The 80/20 Principle (1998), Richard Koch - Book Summary


The 80/20 principle was introduced a long time ago by the Italian philosopher and economist Vilfredo Pareto, but it only really came into practice through the book The 80/20 Principle by author Richard Koch.

The book will give you:

  • The key to taking control of each person's life
  • How to discuss realistically, go into practical problems, convincingly
  • Help improve work efficiency by leveraging motivation

The book is for:

  • Those who want to achieve good results without spending extra time.
  • Those who want to free up time to enjoy happiness.
  • Those who want to increase profits in business.


Richard Koch used to be a management consultant, then retired in 1990 to focus on writing books. He is the author of 18 critically acclaimed books including The 80/20 Principle . He also successfully applied this principle to his own life.

Usually 80% of the results come from 20% of the effort.

If you look back at your work history, you also realize that most of the work is done right near the closing deadline. What you do in the last few days is even more than the previous few weeks of leisure.

In fact, this imbalance is not uncommon. For example, most people drive safely, only about 20% drive recklessly and it is this 20% that causes 80% of accidents. This isn't exactly a coincidence, behind it is the 80/20 rule: 80% of the output is made up of 20% of the input .

Why not a more balanced ratio? Because not every cause leads to the same effect. It is also possible that when applied in practice, this ratio will change to 70/30 or 99.9/0.01 depending on the case. Even the sum of the odds doesn't have to be 100 even.

Thus, the 80/20 rule can manifest in many forms, in many aspects of life, and once you recognize it, it will be extremely useful.

Is the 80/20 rule an injustice?

We all want the world to have justice but that will always be hope because injustice is the nature of society.

Take the very natural aspect of language as an example: According to research by Sir Isaac Pitman, it only takes 700 common words to create two-thirds of daily conversations. If you include the forms that have been divided from 700 words above, the number can be up to more than 80%. That is, less than 1% of vocabulary accounts for 80% of commonly used words.

So where does this imbalance arise? Let's talk first about the butterfly effect, a term used to describe the chaos theory concept of the tight constraint of a system to initial conditions. In other words, a small gap in the beginning can turn into a larger gap or a dominant position later on, and since the universe hates fairness, the agents always have small differences. which results in a huge difference in yield.

Effective business with 80/20 analysis method

How to make the most profit with the lowest cost and effort? The 80/20 method will be an effective tool to guide us to solve the above problem of the business.

First, segment the market : Identify which are the 20% of the products that account for 80% of the company's value, which are the 20% of the customers that bring the company 80% of the profits, the competitors that must compete in each segment. segment, etc. The analysis should be based on specific data and clear facts, otherwise it will easily lead to erroneous conclusions.

After knowing the key 20%, we move on to the next step: Simplify . The more diversified the business, the higher the profit? No problem! Producing many different products means you have to spend more on cumbersome management systems, and with a tangled internal chain, just one link failure can have terrible consequences. bad. So why don't we ignore the 80% cumbersome and ineffective to focus on the simplest, most effective 20%?

In 1992, Corning's US facility was stagnant. The following year, their German market was severely reduced. The administrators sat down to scrutinize the profitability of all the products and got a surprising result: At Kaiserslautern, the company produces 2 items, the simple R10, in large quantities. and R5 in much lower numbers. As expected, the production cost of R5 is 20% higher than R10, but when the full price is increased, this number reaches 500000%!

Is it hard to believe? Don't forget that in order to maintain the specifications of R5 need a lot of engineers on duty to supervise, but if only focusing on R10 production, labor costs will be significantly reduced. And that's what people actually did. By eliminating unprofitable, low-volume products that contribute very little to total revenue and generate negative profits, the workforce requirement for engineering skills has been reduced by 25%.

Top 10 business applications of the 80/20 method:

  1. Strategies
  2. Improve quality
  3. Cut costs and improve service
  4. Marketing
  5. Sell
  6. Information technology
  7. Decision making and problem analysis
  8. Warehouse management
  9. Project management
  10. Negotiate

Above are just the top 10 items, understanding the 80/20 principle you can solve any problem effectively.

Change the way you think, change the way you live

We use 80/20 analytical method with precise specific data. So in life with non-quantitative problems, how to apply the 80/20 principle effectively? That's when you need 80/20 thinking .

When we think 80/20, all we have is our gut feelings and personal experience.

Children are always taught that they should play with all of their friends because each of them is as precious as each other. But as we grow up, we understand that not all relationships have the same 'price', there are friends that are more important to us than many other friends. And it's no exaggeration to say that 20% of friends bring us 80% of life's 'value': joy, happiness, intimacy, etc. - things that cannot be measured but are not difficult to recognize. .

Instead of focusing on quantity, 80/20 thinking focuses on quality, for example, how to deepen the 20% of the most important, meaningful relationships.

Forget about time management!

There are 24 hours in a day and most of us try to do as many things as possible, if we know how to organize it properly, we can increase productivity by 15-20%. But believe me, it's not the best option!

The 80/20 Principle has brought about a revolution in time. Don't worry about the piled up schedule, you just need to focus on 20% of the tasks that bring 80% of the results.

Jim is a friend and colleague of mine. When we teamed up to start a small management consulting firm, the office was packed with people and everyone was running frantic except for Jim. He sat quietly alone, staring at the calendar and thinking about what to do. Every now and then he would call several employees into a quiet room, explain to them what to do, three times over and over in great detail. Jim is slow, sluggish, but a great leader. He spends all of his time figuring out which tasks are of high value, who should be in charge of them, and making sure they get done.

10 things to use time to create the most value

  1. Things that help you quickly achieve your general purpose in life.
  1. Things you've always wanted to do.
  1. The things that already have an 80/20 ratio between time and results.
  1. New ways of doing things promise greater productivity.
  1. Things others tell you not to do.
  1. Things that have been done successfully in another field.
  1. Things that require creativity.
  1. Things that cannot be done by someone else.
  1. Jobs with high quality collaborators.
  1. Things where opportunities only come once.

Improving quality of life through 80/20 thinking

Are we spending 80% of our lives feeling less than 20% happy? If so, change it now!

Ask yourself what is the 20% that brings you 80% of your happiness? After knowing the remaining 80%, we will start to act, very simple: Cut them down.

If the job doesn't give you any inspiration, you can find another job, redefine your self-worth, reduce your hours or whatever, as long as you don't continue to tie yourself to a job that doesn't work. Day by day just counting the hours waiting to leave work.

Discount 80% above, you will automatically have 20% more to create joy in life.

“The central message of the 80/20 principle is a reality that is counterintuitive but pervasive at all times, a state of profound disequilibrium, disproportion, and complete lack of integrity. proportionality between effort and result, what scientists call non-linearity.”

The 80/20 principle is present in all aspects, in all fields: A minority of causes leads to a majority of results . Focus on improving 20% ​​efficiency, cutting ineffective 80%, you will get amazing results!