"Pareto principle": one for three

There is a certain pattern in many areas of our life, which significantly affects the effectiveness of our actions, efforts and costs.

In general, it sounds like this - "a little important gives more results than a lot of unimportant", or, more precisely, "20% of our efforts bring 80% of the result, and 80% of the efforts lead to only 20% of the result."

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Most of us know this pattern as the "Pareto principle" or "Pareto law".

But despite this, the history of the appearance and development of this principle is not limited to only one person, whose name it bears, but in fact, is the joint result of the research and works of several people.

Today we will talk about them.

Wilfredo Pareto: an idea straight from the garden

According to the existing legend, a new idea dawned on the Italian economist and sociologist Vilfredo Pareto (1848-1923) right in the garden. Collecting peas in the garden, he noticed that about 80% of all peas are concentrated in only 20% of the pea pods.

In 1897, while researching the topic of the well-being of the Italian population in the 19th century, and precisely the level of uniformity in the distribution of income and accumulated wealth, Pareto found that most of the income and wealth belongs to a minority of people, namely 20% of the population owns 80% of all wealth.

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Pareto's next find was that this imbalance pattern remained unchanged for statistics from different time periods and different countries. The scheme was repeated over and over again, and with mathematical precision. Although the percentages varied slightly, the overall ratio was constant. And the main thing here was not the percentage figures, but the fact that the distribution of wealth among the population is predictably uneven.

Pareto was an innovator because it had never occurred to anyone to consider two systems of interrelated data — the level of distribution of income or wealth and the number of people earning income or owning property — and compare the percentages between these data.

But Pareto could not fully assess how this scheme is applicable to other spheres of public life, and what significance it has for the economy and society. He put forward only a few sociological theories in which he attached great importance to the role of the elite, and which at the end of his life were appropriated by the fascists of Mussolini. Therefore, for a generation, the 80/20 principle remained unknown and unappreciated.

Joseph Juran: from the particular to the general

The first who paid attention and realized that the principle discovered by Pareto can be applied in various spheres of work was Joseph M. Juran (Joseph M. Juran, 1904 - 2008) - an American specialist and business consultant in the field of quality, academician of the International quality academy (IAC).

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He pioneered the practical application of the pattern found by Pareto, or, as he sometimes called it, the principle of "the few that are decisive", applying it to the search for ways to improve the quality of products.

In the 1930s, as a young engineer, along with other statistical methods, Juran became acquainted with the work of Vilfredo Pareto. A little later, in 1941, while studying the issues of improving the quality of products, he noticed that the appearance of defective products corresponds to the pattern found by Pareto - a relatively small number of types of defects account for the bulk of the cost of eliminating defects. From this he concluded that the level of quality can be significantly improved by applying the 80/20 rule to the manufacturing process.

Juran later suggested that the main part of all the results is provided by relatively few reasons. And only part of our actions are truly effective.
He wrote about this in his book "Guide to quality control" (1951), in which he derived the rule: "Vital few and trivial many" (important - little, ordinary - a lot).
Because the Pareto Principle allows people to focus on areas of greatest impact, it is one of the most powerful tools for improving quality and increasing performance.

In the then America, Juran's theories did not take root. But in Japan, where new technologies were actively developing, new ideas aroused interest and received support. In 1953, Juran began working with several Japanese corporations to improve the quality of consumer products and their value to customers. And quite successfully. But it was only after 1970, when the Japanese threat to American industry became completely obvious, that Juran began to be taken seriously, and he returned to the United States in order to do for American industry what he did for Japanese industry. The foundation of this global quality revolution was the 80/20 Principle.

Referring to the question of why the Pareto principle is usually attributed to Vilfredo Pareto, J. Juran writes: “Several years ago I gave the name“ Pareto ”to this principle of“ the significance of the few and the insignificance of the many. ”Subsequently, I was forced to admit that I mistakenly gave this name This principle ... The universality of the Pareto principle has nothing to do with V. Pareto himself. Where does it come from? As far as I know, I first demonstrated it myself. If I thought about other applications of this principle, I would certainly call it the Juran principle. However, then I did not think about it. I needed to give this principle some kind of name, and the name V. Pareto did not arouse antipathy in me. This is how the Pareto principle appeared. "

Thus, it is Joseph Juran who can be considered the official “parent” of the “20/80” principle, who gave it a definition and a name familiar to everyone.

Richard Koch: the idea to the masses!

However, the mass fame and popularity of the principle was brought by the book of the Englishman Richard Koch "The 80/20 Principle: The Secret of Achieving More with Less".

After graduating, Richard Koch worked as a consultant for the Boston Consulting Group and Bain & Company. In 1983, Richard co-founded The LEK Partnership, a consulting company. In 1990 he left the business to invest and write books.

The 80/20 Principle was published in 1997, and although it was Richard Koch's literary debut, it nevertheless became an instant bestseller.

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Although the book was originally conceived as a book about business and management, namely, about using the Pareto principle to increase the company's profits, the author went further and expanded the boundaries of the application of this principle. He suggested using it in various spheres of life - in management, in politics, personnel management, relationships, as well as for achieving personal success, happiness and well-being.

Since then, Richard Koch's book has become a business classic, translated into 34 languages, and named one of the 25 best business books of all time by GQ magazine.

Subsequently, the author continued the theme "80/20" and wrote the books "Living the 80/20 Principle: A Practical Guide" and "The 80/20 Manager: The Main Principle of Highly Effective People".

It is important to note that the 80/20 numbers traditionally used to describe this pattern are not dogmatic. It is not the given numerical values that are fundamental here, but the very fact of their significant difference, and the specific figures of the degree of unevenness can be any. Indeed, real statistics regularly show that it is impossible to fit all life phenomena and processes into clear parameters 20/80, because the ratio of internal and external factors inevitably go beyond a rigid framework. Somewhere the resulting ratio looks like 20/90, 10/70, somewhere like 30/100 or 15/95. Yes, the sum of the right and left parts of the fractions does not always have to be equal to 100%, since you need to remember that in the two parts of the fraction we have different indicators.

In his books, Richard Koch extended the result of observing the Pareto principle to all economic and sociological phenomena and derived a number of consequences of this pattern, which are now often used as independent empirical rules (consequences of the Pareto law).

Here are some important implications of Pareto's Law:

There are few really significant factors, but there are many usual ones, so only a few important actions lead to outstanding results.
- Most successful events are due to the action of a small number of highly productive forces; most of the troubles are associated with the action of a small number of highly destructive forces.
- Most of the efforts do not give the desired results.
What we see does not always correspond to reality - there are always hidden factors.
What we expect to get as a result, as a rule, differs from what we get (there are always hidden forces at work).

The found and substantiated principle "more with less" is important, since it serves as a practical tool that can guarantee to improve something in any area of our life, and not only in a small amount, but also in a large one.

So, like many other important discoveries, the "Pareto principle" had several authors, one of whom came up with an idea, another formulated and developed the discovery of the predecessor, giving it a name, and the third made this knowledge generally known.

Therefore, speaking about the "Pareto principle", one must remember all three - both Wilfredo Pareto himself, and Joseph Juran, and Richard Koch.

Thank you for attention.

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