Interview: Richard Koch, author of The 80/20 Principle

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31 Responses to “Interview: Richard Koch, author of The 80/20 Principle

  1. LongFlight says:

    This has worked for me in my business and my personal life…but I sum it up as “Work smarter, not harder, and follow your heart.”

    I spend most of my days playing in the forest, spending time with friends and family and keeping whats truly important, important. Somehow I keep becoming more productive financially while spending less time doing so.

  2. Flying_Monkey says:

    Self-satisfied business bullshit masquerading as ‘philosophy’. This is really no different from Oprah magazine.

  3. sirdook says:

    How generally applicable is this 80/20 rule? I haven’t done the calculations, but I’d say this interview was roughly 80% empty blather, with about 20% platitudes and observations that you don’t need an 80/20 rule to discover.

  4. Anonymous says:

    I have read all of Richard Koch’s 80/20 books and currently have SuperConnect on the shelf ready to read, the book Rework actually draws on this in a way too. This guy is seriously good and a real inspiration.

    I LOVE the 80/20 rule and actually find it frustrating that there is still a lack of chatter and books on this and on the web. It really does work and if used correctly can transform your life.

    It has also been used well since by Tim Ferris and Perry Marshall in recent literature, both masters in their field.

    My next project is to try and succeed with Google Adwords and Affiliate Marketing using this rule as my guide.

    My “enthusiasm has been evoked” and I thank you for that.

  5. Anonymous says:

    Wow, some real snap idiotic judgements from plenty of comments on here. The vast majority will never have taken the time to try or research this rule.

    I suggest you read the book and give this a go. A hugely powerful approach that has worked brilliantly in both my business and personal life for me.

    The world is imbalanced, you either embrace it or work hard against it.

  6. koenigstone says:

    wow, so much hate in the comments. it’s uncharacteristic and a little disappointing.

  7. Anonymous says:

    Worry is never useful. When you find yourself worrying, stop it instantly. You do this by posing a choice to yourself – either you act and don’t worry; or you decide not to act and not worry.

    Thanks, but I’ve had enough of our leadership and industry acting without worrying about what might happen.

  8. kateling says:

    Try telling some of the millions of people working two or three low-paying jobs that they’re lucky to have to just stop doing what they don’t enjoy. It must be a nice life, writing and exercising and switching between one’s two homes in Cape Town and Iberia, but
    this is self-help for the privileged, and does nothing to address the fact that most people don’t have that much control over their circumstances.

  9. Anonymous says:

    People are measuring and trying to decipher the ‘secrets’. We are circling around the lessons we’ve been reading and thinking about for centuries…

    the internet allows the true message to spread more quickly but like all great and deep understandings the ability to conduct amanuensis requires a natural facility of mathematics.

    the issue is not “take your worry and decide whether you will act or not” the issue is not
    even “why are you worried?”

    the issue is that worry is a manifestation of fear and both are not nice guests to entertain.
    don’t let them in! reject their ideas, escort them out if you find them.

    you are perfectly capable of figuring out how to make the rent without the input of worry or fear.

  10. Anonymous says:

    Read both of his 80/20 books back in the 1990′s and recommend these juvenile reviewers to do the same before posting inane comments. These two 80/20 books aren’t bad, not bad at all, the first one being the best of the two (haven’t read any of his others).

    And I would note that the author is clear in his books that 80/20 ratio does not always hold true: it could be 70/30 or even 99/1.

  11. Anonymous says:

    There is a certain potential to do the things you want to do, and still have the protection of a “force” putting you back on your feet, should you fall. That potential is not ever lasting, with age and time it weakens.

    If you begin doing what you want in your heart as opposed to what others want you to do for a piece of bread, chances are you are always going to end up with a piece of bread. Difference is that one way you will feel personally satisfied, the other you would feel not so.

    The 80/20 rule applies to 20 percent and doesn’t work for the other 80. That is coded in the rule itself. So if you don’t believe in the 20/80, then perhaps you are in that 80.

  12. Anonymous says:

    For example, in the 1930s G. F. Gause, a scientist in the Soviet Union, put two protozoans – tiny organisms – of the same family but different species in a glass jar with limited food. The creatures managed to share the food and both survived. Gause tried the experiment with two organisms of the same species. They fought and both died.

