are least happy and reduce them as much as possible
Make the choice to be happy
Forget about your weaknesses, focus on building your strengths
Avoid mass transit systems in rush hour (very importance for happiness)
Spend a week each month in the sun
Drive around traffic jams, even if it takes longer
Congratulate yourself for a job well done
Exercise daily
Stimulate your mind every day
Do random acts of kindness for others daily
Write down a list of treats for yourself for rewarding yourself
Watch the sun rise or set
Maximize control over your life
Set reasonable and attainable goals
Be flexible when your plans are forced to change
Choose a partner who has a happy disposition
Choose friends who are happy
Play only the best 15 to 20 percent of your hands and throw in the rest-Larry W. Philips (Zen and the Art of Poker)
Cut corners in areas of your life you hate doing. For anything life enhancing, take the longest, deepest or highest possible route
Big Ideas/Arguments
A few things are important; most are not.
The road to hell is paved with the pursuit of volume.
Happiness atrophies if you don't make yourself happy regularly
The 80/20 Principle occurs because of feedback loop
Eg. after something goes viral, the fact that it is viral will make it more popular
Rich beget riches (feedback loop)
80/20 is not always the exact relationship (the numbers don't have to = 100)
Managers have an inclination to make the product/brand/marketing more complex (and less effective) because they love the intellectual challenge of it. Simple =boring but it sells the best
80% of a books value is contained in 20% of its pages
A business that does not specialize dies
80/20 Examples in the world
20% of your carpet will get 80% of the wear
20% of people produced 80% of divorces
20% of your clothes will be worn 80% of the time
20% of criminals commit 80% of the crimes
20% of motorists produce 80% of all accidents
20% of the population enjoys 80% of the wealth
80% of a computers time is spent executing 20% of the computer's operating code
Surprising Facts
20% of people who marry produce 80% of the divorces, because many people remarry and redivorce, (this means that the statistics that say “50% of marriages end in divorces,” doesn't mean that 50% of all people who get married will get divorced)
Women make 70% of all dollar value purchases in the U.S.
Before Henry Ford only rich people had cars
Unknown Terms
50/50 Fallacy: The false assumption that 50 percent of causes or inputs will account for 50 percent of result or outputs.
The Tipping Point: The invisible point at which a feedback loop takes off and compounds exponentially. Until that point a great deal of effort generates little by way of results. force persists
Village Theory: a theory in anthropology that posits that there is a limit to the depth of personal relationships a person can have. The common pattern of people in any society s to have 2 important childhood friends, 2 significant adult friends, 2 doctors, 2 powerful sexual partners who eclipse the others, 1 person you fall in love with, 1 person in your family who you love above all others. Once these spots are filled they are supposedly filled forever.
Index Tracking (Market Tracking): buying only shares that are in the stock market index. You then only sell shares when they drop out of the index. You only buy new shares when they are first included in the index