Ben Asks: What is the Pareto Principle?

Posted on September 18, 2020 by benstalsberg

Life can be completely chaotic. Understanding where our time, energy and resources go and use this information to our own benefit ourselves, could be the key to taking back control. Understanding the 80/20 law is a wonderful way to explain life in better detail.

Vilfredo Pareto is a hero of mine. He is a person that looked at the world and applied numbers to it. He found logic and rules in the chaos. He was an engineer.

His most famous piece of work was his analysis of the distribution of wealth in Italy. He found that 20% of the people owned 80% of the land and therefore he could say the remaining 80% of the people owned only 20%.

Now-a-days, the ‘80-20 rule’ is applied everywhere from finance, to engineering, to horticulture. It is well-known 80% of the sales will come from 20% of the clients, 80% of the defects in a production plant will occur on 20% of the products, 80% of the harvest will come from 20% of the land.

How does this help us in a chaotic life? Well, how do we analyse ‘life’? A good starting point is to use this simple tool to show us how to be more savvy about the tasks we take on.

80/20 Energy Distribution

As a generalisation, we can say 80% of a given project will take 20% of the effort, therefore when we understand this, and when we reach the last 20% and we start to struggle. We can understand that it is completely normal.

The higher effort required to finish a project is the reason why so many jobs end up half completed or the final detail work comes out at a lower quality standard than the rest. The energy to finish, as a generalisation, is so much greater – 60% higher in fact (80-20%), than the ‘normal’ energy required to start and roll through 80% of the project itself. Knowing it will be a struggle, we can ensure we apply the correct strategy to cope.

We act rather than react.

Imagine you take a long drive with your partner to a new city for a weekend away. If we apply the Pareto Principle, we know that 80% of the journey will be easy. Requiring only 20% of the effort, the miles will flow under the vehicle as you waft along without a care in the world. That is, until you reach the final 20% of the journey. Strap in and hold on as this shit’s going to go down. 80% of the effort is going to be needed to get you through that city centre. The unfamiliar road signs, the crazy local drivers and the bonkers one way system is going to be taxing to deal with.

However, knowing this in advance we can find a strategy to cope. We could plot the distance and find an appropriate place to take a break around 80% of the total journey. A good coffee break to sit down and accurately plan the final route to the destination.

The interesting (albeit super nerdy) thing about the principle is the extrapolation that comes with it.

As 80% of the effort is on the last 20% of the project, in this last 20% of the activity, the first 80% of it will take 20% of the effort, then the final 20% of the final 20% will take 80% of the 80% of the effort. Confused?! Take a look at the graph for a more visual explanation.

Exponentially increasing, the closer you get to 100%, the more and more effort you need to finish. Finding the entrance to a city centre hotel car park is always the worst, right?

Overloaded at Work?

Have you ever sat down and thought “why is work so hard now-a-days?”. In the past it seemed like you could give your full attention to a project, the stress was lower and the end result was better. But now, it feels like you are just pounding out project after project? I know I do.

Maybe the Pareto Principle can help us understand this. Imagine all of the projects you ever completed at work were taken in series. One after the other after the other. Start a project, see it through until the end, finish and then start the next. The graph of effort against time would look like this.

Periods of low effort and periods of high effort. After each high effort, a chance to relax and recuperate due to a period of low effort from the next project. A manageable system that works, right?

But if you are a manager of a company and you looked at this chart, would it not be so unreasonable to say that the workforce is only running at 20% of their effort for 80% of their time? Therefore, running projects in parallel should be completed. A reasonable assumption one might say for the overall productivity of the company.

That’s great until projects get delayed, high level periods start to overlap and of course the average overall maintained effort increases.

With the prolonged increase in effort, comes the stress and fatigue that if not properly managed, can cause failure.

In this instance, failure may mean not completing a project or turning the project in at a substandard level. While objectively, any rational human would judge you compassionately for having attempted to juggle multiple projects, in your mind, neither failure nor a lack of quality, is going to make you feel good.

Understanding this, could help realise why you are feeling exhausted, or why you need to sit down with your boss and ask for a time out. Without this understanding, without knowing your limits, you could be exposing yourself to the harm of a stressful environment for too long a period of time.

Managing your Time, Money and Resources

In production facilities, we use Pareto charts to look at defects. We need to know where the biggest problems are to fix, objectively, rather than with subjective opinions. Imagine we were in a car factory and every day a car came down the line with a smashed windscreen. In addition, 20 cars came down the line with a passenger door that didn’t open and 100 cars came down with a scratch in the paint work. Which is the problem to solve first?

Many people would think the windscreen first – it’s a terrible thing, right? Then the doors, followed by the paint as that’s an easy fix. That was my assumption when starting as a graduate engineer, but how wrong I was. First we would tackle the paint. 100 customers would complain of the scratch in the paintwork Vs. the one person with a smashed windscreen. Therefore to satisfy more people, we take the highest amount first.

We need to assess the amount of potential complaints by the number of incidents. The way we can do this is with a ‘Pareto Chart’. The below chart shows an example for defects in a titanium facility. A classic Pareto Principle distribution showing a clearer picture of where to focus our attention.

https://commons.wikimedia.org/wiki/File:Pareto_chart_of_titanium_investment_casting_defects.svg

Pareto charts are something I consider essential to my daily life. I use them everywhere. At work, at home and when trying to figure out a ‘why’. Have you ever inputted your budget into a chart like this to see where your money goes?

The same pattern will emerge. The highest is probably the mortgage, followed by the bills, then clothing, food, entertaining etc. How does this help you though? Well just like an engineer in a production plant trying to reduce defects to bring the total level down. When plotting your monthly budget into a Pareto Chart, it is easy to identify areas to save money. You look at the highest bar first and work your way down the chart to the bottom.

To take another example, have you ever measured what you do during the day and plotted the times on a Pareto Chart?

A typical day could be, wake up at 6am, lay in bed until 6:15. Get up, shower, have some breakfast and leave for work. Commute to work and slave away all day before returning home. Go for a run, prepare the evening meal, take a shower. Sit down to eat food, turn on the TV. At the end, brush your teeth and go to bed. Read for half an hour and sleep.

The data in a table format would be as follows.

Activity	Time
Sleep	8
Wake up	0.25 (quarter of an hour)
Showering (morning and evening)	0.5 (half an hour)
Breakfast	0.25
Commuting (to and from)	2
Work	8
Running	1
Evening Meal Prep	1
TV	2.25
Brushing teeth and going to bed	0.25
Reading	0.5
TOTAL	24

And this data plotted as a bar chart.

What if we now move the chart to a Pareto style? We simply re-order the blocks to show the biggest on the left and the smallest on the right.

Now the results become quite interesting. If we were to look for things to reduce to allow us to have more free time, it becomes quite easy to see where our time is being wasted.

How many people put ‘watching TV’ as a hobby on their CV do you think? The 3rd biggest usage of time in our days! Statisica.com reports for people aged 25-44, the average TV time per day was 2.75 hours, (just in case you thought my numbers were above average).

When I completed this task on myself to try and make my day more productive, it was a shock to realize where my time went – and I am pretty abnormal. I make sure I have eight hours in bed each night, most people only manage six to seven. If I wanted more time, to create more freedom, I knew where I could find it. Turning off the TV and investing some of that time to better myself…

80% of the time above goes to working, commuting and sleeping activities. Therefore you only have 20% left for you. What would you like to do with it?

The Pareto Principle can be applied to almost anything to understand where your energy, time, money, resources etc are going. It can help you understand why you are burnt out. It can be a tool to show your manager that you need to cool it down a bit. It can be a guide to knowing when to take a break before you do that final push.

Think about an area in your life you would like to understand and see how Pareto can help you.

Let me know how you get on!

Ben Stalsberg

https://en.wikipedia.org/wiki/Pareto_principle

https://www.statista.com/statistics/276748/average-daily-tv-viewing-time-per-person-in-selected-countries/

Ben Explains: Lesson learned from a ‘5 Year Plan’

Posted on September 4, 2020 by benstalsberg

Trying to find a little ‘peace of mind’ can sometimes be the well-needed stress relief in a chaotic, high-speed world. Thinking in the long term could be a method to help you find that aid. Let’s discuss my experience with a ‘5 Year Plan’ and see if it can help you too.

