Applying the Pareto Principle for Exponential Results

Applying the Pareto Principle for Exponential Results

by Alex Hyett | 7 min read

I first learned about the Pareto Principle when I was working in the payments industry.

The company I worked for at the time had around 500 merchants on its client list but less than 100 of the merchants brought in 80% of the revenue.

It got me thinking about what other areas of life follow this 80/20 rule. The more I thought about it the more I saw the 80/20 principle at work everywhere:

  • 20% of my blog posts received 80% of the traffic.
  • 20% of my YouTube videos received 80% of the views.
  • 20% of criminals commit 80% of the crimes.
  • 20% of the people control 80% of the world’s income.

I am sure if you have a look at the data in your life, you will see the Pareto Principle at work too.

If you think about all the people you know and the ones that you get the most enjoyment in spending time with, it will likely be about 20% of them.

Out of all of your destructive habits which ones are consuming 80% of your time?

You might not see an exact 80/20 split but you will probably notice that most of the benefits (and negatives) in life come from a select few activities that you do.

Now you are aware of the principle at work, how do you apply it to see exponential results in your life and business?

Analyse where you spend your time

The first part of unleashing exponential results is to work out where you are currently spending your time.

The are a few ways to do this. The first is to get a pen and paper and list out all the hours of the day and work out what activities you normally do for each hour of the day.

If you are a data nerd like myself then you can use applications such as Rize or the time tracking on your iPhone to get a detailed look at what you are actually doing throughout the day.

Rize

The key part of this is, to be honest with yourself.

If you spent 2 hours of the day scrolling through TikTok then you need to write it down. There is no point lying to yourself as you are never going to see improvements in your life by doing that.

Find the tasks with the highest ROI

Once we have an honest list of where we are spending our time throughout the day we need to see which activities give us the biggest return on investment (ROI).

When I say ROI, I am not purely talking about monetary gains here. Life isn’t just about making money. When you are lying on your death bed you are not going to wish you had made more money.

As you go through your list think about which activities provide the following benefits.

1. Happiness

  • Which activities do you enjoy the most?
  • Which ones make you smile and give you energy?

Life isn’t just about making money and getting ahead in your career. If you spend your entire life in pursuit of money or status you aren’t going to have a very fulfilling life.

Have a look at the activities on your list and see how much happiness you get from them.

  • Do you really find happiness from looking at other people’s lives on Instagram?
  • Are there people in your life that always bring you down or make you feel bad about yourself?
  • If you aren’t happy with your career at least the majority of the time, then it could be a sign that it is time for a career change.

Think about what makes you happy and not what you think society thinks you should be doing with your time. If you enjoy playing video games it doesn’t mean you need to get rid of them if it makes you happy.

2. Leverage

Ideally, our days would purely be spent doing things that make us happy. However, we only have 24 hours a day and 8 of those should be spent sleeping.

So we have 16 hours left of the day to spend time doing what we love.

But, we need to work an 8-hour day, plus an hour for lunch and 2 hours commuting.

So that’s 5 hours left.

After you take into account showering, cooking, eating and binge-watching Netflix there isn’t much time left to do what makes us happy.

This is where leverage comes in.

Leverage in finance comes from borrowing funds so you can make a larger profit. This is how Warren Buffett became rich. He used others people’s money to make even more money by investing it.

“If you don’t find a way to make money while you sleep, you will work until you die.”

Warren Buffett

Financial leverage isn’t the only form of leverage.

You can leverage people’s time to save you time. Is there anything on your list that you could outsource to someone else? Is it worth hiring a cleaner and getting back a few hours each week?

Which activities (if any) are building digital leverage for you?

Digital leverage is leveraging people’s attention allowing you to make money without having to trade your precious hours for it.

Creating content and making connections on social media are both ways of gaining digital leverage.

Those with large social media accounts are able to reach hundreds of thousands of people at a time. Even if only a fraction of those buys anything from you it can be enough to make a living without having to spend the majority of your day at work.

3. Financial

Obviously, we all need to make money in order to afford the basics. However, in the pursuit of trying to make the most money, we often do a lot of things all at once without actually working out the return on investment of those activities.

In my previous point about leverage, one of the things we often do is try and post on every social media platform in the hope that it will drive traffic to our businesses.

However, if your goal is to make money from your following then you will notice that not all social media platforms are made equal.

For example, I have noticed that posting on Instagram doesn’t actually lead to many people clicking through to my website even though I have more followers on there compared to my other accounts.

A lot of platforms are designed to keep people on the platform for as long as possible. Which is why they don’t allow you to post links in your Instagram posts.

They want to keep people scrolling and seeing adverts, not leaving to go on your website.

LinkedIn and Twitter on the other hand generally lead to more engagement even though I have far fewer followers on those platforms.

It is wise to focus 80% of your efforts on the 20% of activities that are going to make the most money in the long run.

Look at the different ways that you make money and double down on the ones that make the most compared to the time invested.

4. Self Improvement

So far we have covered, happiness, leverage and financial ROI.

The last one is more subtle but it is the most important one of the lot. Any activity that improves either your physical or mental well-being is always worth doing even if the benefits take a while to pay off.

1% improvement every day is going to lead to exponential results and if you can improve yourself then can improve every other aspect of your life.

These are my non-negotiables, the activities that I will always find time for in my day as they improve everything else that I do.

Exercise

You can’t do much if you are sick. Doing some exercise even moderate exercise is essential for a clear mind and a healthy body. I always make time to do some exercise even if it is only for 15 minutes a day.

“Those who don’t make time for exercise will eventually have to make time for illness.”

Edward Stanley

The main benefit of exercise is that it gives you energy and the more energy you have the more likely you are to succeed in life.

Many of us have goals that we want to achieve but sometimes lack the motivation or the energy to actually achieve them.

Meditating

I generally meditate before bed so that I sleep better but it can be done any time of the day. Meditating can really help with your mental health if you do it on a regular basis.

Reading

Every day I read a mixture of fiction and non-fiction. Learning something every day is always going to be beneficial in your life.

With everyone addicted to short-form media, those that take to read a book have an amazing advantage over others.

Walking

I get my best ideas when I go for a walk. I have to go for a walk every day otherwise I feel restless.

Writing

You don’t need to write in public to get the benefit. I practise what is called “Morning Pages”.

Each morning I write 3 pages of A5. It is a brain dump of whatever is on my mind at the time.

It isn’t for anyone else’s benefit, and most of it is illegible but it helps to clear my mind before I start my day.

Focus on the 20% of activities that make you happy, give you leverage, make you wealthy and improve your physical and mental well-being and you will see the exponential results that you are looking for.