80/20 Pareto Principle by Richard Koch - Summary Review

Pareto's Law is a game changer.Many of us have come across the so-called 80/20 Principle - the deceptively simple yet revolutionary idea that just 20% of the effort can deliver 80% of the results. But imagine if we actually were to apply it - systematically and conscientiously? Think of the potential for transforming our lives and super-charging our productivity through using this simple yet profound technique. Richard Koch offers this possibility in his best-selling and insightful work, The 80/20 Principle.

The dramatic revelation that the universe is predictably unbalanced was discovered by Italian economist Vilfredo Pareto in 1897, when he realised that 80% of the land in England was owned by just 20% of the people. Incredibly, this same pattern recurred across countries and throughout history, like a secret code across time and culture. Similar patterns were even found in the natural world. It is more than likely that in any large organisation, 20% of the employees will generate 80% of the profits. In your home, 20% of your carpets will tend to get 80% of the wear. On the streets, approximately 20% of criminals cause 80% of the crime. In the shops, more than 20% of novels account for 80% of the sales. In fact, the ratios are quite often even more skewed than that - to 90%/10% or even 95%/5%

Koch convincingly argues that our productivity can be turbo-charged through judicious and consistent daily application of this principle. Essentially, resources which deliver powerful effects should be used whenever possible. In Koch’s words, “the few things that work fantastically well should be identified, cultivated, nurtured and multiplied”.  This is not too different from a designed experiment where main order interactions and main effects are assessed and exploited. In age when so many are drinking from a fire-hose of excessive commitments and information, the 80/20 rule offers a common sense prescription for a more efficient and balanced life.

The point about balance is important. Koch is most definitely one of these lifestyle theorists who believes that every waking hour should be dedicated to some commercial purpose. He articulates instead an updated theory of the Aristotelian "good life", where leisure and cultural activities - recharging the batteries - is the hidden wealth that can spring from an efficient, Pareto-led approach to work and commercial activities. This theme is expounded in his sequel - "Living the 80/20 Way".

Richard Koch argues persuasively in The Pareto Principle that small is beautiful, more is worse, and simplicity is power. He is keen to debunk conventional wisdom that complexity is good and empire-building is a worthy objective. Counter-intuitive Pareto logic can be applied, he argues, to the areas of strategy, quality, cost reduction and service improvement, not to mention marketing, sales, negotiation and a wide range of other corporate endeavours.

Koch's insights are given vast credibility by his own track record as a highly successful businessman. He made a fortune with upmarket diary manufacturer Filofax in the Eighties and has gone on to build up chains of hotels, restaurants and online enterprises. This track record lends huge credibility to this book which cannot be dismissed as “just another” self-help book. In one amusing anecdote, Koch explains how he achieved a first class degree from Oxford purely by focusing on the essentials and developing profound knowledge about just a few key areas.

Koch goes on to apply 80/20 thinking to business, investments and even relationships. He is less convincing when he strays into the last two fields. Koch’s most counter-intuitive idea is that instead of diversifying investments, people should put all their financial eggs in the most lucrative basket – and watch it like a hawk. This may be fine for entrepreneurs and risk-takers, perhaps, but it hardly worked for the loyal shareholders of Lehman Brothers.

However these flaws should not detract from this captivating, incisive and revolutionary book. The Pareto rule is no crazy notion but a confirmed mathematical rule. I have used Pareto analysis myself in statistical analysis of business processes and it can be scarily accurate in many situations. It is also a great aid to effective time and project management.

Koch is a great believer that action of the wrong sort is actually worse than inaction. He advocates constructive laziness - doing the minimum amount of work possible to achieve the maximum result. He quotes the "von Manstein matrix", devised by a Prussian general, who argued that only the intelligent and lazy officers should be promoted.

Koch’s guiding motto could well be ”intelligent laziness”. He calls us just to do the things that add the highest value, and keep on doing them. This in short, requires a time revolution. There are echoes here of that old Tony Robbins message – if we keep on doing what we’ve been doing, we’ll keep on getting the results we’ve been getting. Koch dares to break the mould.

Pareto's startling discovery cuts like a knife through the irrelevant garbage that clogs up our daily lives. Clarity is power, and Koch tells us to prune 80% of our activities and just focus on the vital few. The final chapters provide some vital insights and strategies for living the 80/20 Way, a theme that Koch develops in his next eponymous best-seller.

In summary, the 80/20 Principle is a challenging and exciting self help book, because it shows just how much power lies untapped in each of us. Even better, it offers authentic and practical pointers as to how we can unleash that power.

The 80/20 method, contrary to popular belief, is not about superficiality or short cuts. It teaches us to focus on the essence, the kernel of what really matters, and in doing so equips us with a more profound understanding of the world around us.

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