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Pareto Principle

Category
Economics
Also Known As...
80/20 RuleLaw of the Vital Few
Pareto Principle

Definition

The observation that for many situations, roughly 80% of the effects come from 20% of the causes.

Origin

Named for the Italian economist Vilfredo Pareto, who developed the 80/20 connection in the late 19th century, applying it to realization that 80% of Italian land was owned by 20% of the population (source).

Everyday Use

The 80/20 Rule reminds us of the disproportionate influence and important of certain items within any system — be they customers, data points, or hours in a day.

Some examples might include that 20% of our coworkers cause 80% of the challenges, that 20% of our committed time brings 80% of our happiness, or that 20% of the pea pods in our garden produce 80% of the peas. It's a reminder that we ought not to give equal weight to all causes in our life when it's better to focus on the few that are having big effects.