The student bar at Oxford Brookes University was unusually busy on a Thursday night. The sporty people were spread over an area in the corner, the music types were hanging near the pool tables and the ‘in crowd’ were sitting at the bar chatting with the bar staff. Intermingled in all these groups were ‘everyone in between’ sitting, standing, chatting, laughing and having a pretty good time.

Sean, my good friend, was talking to us about his plans for the future. Sean and I met during the engineering program introduction day and hit it off immediately. A little bit older than me, he became a big brother-type figure in my life. We shared common interests and made each other laugh, though it was notable how often I was the butt of his jokes. He would sometimes play pranks on me and tell stories to strangers of my mishaps, but we were good mates. I kind of felt a bit of respect for him with the lessons and guidance he showed me along the way. If Sean slipped up on anything though, I was always there to pounce.

On that night in the bar, Sean was discussing his ‘5 Year Plan’. My former, 20 year year old younger self had never heard of anything so grown up coming out from such a hoodie-clad-person. Sean detailed his career plan, his goals to save for an apartment and his intentions for him and his girlfriend’s future. He seemed to have it all figured out.

It is only reflecting back now, that I can appreciate how wise Sean’s words were. We all should have listened and made notes as if we were in a lecture from a proper professor. Solid advice, most likely handed down from his father to him, which Sean was gracious enough to share with his motley crew. Regrettably, instead of seeing this advice for the value it carried, it was simply an opportunity for ridicule for my immature self. His advice was not ‘normal’ at our age, and with anything not normal, it was open for mockery. I pasted him that night for his fancy ‘5 Year Plan’ and little was said about it ever again..

In those subsequent years after graduation, I followed my dad’s way of thinking. Solve one problem, then wonder what is next, or react to the next thing coming your way. I was in completely ‘reactive’ state of mind, as opposed to the logically laid out ‘active’ one Sean had. I had an idea where I wanted to go; I wanted to work in Formula 1. However, I didn’t have many plans or ideas for anything else.

The years passed as I lived a life of instant gratification. My ‘buy now pay later’ mentality fuelled by a life of living in the moment and not really caring about the future. It was only when I moved to Norway, some 15 years later, I sat down and thought, “Shit I really need to sort this out”. I had racked up a mountain of debt and was becoming fed up with the restrictions that came with it. I reflected that perhaps Sean had been onto something after all.

I sat down and calculated my budget and worked out how many months it would be to pay off everything. The credit cards, car loan, loans from family members and so on. “Life is so much more than just money, but what else did I want though? If this is the direction I am heading, what would I like to see along the way?” I pondered.

As I expanded my thinking from finiances into other areas – fitness, housing, vehicles etc. I found myself l visualising Ben, five years in the future. Where was he? What was he doing? How did he look? What did he wear? What were his priorities?

As I worked out the answers to these questions, like inputting a GPS coordinate into a sat nav system, I saw a new path to follow. A guided route stretched way ahead in front of me to a vision of my new better life.

But the time frame seemed so long,

“Five years of my life? Would it be worth it? But how long really is five years?” I considered the reality of five years. “If our generation will live until we are 80-90, and I’m 35, I still have 45-55 years to go. If I sacrifice five years now to pay off the 15 years of fun I’ve just had and make the next 45-55 years of life better, it doesn’t seem so bad of a trade off after all?”. This was the motivation I needed.

I made a spreadsheet for every part of my life. Finances, career plan, housing, vehicle options, savings, vacation plans, a short, medium and long term wish list. I set in as much detail as I could and planned everything I could think of. Much like a mountaineer setting off to climb a difficult path, I had a map of where to go, what obstacles to look out for and what milestones to celebrate along the way.

As I write this post I’m coming to the end of the 5 year period and here is what I have learned on my journey.

At Peace

I found in my past I was always rushing to get to where I wanted to go. Now, I understand with careful planning it’s going to take it’s own time to get there. Like running a marathon, I can sit back, relax and settle into a good pace. Life is less stressful when you are not sprinting from one thing to the next.