    This is a very confused account of the competitive exclusion principle. I’m familiar with Gause’s test on two protozoans of the same family but different species, Paramecium caudatum and P. aurelia, and only one of them lived. What species did he use that found a way to mutually co-exist?

  13. puravida says:

    I don’t think Koch calls the 80/20 principle a scientific law or that he is overstating its importance.

    Economists such as Paul Krugman, and complexity theorists at the Santa Fe Institute, accept the existence of power laws, including the 80/20 principle, as scientifically interesting. They admit they are hard or impossible to explain, but they apply to phenomena as diverse as meteors, earthquakes, cities, and wealth distribution. Krugman has said that the mathematical patterns are so precise that they are “eerie”.

    So I think it’s true that the Pareto (80/20) principle is certainly a useful rule of thumb, but also something more – an empirical observation that tells us something about how the universe works.

    If that isn’t exactly a scientific law, for me it comes close.

    • Anonymous says:

      The Pareto principle talks about power laws, but it doesn’t say anything about 80/20 as being the necessary ratio. The wikipedia article on the subject mentions Krugman in a somewhat different light:

      The Pareto principle has also been used to attribute the widening economic inequality in the United States to ‘skill-biased technical change’—i.e. income growth accrues to those with the education and skills required to take advantage of new technology and globalisation. However, Paul Krugman in The New York Times dismissed this “80-20 fallacy” as being cited “not because it’s true, but because it’s comforting.” He notes that the benefits of economic growth over the last 30 years have largely been concentrated in the top 1%, rather than the top 20%.

    • sirdook says:

      Yes he does call it a natural law, and he does overstate its importance (see quotes below). But in general, I would caution you to be skeptical of anything which claims to simultaneously “apply to phenomena as diverse as meteors, earthquakes, cities, and wealth distribution” and yet be a source of specific, useful, easily digestible advice in each of those specific domains.

      Avi: Why is applying Pareto’s law to one’s personal life so powerful?

      Richard: There are lots of self-help books that require you to believe in an idea, so it is often self-fulfilling and there is no scientific way to test whether it is the idea of the belief that delivers results. What happens if you lose your faith in the idea? But the 80/20 principle is not like that. It works whether you believe in it or not.

      Avi: Are there other scientific laws which can help our productivity and wellbeing?

      Richard: Yes, I think there are, and I explored those in my book called The Natural Laws of Business in the US.

  14. Daemon says:

    Hmm. You’d think they’d front-load basic information like what in hades this principle actually is. Lost interest after a few ‘graphs.

  15. AnthonyC says:

    “Worry is never useful. When you find yourself worrying, stop it instantly. You do this by posing a choice to yourself – either you act and don’t worry; or you decide not to act and not worry.”

    I’ve read that one before, in a quote from the Dalai Lama. If something is within your control, no need to worry. If something is not within your control, no use to worry.

    Sadly, the choice about whether to worry is one of the things not under conscious control. Also, as other comments have pointed out, most of this advice assumes a rather privileged starting position. In fact, I would go so far as to that those of us lucky enough to start from such a privileged position (I count myself in that group, though I am nowhere even close to where he is) have a duty to everyone else to *make sure they have the same option to do what makes them happy* before forsaking all unpleasant activities.

    Also, on a physiological level, “wanting” and “liking” are two different systems in the brain. The things people want often do not make them happy. The things that make them happy, they do not always want. It may be relatively easy for Richard Koch to bridge this gap, because his wealth allows him to relatively easily obtain what he wants, leaving him time to obtain what he likes.

  16. Anonymous says:

    Richard Koch

    Hi there, this is the author (Richard Koch) commenting. I’m glad to have stirred up a hornet’s nest and appreciate especially the comments from people who’ve actually read the books. Looks like I didn’t do a very good job of converting the unconverted, or even getting many of them to give the idea a fair chance.

    I should have stated the idea explicitly in the interview. The 80/20 principle says that the world is lopsided in that a majority of results tend to come from a minority of causes. It doesn’t matter if it’s 80/20, 70/30 or 95/5 (or anything else). A recent example re Twitter — it turns out that there is a clear Paretoesque relationship in that only about half of Twitter’s registered accounts follow 2 or more people. Only about 10% of them follow more than 50 people. One and a half million Twitter accounts, less than 1% of the total follow more than 500 people. Just two accounts follow more than half a million people. (Data from Silicon Alley Insider, March 31, 2011). If you do the math you find that 10% of Twitter accounts follow 85% of all the people followed.

