Date: 10th Mar 2017

Applying the law of Pareto can help you to concentrate your efforts on people you trust.


How Pareto Works

The Pareto Principle, or ’80-20 Rule’ one of the simplest and most powerful management tools on the planet. On the face of it this is an easy way to think about and understand situations personal and business.

It is named after Italian economist and Sociologist Vilfredo Pareto (1848-1923), who first discovered and studied the “80:20” effect. In his paper “Cours d’économie politique“, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population. He developed the principle further by observing that about 20% of the pea pods in his garden contained 80% of the peas.

There are many examples of this in business and in life, and I would like to extend Paretos’ law by applying it to trust.

Think about someone you trust implicitly, be it personally or professionally. We will call her “Charity.” Charity is a long standing customer of yours who has been loyal to your business and you enjoy a good two way relationship.You have a mutual trust of each other.

The interaction is in the main quite smooth and trouble free. As a result it is easy to take Charity for granted. You know she trusts you and will do business with you, so perhaps as a result you channel less energy into Charity. Often saying to yourself, “Charity, well she’s no problem so we don’t have to worry too much about relying on her to do business with us.”

Conversely, think about doing a business deal with someone where there exists much less of a relationship, lets call her “Faith.” She cuts a hard bargain, she questions every price you ever give her and always tries to drive down the price, which plays havoc with your profit margins.

Indeed you may well have some element of apprehension or fear when dealing with her. As a result of this you may well expend more time and energy in trying to convince her of your worth. As a result, you may well disregard and take ”Charity” for granted in favour of “Faith” whilst you try and convince her.

During my own time in business I have found that in the main, concentrating on “Charity”, who can typically produce 80% of the income/results of my business, is more productive that concentrating on “Faith”, who will produce 20% of the results but could well demand 80% of my time.

You can apply this rule to many areas in life, both at home and work. It is a fascinating principle.

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Written By

Gary Dwyer

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