How to Be an 80/20 Individual
Take away our twenty most important people, and I tell you we would become an unimportant company.
--Bill Gates, chairman, Microsoft
This book is about a revolution that is changing the lives of individuals, individuals who are changing the world. I call these revolutionaries "80/20 individuals," people and small teams who use the 80/20 principle to build businesses, and fuel their careers. You may already be an 80/20 individual without knowing it, but if you are not, you have everything to gain by becoming one.
The 80/20 Principle, my earlier book, struck a chord with many of readers by answering two questions:
*How can I use the 80/20 principle to raise the profits of my corporation?
*How can I use the 80/20 principle to be more effective personally?
This book answers a quite different question:
*How can I use the 80/20 principle professionally, to create my own wealth and improve my well-being?
This is a book for individuals at work. I explain how you can become much more successful in your career by transforming any business. Whether you are an entrepreneur, a manager, an executive, a worker, or unemployed, you can use the step-by-step method described to remodel an existing business or create a new one--one that most benefits you and your close associates. My objective is to help you first, your customers second, and corporations only if helping them helps you.
The world belongs to individuals, not to corporations. And by using the 80/20 principle to accomplish more by doing less, you can turbo-boost your career.
A Brief History of the 80/20 Principle
In 1897, Italian economist Vilfredo Pareto (1848-1923) noticed a regular pattern in distributions of wealth or income, no matter the country or time period concerned. He found that the distribution was extremely skewed toward the top end: A small minority of the top earners always accounted for a large majority of the total wealth. The pattern was so reliable that Pareto was eventually able to predict the distribution of income accurately before looking at the data.
Pareto was greatly excited by his discovery, which he rightly believed was of enormous importance not just to economics but to society as well. But he managed to enthuse only a few fellow economists. Although he could write lucidly on less momentous subjects, his explanation of the "Pareto principle" lay buried beneath windy academic language and dense algebraic formulae.
Pareto's idea became widely known only when Joseph Moses Juran, one of the gurus of the quality movement in the twentieth century, renamed it the "Rule of the Vital Few." In his 1951 tome The Quality Control Handbook, which became hugely influential in Japan and later in the West, Juran separated the "vital few" from the "trivial many," showing how problems in quality could be largely eliminated, cheaply and quickly, by focusing on the vital few causes of these problems.1 Juran, who moved to Japan in 1954, taught executives there to improve quality and product design while incorporating American business practices into their own companies. Thanks to this new attention to quality control, between 1957 and 1989, Japan grew faster than any other industrial economy.
In the United States and Europe in the 1960s, the Pareto principle became widely known as the "80/20 rule" or "80/20 principle." While it is not wholly accurate, this description was snappy and influential. Engineers and computer experts began to use the principle routinely.
The 80/20 principle is an empirical "law" that has been verified in economics, business, and interdisciplinary science. It states that 80 percent of results flow from 20 percent of causes. In other words, most of what exists in the universe--our actions, and all other forces, resources, and ideas--has little value and yields little result; on the other hand, a few things work fantastically well and have tremendous impact. There is no magic in the 80 and the 20, which are merely approximations. The point is that the world is not 50/50; effort and reward are not linearly related.
Most of the universe consists of meaningless noise, which can drown out those few forces that are tremendously powerful and productive. But if you isolate and harness those powerful, creative forces within and around you, you can exert incredible influence.
In 1997, I wrote The 80/20 Principle,2 the first book on the subject. I showed how the principle could be applied not merely to help corporations drive business results, but also to help individuals improve their lives. I explained how to become effective or happy by realizing the importance of just a few isolated people or things. If you concentrate on the few that work best for you, you can get what you want. You can multiply your effectiveness, and even your happiness.
This idea broke new ground, since nobody had previously linked the principle to individual fulfillment. It struck a chord; as many readers around the world discovered, the 80/20 principle is an extremely useful way to get more out of life.
This new book, however, has a very different theme. The 80/20 Principle showed how companies could use the "law" to drive business results and how people could use it to improve their personal lives--but not their professional lives. The 80/20 Individual demonstrates that the 80/20 principle is liberating and powerful, a practical business tool that individuals can use to increase their output and creativity in every aspect of their business and career. The link between the application of the 80/20 principle and an individual's role in creating wealth is one that has never been made before.
Value Comes from Growth
The most interesting and valuable part of business is not the maintenance of existing operations: doing efficiently today what we did yesterday, in the same way we did it yesterday. If every organization maintained the status quo, the economy would never grow.
Growth is more important. Growth means creating something new and valuable. Growth is ultimately driven by individuals and small, self-selected teams of individuals, operating both within established corporations and in new ventures.
The most formidable weapon for growth in business is the 80/20 principle, creatively applied by individuals and small teams of individuals. With the 80/20 principle, people can leverage the most powerful forces around them--tangible, but especially intangible ones--to dazzle the world and provide customers with much more of what they want for much less of what they wish to conserve (money, resources, time, space, and energy).
80/20 Individuals in Organizations
Individuals are usually only partly aware of what they could do to create wealth. They may also be unaware of what they are already doing. In this book you will encounter several people who are creating enormous wealth for others, without realizing it. They are already 80/20 individuals, but they are not yet reaping the rewards appropriate to their creativity. They think they are cogs in a corporate machine, while in reality they are at the heart of wealth creation and economic growth.
Even if you work for a large or prestigious organization, if you create something that reflects your individuality and your ideas, then you are the primary wealth creator. Usually, your corporation keeps most of the wealth that you create. However, once you realize the disparity between the value you create and what you get back, you can narrow the gap.