    I could give dozens of other examples but the telling thing is that whenever you do this type of analysis you NEVER find a relationship approaching 50/50, i.e. half of causes lead to half of results. The lowest it ever gets in my experience is about 65/35 and that is very rare.

    The point is not the 80/20 either, because at the extreme you will find a tiny proportion of very powerful events or causes that account for many times their “natural” right to cause results. Fewer than 0.2% of books account for roughly half of their sales, less than 0.1% of ethical drugs constitute half the pharmaceutical industry’s sales, and less than a quarter of one percent of all companies listed in the world account for 50% the total value of companies. Risk managers have found that under 0.1% of all risky events cause at least half the losses. More loosely, you can see the psychological and practical effect of very few events in the world, for example the American and French Revolutions, the war of 1914-18 and its corollories including the Soviets and Nazis, dropping the atom bombs on Japan in 1945, 9/11, and on the positive side discoveries such as penicillin, the silicon chip and the internet.

    There is no right or wrong about the 80/20 principle. It is not a good or bad thing, or rather it is clearly both. In saying wealth follows that pattern I am not advocating unequal distributions of wealth. I am just observing a fact. And left winger should note that a century of increasing taxation has made little dent on the inequality. It is baked into the structure of society. If you are on the right you say that’s natural, if you are a liberal you say that means we should try much harder to remove inequality at source, i.e. in education. Personally I lean to the liberal side, but that’s just my opinion and has nothing to do with the 80/20 principle.

    And another thing — why am I pilloried for being rich? I started with nothing and my parents were lower middle class and gave me no start in life because they couldn’t, except they paid the small contribution to my university fees the law required at the time and we delighted to do so. Maybe I’ll lose all my money and then I’ll have greater credibility? I thought most people writing comments were Americans! And no, I didn’t grow up in South Africa, but in welfare-state England. I went to America in my teens and found it liberating. Nothing unusual about that at the time.

    Many economists believe that the 80/20 principle is some kind of law. Paul Krugman has related it to a whole host of similar power laws that have weirdly unbalanced relationships that can be, in his words, “terrifyingly precise”. Back in 1936, economists at Harvard reviewed Pareto’s finding and found it worked amazingly well. In the 1950s the distinguished economist Josef Steindl wrote “For a very long time the Pareto law [the 80/20 principle] has lumbered the economic scene like an erratic block on the landscape: an empirical law that nobody can explain.”

    Frankly I don’t know if the principle is a law or a rule of thumb, and I don’t much care. I do know it’s incredibly powerful and can help anyone make much more of their life, by working with the grain of the universe instead of against it. I hope the skeptics will at least look at one of my books and discover the power they can have.

  17. Anonymous says:

    If this is supposed to be advice, it boils down to: “Live like the idle rich and you will become the idle rich.”

    No doubt it works for him, a man obviously born rich (in apartheid South Africa?) but for the poor person trying to build a life, I doubt it.

    Whether he tries or not, money just falls into his lap. His own words in this interview. As advice, this is *beyond* useless.

  18. pinch says:

    Hate to say it; this guy might be a douche.

    • IronEdithKidd says:

      See Kateling’s comment for confirmation.

      White male priveledge rears it’s ugly head, this time sprinkled with officespeaky jargonshit.

  19. Anonymous says:

    “[The] book…describes the pattern of wealth which followed a regular relationship which today we call a “power law” and which corresponds to the pattern that 80% of wealth and income went to 20% of the income earners.

    Actually inequality has gotten so bad in the USA that it’s more like 90% goes to 10% at this point. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.

  20. adamnvillani says:

    This guy really needs to learn the difference between a vague rule of thumb and a scientific law.

  21. Anonymous says:

    Wow. For those who’ve commented with such visceral negativity, talk about missing the point.

    No one can deny that not all of our effort results in equal payoff, not all of our time is spent gaining equal benefit. If we examine the value of our time and our effort we can gain insight on what to focus on.

    How the heck is that not valuable?

  22. altofeux says:

    Not counting the fact that it’s often not possible to know in advance which 20% will give you the 80% results.

