Ben Asks: What is the Pareto Principle?

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. 

File:Pareto chart of titanium investment casting defects.svg

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.

ActivityTime
Sleep8
Wake up0.25 (quarter of an hour) 
Showering (morning and evening)0.5 (half an hour)
Breakfast0.25
Commuting (to and from)2
Work8
Running1
Evening Meal Prep1
TV2.25
Brushing teeth and going to bed0.25
Reading0.5
TOTAL24

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/

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