Those who can create wealth--and know that they can--are able to dictate their own terms. Wealth is a means to happiness, but it is not the main one. What most people want is control over their lives. They want the ability to choose how they live: what work they do, the way they interact with friends and colleagues, the quality of their personal relationships, the way they view themselves.
What you gain as an 80/20 individual is the right to control your life: your work life, your personal life, and the intervening spaces where they collide or mesh. For example, your understanding of the 80/20 principle can allow you to strike a completely different deal with your current employer.
Many 80/20 individuals can be partly inside and partly outside their organizations, retaining contact and continuity with colleagues while also embarking on side ventures. For many 80/20 individuals these hybrid arrangements are greatly superior to the traditional alternatives: either staying put and being exploited as an employee or starting a new business from scratch.
My premise is simple--if you add great value to your organization, know that you do, and can demonstrate how, you can reasonably insist on setting your own agenda, goals, and rewards because you will always be creating more value than you receive. If this simple view upsets existing arrangements with your employers, quit. So much the worse for them. You create--you are in control.
The 80/20 Principle Is at the Heart of Creation
People think that creativity is largely a matter of talent, experience, or luck. They are wrong. Talent, experience, and luck are all key elements, but there is something more fundamental, accessible, and powerful that you can use to multiply your creative effect.
The 80/20 principle is central to all acts of creation. Take plant growth. Rain is clearly important. And what causes rain? Clouds--but only a few clouds create the most rain, and only at particular times, in particular locations.
Fertile land is also important. While also partly due to rain, there are other factors that influence fertility, including the variety and number of plants and animals that have used the land before. As a result of small differences in these few factors, a few pieces of land will be tens of times more fertile than others, yielding stronger, healthier plants in greater abundance. In plant growth, as in all creation, a few key variables can make all the difference.
In business the 80/20 principle is behind any innovation, any extra value. It is an entrepreneurial principle, a formula for value creation utilized not only by entrepreneurs, but by most managers and organizations.
The human need for better value, higher productivity, and reduced effort is nothing new. It's what led humans to three of the greatest breakthroughs to affect our planet: the invention of agriculture, the agricultural revolution, and the Industrial Revolution. These conscious acts of creation vastly increased our planet's population and raised our standard of living.
How do such extraordinary conscious acts of creation happen? I could describe them in many different ways, but every conscious creation shares the following three characteristics:
Creation is a matter of rearranging things that already exist. "There is nothing new under the sun," as the Preacher said in Ecclesiastes.3 The invention of agriculture around 7000 b.c. involved taking what already existed in nature and rearranging it to make it dramatically more productive. The agricultural revolution after 1750 rearranged the ancient elements of production, applying the leverage of scale and machinery. Scientists today study the processes of nature, then either speed up or alter the original process. An example is the microchip. Sand has existed in abundancy, with little value, for millions of years; yet a microchip, made of silica, formed from sand, can be extremely valuable.4
Conscious creation leverages the most powerful forces available. There are countless natural forces, both organic and inorganic. Only a few of them are really useful for creation. And within each species or type of force, a small minority are much more powerful and useful than the rest. Among all plants, a few vegetables are the most nutritious. Among farming methods, a few yield the greatest harvest. Among all areas of production, a few are the most efficient.
Breakthroughs in productivity occur when the most productive way of doing something is further enhanced by increasing scale or capital, or applying an innovative technique. These breakthroughs spring from thought and experimentation, the most powerful forces of conscious creation. Great things are created not only by the most powerful physical forces, but also by the most powerful ideas.
Creation occurs when ideas and individuals collide and collude. Of course, the raw materials of creation are physical, the stuff the universe makes available to us. But the essence of creation is intellectual.
The idea for the microchip did not arise from building sandcastles, but from building upon ideas. Creation requires ideas and individuals, usually only a few of each. All great scientific breakthroughs can be traced to a few fertile ideas that are pondered and rearranged by an individual or a small team. All business growth arises in the same way. Doing something differently, creating something new--all such actions start with an idea. The idea normally originates with an individual and is refined within a small team.
Business creation has a fourth common characteristic. If it is to survive, even for a time, a business innovation has to improve value to customers. It has to offer more for less--a lower cost or a better product or service--to customers who will pay for it. (It is not enough to offer something that is better and cheaper than something else if no one wants it, or if there is already an even better alternative.)
Both agricultural revolutions--the one around 7000 b.c. and that around a.d. 1750-1850--provided better food at much lower cost. Any automobile bought today costs a fraction of the price, adjusted for inflation or earnings, that it would have cost fifty years ago, yet cars today are much safer, faster, more comfortable, and more powerful. We get much more for much less.
Creation is not a mysterious process, confined to the scientific genius, the mad inventor, or the entrepreneur. Creation can be engineered, if you understand what drives it. Individuals and ideas drive creation. It happens in predictable and repeatable ways. If we understand this, we can create.
Become an 80/20 Individual
The 80/20 principle enables anyone who is determined, bright, and hardworking to stamp a footprint on the world by becoming an 80/20 individual. To make something new and popular, to feel that you have achieved something, and to acquire the status and freedom that come with this new territory--these are things to relish. In The 80/20 Principle, I explained how to transform your organization's performance and your life. In The 80/20 Individual I will show you how to use the 80/20 principle to create wealth, and improve your well-being by keeping part of this wealth for yourself.From the Hardcover edition.
Excerpted from The 80/20 Individual by Richard Koch. Copyright © 2003 by Richard Koch. Excerpted by permission of Crown Business, a division of Random House LLC. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.