  23. Solodini says:

    Thanks to Richard for taking the time to comment. I agree with the few people who have commented positively and especially the person who mentioned these negative people being the 80 to the positive 20 (or less).

    Richard mentioned in his introduction that being rich and spending money isn’t his target. He mentioned that his life is comfortable and his vehicles are old. He doesn’t seem like a tight pocketed, well fortuned scrooge to me, at all.

    I’m certainly not rich but I’ve taken a lot of what he’s said into account previously, albeit via Tim Ferriss (say what you will). In fact, I’m a university graduate with the associated debts and have worked throughout my university career to support myself. In regard to relationships, I’ve been socially generous to most people I’ve encountered and given all equal opportunity to appeal to my sensibilities but those who did not I have not bothered to maintain relationships with. Those who I have maintained relationships with have made my life much more of a joy than it had been before then. I have not been showered with gifts or taken on lavish holidays but have spent evenings in our cheap residences, eating home cooked food and engaging in enjoyable discussion. I’ve found this to be much more enjoyable than the nights out getting drunk as I used to do and as many I know do now.

    The principle is not about being rich but about enjoying your life and what you value. I value education, information, music, food and health. In my honours year at university I applied what I had learned about music and reformatted it to a guitar tuition book which teaches as much as possible, rather than as little as possible. Many will teach a few chords and two scales in a couple of keys each, taking 50 A4 pages to do so. I’ve streamlined what I know to teach people to work out each key of one scale which expands into 6 others directly and 14 further indirectly. From this I have taught them to figure out every chord they could ever need, every rhythm they could encounter and compose beautiful music with it. My main test subject in this has been learning guitar for 7 months and now knows most of what I have learned in the past 10 years and composes music which I would be proud of myself.

    I intend to teach from this method as my career. Charging £25 for an hour lesson, I can teach 6 students each week and earn enough to live comfortably, paying a normal price of rent for Edinburgh. That’s 6 hours of work each week to live comfortably. I intend to grow my portfolio of students past that so I can support my partner while she continues her education. Even so, to double my income I would only need to work 12 hours per week. If we were to have children in future, I could support 2 children as well for only doing 24 hours of work.

    Yes, this isn’t necessarily the typical career but it’s taken what I know, has optimised it and made a sustainable living out of it. Not everyone can be a guitar teacher for a living but I also enjoy cooking and have considered cookery as a career. I undertook an entrepreneurship module at university and for my hypothetical business plan I planned a potato chip company employing an existing company in the midlands to manufacture for me and transport to a central distribution centre which serves all of the UK. VERY conservative estimates had this out of debt within 18 months and making profit comfortable from then on. Factored in was a £12k salary for myself which increased to £30k by end year 3. My lecturer has run various companies, still does and said that the figures I developed were conservative and could easily expect much greater profit and growth than planned. My end goal was not to sell a huge corporation but, as briefed in the assignment, earn a comfortable wage to support a family and a mortgage. With the manufacturing company disciplining and managing their own staff, again I could work very few hours each week and still build a comfortable business.

    80/20 is not idle posturing for the rich. It’s common sense. The figure would probably balance out more if people didn’t waste as much time or rely on others for everything. Plan something, assess it and then post about how unattainable it is. What proof do you have which combats Richard’s?

  24. Anonymous says:

    It is easy to avoid things you don’t want to do when you are wealthy.

  25. Teller says:

    My happiness island was reading his responses as if spoken by Dan Aykroyd’s lockjaw voice in Trading Places.

  26. w000t says:

    I only read about a fifth of this interview, but I think I got more than three-quarters of the worthwhile stuff.

  27. Ipo says:

    Odd, I was entirely sure it was roughly a 72/28 ratio.
    But then, I’m not rich.
    Yet.

  28. Anonymous says:

    The rule is in effect right here in the comments. 80% will btch and moan about hard times and hard luck and 20% will realize that they need to apply it to their own lives in different ways. Being happy is a choice not an event, you make it every second. You can find quite a bit of joy in tackling your life as it is right now, making small focused changes – you will find that the search for little things you can change right now becomes a goal in itself, a game yo u can play with your life as it is to slowly grow the power you wield over yourself and your life, as well as learning how to let life flow without throwing up dam walls so that you may reflect more easily on why you cannot get downstream.

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