Resource optimisation, the 80/20 rule
In business and in almost every other facet of life we operate within a space of constraints. Resource constraints span a whole spectrum: human, financial, space, attention in all its guises and most importantly time is by far the most problematic of them all because human beings or life as it were has a limited lease. It is finite and besides that, life is a lottery because nobody knows how long they are going to be around and alive on this space called earth.
Given the foregoing obvious, yet always shocking truth and reality, one would think that every soul would have had a very urgent demeanor about everything they undertake. Fortunately or not, depending on which side of the horoscope one turns out from, the reality is that most humans go about doing things as if time is on their side, as if they have mastered the magic to harness and conquer time and therein they do things in a very wasteful and lackadaisical manner with no sense of urgency.
It is because of the very scarce nature of time that lean thinking is a very important resource in all matters of life as a philosophy. One of the key strands of study to be vigorously pursued in lean thinking, as a way of business life, is the 80/20 rule, The Pareto Principle. The origins of the 80/20 rule are that in the late 1800s, Vilfredo Pareto, an Italian economist, established that 80 percent of the land in Italy was owned by 20 percent of the population.
Further studies of this social dynamic revealed the pervasiveness of the Pareto phenomenon and the versatility in manifestations of the 80/20 rule in almost all matters of social endeavour. The 80/20 principle became at first a socio–economic law but has since graduated to be an universally applied principle on all matters business, politics, economics, social relationships and virtually every facet of life that needs prioritisation and where resource allocation and the question of making choices come up.
The Pareto law, in general, postulates that 80 percent of the objectives and/or its effects in broader terms, are achieved with 20 percent of the resources, efforts or actions. What are called the causes or agents. The implications are that it takes 80 percent of the effort or actions to achieve the remaining 20 percent of the goals or outcomes. Therefore in terms of financial quantum, this means that the cost required to move from 80 percent to 100 percent of the objective is four times bigger than the one required to move from zero percent to 80 percent.
The insights to extract from this is that beyond a certain threshold, the marginal cost of getting more from a situation such as improving one’s market share in a specific market or achieving additional marks in an assignment becomes prohibitively exorbitant.
Mystery of performance, therefore, is that one must establish an optimised level of achievement where they know that they have done the 20 percent and have achieved the 80 percent; otherwise one risks the danger of suffering burn out and damaging their rejuvenation capabilities to the extent that they become overstretched and empty their tank and would be unable to take on more important tasks and ventures when the need or the opportunities arise in the immediate future, We can relate this to what happened with the United States of America during and after the George Bush Jnr. era when the USA took on too many battles, without regard to the 80/20 rule and became so overstretched with Afghanistan, Iraq plus waging a global war against the terrorist franchises across the world to the extent that it eroded USA’s capabilities to take on more important pursuits in future: hence Syria has remained unresolved until today, the horrendous amounts of daily massacres notwithstanding. This is because Bush and his generals suffered some amnesia and forgot or deliberately ignored the 80/20 rule.
In a nutshell we have plenty of empirical evidence that the 80/20 rule can and must be applied across all facets of human undertakings: at a personal level with personal endeavours, at community and even global level. In business, economics, politics, religion and even in matters as grave as warfare. The 80/20 rule rules.