Simon Sinek in his book “Start with Why” discusses how successful entrepreneurs look back on the times starting out, hustling their way to achieve year upon year as the best times in the company. When they have made it and start to follow their ‘What’, rather than their ‘Why’, the focus is lost and the enjoyment decreases too.

Therefore, why not relax and enjoy those early days longer? When you chase a dream the story is over when you accomplish it, right?

Delayed Gratification

I had/have a financial plan in place enabling me to live an extraordinary life in the future. For example, I don’t have a fancy car now, on a loan, I have a regular VW Golf and I’m saving money each month for my ‘dream car’ later. The temptation of instant gratification now, is overcome by the thought or dream of what will come later. But it is not easy. Swimming against the flow of a society pushing you down river into debt is hard. What I found to ease my mind was actually the improvement to me, my character.

The ‘Stanford Marshmallow Experiment’ by W Mischel, E B Ebbesen, A R Zeiss, studied how children reacted to a simple challenge. A single marshmallow now, or two later. The study, in which some modern day versions have some very amusing YouTube videos, showed some very interesting results—albeit with some counter arguments and studies weakening the original theory such as the work completed by Watts, Duncan and Quen.

The team in the original study, followed the children for the next 40 years of their lives. The results showed the children who had waited and had the ‘delayed gratification’ of two marshmallows were more successful, achieved higher SAT scores, less substance abuse, less divorce, lower obesity levels etc.
Ilene Strauss Cohen Ph.D, wrote in Psychology today, “Over time, delaying gratification will improve your self-control and ultimately help you achieve your long-term goals faster….People who learn how to manage their need to be satisfied in the moment thrive more in their careers, relationships, health, and finances”

Motivation

The final thing I noticed when I planned ahead in my life was the increased motivation to get things done. Much like Edwin Locke’s ‘Goal-Setting Theory’. A technique used by management companies all over the world, encouraging specific, challenging, and time defined goals as a key for success. By planning, I became super-productive and super-motivated.

But a word of caution. It is easy to write almost anything down on a ‘5 Year Plan’ and ‘hope’ it just happens. One could write ‘to be a millionaire’, but this may lead to more stress and depression if you are simply not able to or not lucky enough to achieve it.

My advice, taken from the book ‘Start with Why’, is to begin with defining your ‘Why’ first. Why do you want to be in that position? Why do you want to move there? Why do you want that vehicle?

Having a clear understanding of ‘why’ is one of the most powerful tools in the armoury. When times go bad or temptation comes along to veer off your path, remembering your ‘why’ helps you steer a true course forwards.

I was fed up with being trapped by the restrictions of being in debt. My ‘why’ is freedom.

This ‘5 Year Plan’ for your life concept isn’t new. This isn’t an original thought from me. There are even ‘wikihow’ pages on how to do it. People will advise you on Youtube how to use a picture board to show the things you desire. Whereas others will say write everything down and place it in a special jar. I made a spreadsheet.

How do you create the plan? Well, it’s up to you. But you’ve already taken the first step, so good luck!

“Slow and steady wins the race”, right? The benefits of a 5 year plan have shown me you can gain more control of your life, reduce the chaos and improve your own character in doing so.

So why not try it for yourself and let me know how you get on!

Ben Stalsberg

https://www.wikihow.com/Write-a-Five-Year-Plan

https://en.wikipedia.org/wiki/Stanford_marshmallow_experiment

https://en.wikipedia.org/wiki/Delayed_gratification#:~:text=Delayed%20gratification%2C%20or%20deferred%20gratification,preference%20for%20a%20later%20reward.

https://www.theguardian.com/education/2018/jun/01/famed-impulse-control-marshmallow-test-fails-in-new-research

https://www.psychologytoday.com/us/blog/your-emotional-meter/201712/the-benefits-delaying-gratification#:~:text=Studies%20show%20that%20delayed%20gratification,personal%20traits%20of%20successful%20people.&text=Over%20time%2C%20delaying%20gratification%20will,your%20long%2Dterm%20goals%20faster.