Divya BThis was an article given to Divya Bhaskar, Ahmedabad (Feb 19, 2022)

Context:

We use Pareto ideas across our daily work, even in mental health.  For example, index trauma (covered in Module 6) is based on the 80/20 principle.  Other examples in daily life include equity portfolio planning and financial well-being.

Please read the entire article below in English:

The Pareto Principle, also known as the 80/20 rule, suggests that a significant portion, often around 80%, of effects come from a relatively small portion, usually around 20%, of causes. In simpler terms, focusing on a few key areas can often lead to most of the desired results. For example, in business, you might find that 80% of your sales or profits come from 20% of your customers. By understanding your priority customers, you can serve them better, sell more, become more profitable, and save energy for them. Conversely, the efforts may not generate meaningful value if you focus on the least profitable customers. The idea is not to ignore the bottom 20 %  but to distribute your efforts more wisely.

The same is true for your wardrobe! If you carefully notice, we generally wear 20% of our clothes 80% of the time, and the remaining 80% occupy “space”.

  • During my assignment in Beijing, there was a complaint that the site didn’t have enough meeting rooms. Upon daily surveys over a month and a half,   we identified that 80% of the rooms had a capacity of more than 4 people. Still, that capacity was used only 20%. Hence, about 80% of the time, the room only had 2 or less occupants. Based on this information, we decided to split some of the larger rooms with higher capacity into two by putting a divider that gave us more rooms without taking additional floor space!  Without adding more floor space for the rooms or spending more money to create new rooms, we solved the problem; in fact, the occupants were pleased!
  • A designer I worked with was complaining about the limited staff. When we analysed the data, he realised that 80% of the staff’s time and energy was spent discussing and customising specific details of boutique bungalows. And the priority for the firm was to create big and visible projects across the country. They also realised that large buildings had fewer discussions on amenities and, therefore, more time was available on creative aspects such as the look or the architectural elements. Based on the insights, they realised they were spending 80% of their time on projects that only gave roughly 20% revenue. In contrast, the projects that gave maximum scale and revenue did not need that much time! Hence, the firm reassigned its resources to a few large projects and phased away small projects by assigning them to other designers.

This principle can be applied to various aspects of life, from personal productivity parenting to business management to prioritise tasks, resources, and efforts for maximising effectiveness.

How could Pareto analysis be used on your stock portfolio? I shall be talking more about that in the following article!

By Dr Gunjan Y Trivedi ([email protected]. Life Coach & Consultant) Dr Gunjan has worked in global corporations in technology and business across Japan, China, India, and the USA.  At present, he works on identifying and addressing productivity issues and functional impairment due to mental health.