The Pareto Principle (80/20 Rule)
The Pareto principle originally referred to the observation that 80% of Italy's wealth belonged to only 20% of the population. But over the years, the principle has been expanded to describe the characteristics of typical distributions. It indicates that most things in life are not evenly distributed.
- 20% of your employees produce 80% of the output
- 20% of bugs produce 20% of computer crashes
- 20% of your customers bring 80% of the profit
Why is this useful? It is useful because it states that majority of results come from a minority of inputs or action. We can then concentrate on putting in that first 20% that will make a difference. Like say, saving 20% of your income and investing this every month could very well mean the difference between a luxurious retirement stage or having to strive and work hard for money forever.
The small things that you do today will count in the end. Start saving now!
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