Book SummaryThe 80/20 Principle, by Richard Koch

1-Page Summary1-Page Book Summary of The 80/20 Principle

Why do some people and organizations enjoy massive success and wealth while the rest of us don’t? In The 80/20 Principle, management consultant and entrepreneur Richard Koch explains that the successful few are simply leveraging a fundamental truth at work in all of our lives: 80% of results stem from 20% of inputs.

Although our lives tend to be increasingly busy and complex, only a small fraction of the actions we take—and the people we interact with—contribute to our joy and success. According to Koch, we can all take advantage of this 80/20 Principle to multiply our...

The 80/20 Principle Summary What the 80/20 Principle Is and Why It Matters

According to Koch, the 80/20 Principle is at work in every aspect of our lives, and we can use this principle to simplify and optimize our lives. Let’s examine what the 80/20 Principle is and why it matters.

The Definition of the 80/20 Principle

The 80/20 Principle dictates that 80% of outputs stem from 20% of inputs. This unbalanced relationship, Koch says, shows up in various areas of life. For example, in any given company, we can reliably predict that 20% of products account for 80% of profits, 20% of customers account for 80% of sales revenue, and 20% of employees account for 80% of results. Similarly, in our personal lives, we owe roughly 80% of our achievements to 20% of the time we invest, 80% of our happiness to 20% of our life experiences, and 80% of the value we derive from relationships to 20% of the people in our lives.

(Shortform note: Koch credits discovery of the 80/20 relationship between inputs and outputs to Italian economist Vilfredo Pareto. According to Koch, Pareto studied wealth concentration among people in 19th-century England and discovered that a minority of people held the majority of wealth. Many people have commented on Pareto’s...

The 80/20 Principle Summary The Mindset Shifts to Make to Take Advantage of the 80/20 Principle

Now that you know what the 80/20 Principle is and why it matters, let’s examine the mindset shifts you must make to take advantage of the 80/20 Principle and achieve the happiness and success you want. Koch identifies three core beliefs you must embrace: Major improvements are always possible, it’s your duty to enjoy life, and time is abundant.

Core Belief #1: Major Improvements Are Always Possible

First, Koch says, we need to assume that the way we currently do things is compromising our happiness and success. We must abandon the notion that we’ve already done all we possibly can to improve our lives, as this mindset will prevent us from realizing our potential.

Instead, we must internalize the belief that we can greatly improve the quality of our lives by applying the 80/20 Principle. The reality, Koch says, is that we can always make major improvements to increase our wealth, happiness, freedom, and knowledge—either by doing things differently or doing less. Once we embrace this insight, we can take action to expand the 20% of our lives that help us make those improvements.

**The Downside of Pursuing Relentless Improvement and Chasing...

The 80/20 Principle Summary How to Maximize Your Happiness and Success

Now that you know the three core beliefs you must internalize to improve the quality of your life, let’s explore how you can apply the 80/20 Principle in your personal life to increase the success and joy you experience inside and outside your work. We’ve consolidated Koch’s advice into five tips.

Happy Life Tip #1: Work Less and Find Creative Ways to Use Time

According to Koch, the key to success and happiness is not hard work. The future, he says, rewards creative innovators who are savvy enough to manipulate the 80/20 Principle for their advantage, allowing them to work less and earn more.

According to Koch, we can observe this among the successful few, who work less by finding unconventional ways to use time. They turn down superfluous meeting requests, outsource the tasks they aren’t good at, and focus exclusively on the things they know lead to high returns on happiness, profits, or both. For example, it may take someone four hours to create an intricate spreadsheet whereas it would take the accountant on staff 30 minutes. In this case, it’s much more time efficient to assign the spreadsheet task to the accountant. Koch insists we need to do...

The 80/20 Principle Summary How to Streamline Your Business and Increase Profits

By this point, you know how to apply the 80/20 Principle in your personal life. Now let’s examine how you can apply the 80/20 Principle in your business. In this section, we’ll examine the four steps you must take to boost your company’s success and profits: Analyze your business, increase your returns, simplify your systems, and make other strategic improvements.

Step #1: Analyze Your Business With the 80/20 Principle

As we mentioned previously, in any company we can predict that 80% of profits are generated by 20% of inputs in each domain, including customers, products, employees, and departments. How can you identify the top-performing 20% of those inputs? Koch says there are two methods: conducting an 80/20 Audit and applying 80/20 Reasoning. Let’s briefly review each method.

Method #1: Conduct An 80/20 Audit

One option is to perform an 80/20 Audit (what Koch calls an 80/20 Analysis), which involves gathering two different sets of data—one measuring a percentage of all inputs and the other measuring a percentage of all outputs flowing from each of those inputs. For example, conduct an analysis to determine what percentage of your total...

Shortform Exercise: Create Time for Things That Make You Happy

Koch says we need to be ruthless in cutting down the time we spend on the 80% of people and activities that make us unhappy, and increase the time we spend on the 20% of people and activities that make us happy.

Describe the people, activities, and situations in your life that make you unhappy (for example, attending long meetings, cooking meals, or listening to a friend complain).