The 80/20 Principle PDF
Preview The 80/20 Principle
In 1897, Italian economist Vilfredo Pareto, in his study of the patterns of wealth and income, observed that the distribution of wealth was predictably unbalanced. He first discovered this pattern in 19th-century England and found it to be the same for every country and time period he studied. Over the years, Pareto's observation has become known as the 80/20 principle.
Now in 1998, Richard Koch takes a fresh look at the 80/20 principle and finds that the basic imbalance observed by Pareto 100 years ago can be found in almost every aspect of modern life. Whether you're investing in stocks, analyzing company sales, or looking at the performance of a Web site, you'll find that it's usually 20 percent that produces 80 percent of the total result. This means 80 percent of what you do may not count for much. Koch helps you to identify that 20 percent and shows you how you can get more out of your business, and life, for less.
FromThe Pareto Principle--in Koch's words, "a minority of causes, inputs, or effort usually lead [s] to a majority of the results, outputs, or rewards" --is hardly new; Vilfredo Pareto discovered it in 1897. But London-based investor, entrepreneur, and author Koch traces Pareto's insight through the past century (George K. Zipf, Joseph M. Juran, IBM and other computer firms) and adds a bit of chaos theory to make the 80/20 principle a way of life. He spells out essential characteristics of "80/20 analysis" and "80/20 thinking," then explores application of this "Vital Few" approach, first in business, then in achieving personal success and happiness. Koch closes with a chapter on the social implications of the Pareto Principle, urging that this predictable imbalance between inputs and outputs is "not inherently right wing," and that steps such as spreading best practices in education to all students and giving those currently excluded from the market economy a stake in the game would generate less inequality as well as greater productivity. Mary Carroll
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