Economic Wisdom to Apply in Your Twenties

Chapter 58

Chapter 7, Section 6 Use 20% of your energy to capture 80% of your wealth

in this world:

20% of people are rich; 80% of people are poor.

20% of people control 80% of the world's wealth; 80% of people control 20% of the world's wealth.

20% of people think that I will be rich if I do what I want; 80% of people think I will do what I want as long as I have money.

20% of people are buying time; 80% of people are selling time.

20% of people do business, and 80% of people do things.

20% of people love investing; 80% of people love shopping.

20% of people have goals; 80% love to think about it.

20% of people take a long-term view; 80% of people care about the immediate.

20% of people look for answers in questions; 80% of people look for questions in answers.

……

Isn't it fun?In fact, it is also very objective.This is the very famous 80/20 rule in economics. The 80/20 rule was discovered and proposed by the Italian economist Pareto at the end of the 19th century and the beginning of the 20th century, which is also known as Pareto's law.Pareto research found that in any set of things, the most important only accounts for a small part of it, about 20%, and the remaining 80%, although it is the majority, is secondary, so it is also called the [-]th law.Pareto also found that this imbalanced pattern repeats and can be predicted in advance.

Later, people gradually discovered that the "February [-] phenomenon" in society is indeed as common as the "golden section".

The 80/20 rule is a law of selectivity.You achieve maximum effectiveness by focusing on the 1/5 you are best at.The most successful professional companies or enterprises only leave their main skills to do it themselves, and outsource all other things.If you are good at marketing, then you don’t manufacture; if you are good at research and development, you not only find others to manufacture products, but also outsource marketing and sales; It is strongest in special commodities with high profit margins, and will not enter the mass market.

The 80/20 rule tells us that your company should be as simple as possible and focus on areas that are several times stronger than your competitors.

Georgia Decor is a multi-million dollar annual turnover carpet supplier.The company used to only sell rugs, but now it also rents out rugs, in pieces that are joined together rather than whole.Georgia Decor realized that 80 percent of the wear on a rug occurs in 20 percent of the places.Usually, when the time comes for the carpet to be replaced, it will still be in good shape for the most part.In the decorating company's rental program, the carpet is replaced as soon as it is inspected for any wear or damage.

This approach also reduces costs for the decorating company's customers.A small 80/20 rule changes a company and can lead to widespread change in an industry.According to the 80/20 rule, if most of your money comes from a small number of activities, you should completely transform your company and focus on increasing that small number of activities.Figure out where you have the greatest potential to reduce costs (maybe 20% of your business as a whole), and put 80% of your efforts there.

80／20法则无处不在、无时不有，它就像人的影子，潜伏在生活的每个角落。地球上大约有80％的资源是被世界上20％的人消耗掉的；在公司的客户中，为公司创造80％收益的客户实际上只占所有客户的20％；而在企业中，20％的员工为企业创造了80％的收益……

The 80/20 rule has been around for a long time, it just went unnoticed.We often only see a company's "net" results, but that's by no means the whole picture.Beneath the surface, positive and negative productive forces pull on each other and add up to produce the effects we see on the surface.Once we identify all the forces under the table, the 80/20 rule is most effective, we can eliminate negative influences, and spend all energy on the most effective productivity.

Wisdom Pieces: The [-]th Rule of Business

1. "Twenty-Eight Management Rules".Enterprises mainly focus on the management of 20% of the backbone force, and then drive 20% of the majority of employees with the minority of 80%, so as to improve the efficiency of the enterprise.

2. "Twenty-Eight Decision-Making Rule".Grasp the most critical issues in the common problems of enterprises to make decisions, so as to achieve the effect of outline.

3. "Twenty-Eight Financing Rule".Managers should invest limited funds in key projects of operation, so as to continuously optimize the investment of funds and improve the efficiency of fund use.

4. "Twenty-Eight Marketing Rules".Operators should seize 20% of key products and key users, penetrate marketing, and affect the whole body.

(End of this chapter)