Vilfredo Pareto was born in Paris in 1848, an appropriate year for such a revolutionary thinker: Europe was awash in the idea of revolution after the French monarchy was overthrown, and social change was in the air.
Pareto grew up in Italy after his family returned to their ancestral home from Paris. Here, he became an engineer while showing incredible promise in math, but it took a few years for him to finally transition into economics, the field Pareto is most well-known for today.
It was wealth distribution that fascinated Pareto so much.
While poring over land ownership statistics, he was struck by a startling imbalance: a mere 20% of the population owned a staggering 80% of the land.
This wasn’t only the case in Italy, nor was it confined to real estate ownership. It seemed like this 80/20 relationship was everywhere one cared to look. And so was born the Pareto Principle, wherein 80% of the effects come from 20% of the causes.
A multifaceted thinker, Pareto shuffled through various roles as an engineer, economist, and sociologist. He was an influential political thinker, too. However, it’s the 80/20 rule we want to focus on today, and with good reason: it’s everywhere. This power law distribution isn’t a panacea for explaining everything that ever happens, but it can be a useful framework—a lens through which to view the world.
Pareto’s Principle in the Real World
There are examples of the 80/20 rule almost anywhere you look. It turns out that a small percentage of things are often responsible for most things. Let me give you some examples:
Business: 80% of the sales result from 20% of the customers. Companies will often spend time trying to figure out who the top 20% are, then market directly to them as a result.
Software Development: Approximately 80% of the software bugs can be attributed to 20% of the code. Developers are constantly aware of this, as focusing on these problematic areas is far more efficient than scouring the entire codebase.
Health: Roughly 80% of your health outcomes can be traced back to 20% of your lifestyle choices. Whether it’s a particular exercise routine or dietary habits, a small set of actions usually makes the most impact.
Social Media: Around 80% of the information that circulates through social networks comes from 20% of the users. This is critical for understanding virality and influence on platforms like Twitter and Instagram.
Personal Consumption: I don’t know about you, but I can remember quite a few scenarios where 20% of the people at a party drank 80% of the booze. This applies to coffee, dessert, pizza… you name it.
Investing: In a diverse portfolio, you’ll probably notice that 80% of your returns come from 20% of your investments. Trying to figure out which 20% to focus on is the tough part!
So yes, these are everywhere. Take a look around with an eye to finding 80/20 relationships, and it’s almost too easy. Sure, some of them might seem more like 70/30 or 90/10 dynamics, but the principle is the same, an whether it’s 80% or 70% is often a matter of definitions.
A Grain of Salt to Go With the Principle
No rule should be applied uncritically, and Pareto’s Principle is no exception. I’ve already called out the fact that the numbers might not be precisely 80/20, and that there’s some subjectivity in the setup. Importantly, the 80/20 rule isn’t supposed to justify neglecting the remaining 80% that contributes to 20% of the outcomes. In many cases, those 80% of things are crucial to the outcome.
It’s also not always easy to identify what that 20% might be. Even if you can figure out what it is, you can’t always do anything with it. Knowing that 20% of lightning strikes are powerful enough to fuel the flux capacitor in Doc Brown’s Delorean is only useful if you have a time machine.
Still, you can probably see how helpful such a framework can be if you can figure out how to apply it in your own life. If you’re creating a list of things you’d like to get done this year, you might consider zooming in on the most important 20% of them. If you made ten goals, circle around the most important two. Spend 80% of your time and energy on these.
If you run a business, think about how much time you spend on individual activities. Think about how to spend less time on the less impactful ones, and focus instead on very high-impact stuff. If you write on Substack, think about how you might focus on the 20% of writing that gives you (or your readers) the most value.
Some other areas where you might be able to apply this in your life:
Health Goals: Make a list of what you do with your time, and identify the top 20% of lifestyle choices that contribute to 80% of your well-being. Don’t forget about mental health!
Time Management: Track how you spend your time for a week, and spend some time identifying which small portion of your activities give you the most pleasure, or yield the most productivity. Allocate more time to them.
Writing and Content Creation: Identify the types of content that resonate most with your audience (or with you, if you’re writing for personal reasons). Spend the majority of your time producing such content.
Investment Analysis: Think about this holistically. If you’re American, you probably have more wealth tied up in your home than anywhere else. Start there. If you don’t own a home, think about where your money is tied up, and this works for debt too (just invert and pay off the highest interest rates first).
Remember, this rule isn’t set in stone per se, but it is a reliable framework to get you started.
Helpful heuristics like Pareto’s Principle cut through the complexity of the modern world. Whether you're leading a nation, running a business, or just trying to improve your health, remembering that a small portion of efforts yield the majority of results can be powerful.
What are some areas in your life where you might be able to apply the 80/20 rule? What are some areas where you’ve seen Pareto’s Principle in action in the world? Let me know in the comments.
Definitely a solid exercise for time management. Early on, it’s sometimes hard to see where that 20% is coming from.
Pareto’s Principle can be applied to building design (reducing energy consumption and carbon emissions by 80% costs half as much as going to 100%), urban design and electrific vehicles (80% of the time, walking, bikes and e-bikes should do the job) and let the 20% who live in the country have their electric pickup trucks. I wrote a piece about this a few years ago https://www.treehugger.com/on-perfect-being-the-enemy-good-5101532