The first time I heard about the Pareto principle was during my internship at Airbus, where I worked in the production engineering department.

The production engineer I worked with told me that their goal was to apply the Pareto principle to the full production line in order to improve efficiency and productivity. He explained that by identifying the most important tasks and focusing on them, they could achieve significant improvements in their processes and ultimately achieve greater results with fewer resources.

Since then, I began to observe and put the Pareto principle in action in every organization I worked for. Whether it was a small startup or a large corporation, the principle held true - a small number of inputs or actions often had a disproportionate impact on the final outcome.

Today, I will explain you why the Pareto principle is a powerful tool for process improvement and optimization, and why you should take advantage of it in your career.

Well, actually you can apply this fantastic Principle in life in general. If you are not doing it already, the consequences are already visible in your life.

Pareto in our Lifes

Someone said Pareto in action? That is the situation, for example,in the US assets distribution - where boomers (the group of people born between 1946 and 1964) are ~65million individuals or 25% of the US population, but they control 77% of financial assets.

Well, that’s only in the US right? and financial terms. Let me tell you that the brain you are using to read this post, consumes ~20% of the energy of your body, but its mass makes only ~3%.

If we pay attention, Pareto is well embedded in our lifes. That also applies to our work part of it:

  • Emails: Roughly 80% of the emails you receive come from 20% of your contacts. By identifying and prioritizing the most important contacts and emails, you can achieve greater productivity and efficiency.

    • Most emails you received are just noise.
  • Software functionalities: Roughly 80% of the value generated by a software application comes from 20% of its functionalities. By focusing on the most important functionalities, software developers can optimize the user experience and increase user satisfaction.

    • Remember product guy: 80% of the users, will be interested in 20% of your software capabilities. Make sure to gather proper requirements and design the high-use functions as simple and user friendly as possible.
  • Customers: Roughly 80% of a company’s revenue comes from 20% of its customers.

    • By identifying and focusing on the most important customers, companies can improve customer satisfaction, loyalty, and retention.
  • Data insights: Roughly 80% of the insights generated from data analysis come from 20% of the data. By identifying and analyzing the most important data points, data analysts can generate the most valuable insights for their organization.

    • Make a proper EDA - 80% of the insights are hidden in 20% of the data you gathered
  • Time Management - Keep what it is essential

Pareto in Data Analytics

Data analytics is all about uncovering patterns, trends, and insights within a vast sea of data. But, as anyone who has sifted through a large dataset knows, not all data points are created equal. Some provide significant insights, while others add little value. This is where the Pareto Principle, commonly known as the 80/20 rule, comes into play.

The Pareto Principle asserts that roughly 80% of effects come from 20% of causes. In a business context, it might mean that 80% of sales come from 20% of clients, or 80% of complaints

Pareto Principle in Context

Pareto & Lean: In Search of Efficiency

Lean methodology is a philosophy and approach to process improvement that emphasizes the elimination of waste and the continuous improvement of processes. By focusing on the most important tasks and eliminating waste, lean methodology aims to increase efficiency and productivity.

Pareto & Diminishing Returns

Diminishing returns is a concept in economics that refers to the point at which the level of profits or benefits gained from a certain input decreases as more of that input is added. In other words, the more resources you put into a project or process, the smaller the marginal benefit becomes.

It describes how the marginal benefit of additional inputs or resources decreases as more are added. This principle is often related to the Pareto principle, which highlights the importance of identifying the inputs or actions that will have the greatest impact on achieving your goals.

Decreasing Marginal Utility

The principle of diminishing marginal utility states that as a person consumes more and more of a particular good, the additional satisfaction they derive from each additional unit of the good tends to decrease.

In other words:

  • The more of something we have, the less valuable each additional unit becomes to us
  • The 10th slice of pizza is not as great as the first one (and probably with negative ‘utility’)

This concept is related to Pareto’s principle in the sense that both are concerned with the idea of prioritizing resources or effort based on their relative importance or value. The principle of diminishing marginal utility suggests that we should allocate our resources in a way that maximizes their overall satisfaction or value.

For example, suppose we have a limited budget for purchasing goods and services. If we apply the principle of diminishing marginal utility, we would allocate our budget in a way that maximizes our overall satisfaction, rather than simply purchasing more and more of one particular good or service.

Overall, both the principle of diminishing marginal utility and Pareto’s principle are important concepts in economics and decision-making, as they help us to allocate our resources and efforts in a way that maximizes their overall value and impact.

Pareto & Chaos Theory

Chaos theory is a branch of mathematics that studies the behavior of complex systems that are highly sensitive to initial conditions.

These systems exhibit what is known as “chaos,” which refers to the apparent randomness and unpredictability of their behavior. However, chaos theory has shown that even seemingly chaotic systems have underlying patterns and structure.

So how do these two concepts relate? One way to think about it is that chaos theory helps to explain why the Pareto principle holds true in so many different systems. In a chaotic system, small changes in initial conditions can lead to vastly different outcomes. This means that the inputs that have the greatest impact on the system will often be magnified and have a disproportionate influence on the final outcome.

The Pareto principle reflects this by stating that a small number of inputs or actions will have a large impact on the final outcome, while the majority of inputs or actions will have a relatively small impact.

You can view it also in a way that some actions, are giving us a huge leverage to achieve a goal.

Pareto & Minimalism: Keeping the Essentials

Minimalism is a philosophy and lifestyle that emphasizes simplicity and the elimination of excess. While it may not seem immediately related to the Pareto principle or chaos theory, there is actually a connection between these concepts as well.

The Pareto principle suggests that a small number of inputs or actions have a disproportionate impact on the final outcome.

This can be related to minimalism in that minimalism is about focusing on the essential and eliminating excess.

By identifying the small number of inputs or actions that have the greatest impact, minimalism can help individuals and organizations streamline their processes and reduce waste.

Pareto & Time Management

By focusing on these important tasks, individuals can achieve a disproportionate amount of progress in a short amount of time, similar to how the Pareto principle suggests that a small number of inputs or actions can have a disproportionate impact on the final outcome.

I was talking already about Time Management and recommeding The Pomodoro method, which is related to the Pareto principle in that it encourages individuals to identify the most important tasks and focus on them exclusively during each Pomodoro interval.


Where else have I seen Pareto in Action?

Winner Takes All Effect

A typical Skew Distribution that you can observe in: sports, stock markets, product…

Regarding product, we can see it as well in this way - The most addictive App (product) will capture most of our attention. Think how it was first facebook, then instagram and now TikTok.

If you are interested about focus and attention - you should have a look to this article: