The Pareto Principle and Equity: A Discussion On What Matters

I don’t know about you but I have been struggling with a lot of goals I set for myself in life and it took me a while to know the answer. I’ve read up on time management, goal setting, the habits of successful people and even books on how to be original. I also spend a lot of time watching Ted Talks about different topics related to attaining success. But for some reason, the answer for me was so simple and I came across it in one of Casey Nesitat’s vlogs.

Ever heard of the Pareto Principle? It’s a concept developed by an Italian economist named Vilfredo Pareto. It has different terms across numerous textbooks like the Pareto effect, Pareto’s law or the 80/20 Rule. Though the gist is simple, it specifies an unequal relationship between inputs and outputs where 20% of invested input is responsible for 80% of results obtained. In other words, most things are not distributed evenly.

The key point in the Pareto Principle is that each unit of work does not contribute or equal to the same amount of output.

  • 20% of sales employees contribute to 80% of total sales
  • 20% of customers generate 80% of total revenue
  • 20% of shoes experience 80% of daily wear and tear
  • 20% of menu items make up 80% of total items ordered
  • And the list can go on and on

So why is this important? Why am I writing about this?

I feel that it is important in life to know what is important and this principle does a good job of solidifying that point. See, growing up I never heard of this principle and I did not have access to effective advice when I needed it. I have worked tirelessly in creating spiels and sucking up to my boss back at my call center job to get ahead of my colleagues and hopefully get a promotion. I worked day and night editing videos in hopes that my works get noticed and I could make a name for myself in film making. I worked hard during training back in my high school basketball team because I wanted to play college ball. I worked hard in my past relationships because I wanted to have a partner who wouldn’t cheat on me and work with me towards marriage and life. But, I never attained any of that. Why? It was because I was working too hard on the wrong things or on 80% of things that did not really have much impact.

Equitable Distribution

If you’re an economist, or you’ve had experience taking up courses related to the field then you’ve probably heard of this term and it is usually applied to the subject of income. An equal distribution of (unit) means that everyone receives exactly the same amount where in an equitable distribution of (unit) means that everyone receives their fair share. Now, fair share here doesn’t mean equal.

Imagine a group of women that consists of 4 prostitutes and they all work together in a prostitute bar. (I don’t know if such a thing exists but I bet that you can imagine what it’s like) They have this manager who clients pay to and he’s in charge of distributing the ladies’ wages after a long night of boinking. Prostitute 1 averages 4 boinks per night while Prostitute 2 averages 2.5 boinks per night. Prostitute 3 boinks at 7 per night while Prostitute 4 sometimes gets lucky with 1 boink per night, 4’s average is 0.5. The cost of one boink is $7 and the manager gets a $1 cut.

Worker Boink Average Equal Distribution of Wage Equitable Distribution of Wage
Prostitute 1 4 Per Night $21 $24
Prostitute 2 2.5 Per Night $21 $15
Prostitute 3 7 Per Night $21 $42
Prostitute 4 0.5 Per Night $21 $3
Total 14 Per Night $84 $84

At average, the ladies make $84 collectively, every night, which means good business for the prostitute bar but that’s not the point. Notice the difference between the equal distribution of wage and the equitable one? What’s more fair to you? Of course, if you’re the manager, you’d end up sticking with the equitable distribution plan rather than the equal one. You want your ladies to work hard every night and having Prostitute 3 on your team can motivate the other ladies to improve their boink-per-night count.

The point is, equal distribution and equitable distribution can be good concepts, but depending on where they are applied to. If equal distribution is applied to the above scenario then Prostitutes 1, 2 and 4 would boink at the same pace every night since Prostitute 3 boinks enough for all of them to have a good pay day. Sounds like a good strategy for Prostitute 1, 2 and 4 right? NOT. Prostitute 3 leaves and ladies 1, 2 and 4 would have to sleep with more men. They’ll hate their job since they depended on Prostitute 3 so much and eventually leave, killing the Prostitute bar.

Now let’s talk about attention.

I Need Attention!

Just like a baby that won’t stop crying, your problems need attention too and if you don’t give it enough, they might just make you stay up all night. Rumour has it; Vilfredo Pareto came up with his idea when he noticed how 20% of the pea plants in his garden generated 80% of the healthy pea pods. If I were him, I would’ve focused my attention on the 20% of pea plants and left out the others to die.

Instead of spending too much time on working on spiels, I could’ve just used the same amount of time bonding with my colleagues and upper management. Instead of working too hard in training back in my high school ball days, I could’ve just went out of my way, befriended scouts and played with more experienced guys. Instead of working too hard on my editing, I could’ve focused more on the idea of the videos I put out and I would’ve had better chances of getting noticed. So what’s the moral?

It’s important to know what’s important to get to where you want to be. Whether it’s a girl you like, a goal you have in mind, it is essential to properly acknowledge what’s important for you to do to actually realize achievement. Once you have what’s important figured out, the next step is to equitably divide your attention, energy, and time. In my country we call this skill diskarte.

Diskarte

Say for example that I want to be a dean’s lister by the time I graduate, how will I do this? I’d spend a good amount of time developing a strategy on how I plan to direct my actions. But in order for my strategy to be effective, I’d have to understand first what it takes and what’s important for me to do. So I go around the school and ask dean’s listers on what’s important for me to do to achieve what I want to achieve. They say good grades. I check what it takes to know the requirements to be a dean’s lister, it says the same thing, good grades. So I focus 20% of my time for the whole semester to study well on tests and quizzes and get good grades, and the other 80%, well meh. Kidding. I’d befriend my professors and make sure that I shine so bright in their eyes that they sometimes mistake me for champagne. Better chances right?

Some people look down on this skill because it simply does not align with the way they do things. That’s fine, I suffer from the same dilemma too. However, you will often find yourself in crucial scenarios that will require you to think if things are worth going out of your way for. If you ever become aware the next you find yourself in a situation like this, think of the Pareto Principle. Are the actions that I need to do belong to the important 20% of the pie? If so, then stick with your principles and find an acceptable way for you to do what you need to do. If not, then you already know what’s up.

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s