What are /biz/'s thoughts on the Pareto Principle?

>>1569139
It's true for certain things, but even then, the statement is general enough to try and force itself into very specific things not dislike horoscopes.

>>1569139

True most of the time. The thing is the only way you can rise above the average crowd is if you go the additional 20%.
Of course some dumb workes and mechanics can build a car but if you want a brand quality car you gotta do the extra work

>>1569139
I buy a business that makes $10k per month and requires 100 hours per month of work.

client group 1 takes 80 hours of work and pays $2k.

client group 2 takes 20 hours of work and pays $8k.

do I continue to work 100 hours per week to make $10k or do I dump the $2k that takes 80% of my time and go after more of the most lucrative clients?

Given limited time for work and unlimited clients from each group, why would I do the lower paying jobs?

I'm much better off dumping the lower paying work and going after more of the higher paying stuff. In fact you've got a financial duty to not work for the clients that pay the least.

>>1569167
Counterpoint:

Instead of only having 2 companies, make it 2 thousand companies. You cut out 80% the work and 20% of the profit by removing the first thousand. Now you look at the second thousand, and the pattern emerges again.

Well.. why not axe the next 500 too and be hyper efficient? 250, 125, etc. Where do you stop?

For what it's worth I'm not saying I agree with this little thought experiment entirely, but the point is that the 80/20 rule crops up a lot in weird places. Opportunity costs saved in one area, frequently cost you in another. It's very often the case that the most profit is obtained with inefficient utilization of resources.

Particularly in anything with high static costs. If you need a specific piece of equipment, or a certain amount of manpower for specific highly profitable ventures, it's very often beneficial to keep them around and operating, even if they are 'losing' money because it's better to have them when you do need them. This shows up in everything from manufacturing, and employment, to the size of hotels.

Most hotels spend a huge portion of the year mostly empty, but you wouldn't argue in favor of downsizing a hotel to more efficiently utilize the space unless it actually lead to higher profits would you? If you are in an industry where you can aggressively get more high paying clients, but are constrained by manpower or something like that, then yes, getting rid of low profit clients makes sense. Until you hit those constraints, profit is profit.

>>1569201
it's not a thought experiment, I bought that business and dumped the clients that took 80% of my personal time and paid 20% of my personal salary.

not to say those clients are worthless, just saying assuming limited time and unlimited clients nobody goes after the cheap ones.

of course in reality clients aren't unlimited and time isn't necessarily limited.

hotels and retail establishments don't usually make their money off of selling to low-end clients. They're usually a real estate play that only needs to make enough to pay the mortgage. The actual money is made off owning the property and the name.

nothing wrong with exploiting cheap markets, it just takes a lot longer to pay off is all.

>>1569223
Let me give you an example from my work. I do real estate. My limitation is almost always capital. Because I'm limited by money, it's worth putting in extra time to pick and choose the ideal options. If I had a looser money supply, I'd be more time limited, so I'd make sloppier decisions, or have to hire more people to keep my standards.

80/20 values aren't exactly fixed, but there is definitely a tradeoff in most markets that aren't perfectly homogenized. It's a number that crops up because of the tradeoffs between opportunity costs.

>>1569139

live by potato principle. do not trust people from cultures who eat the potato.

>>1569233
I work in contracting where 80/20 values are prevalent.

there's the example I mentioned, the 80% of clients that will pay you the least amount of money while wasting most of your time.

on individual contracts you'll find that about 20% of the contracted work is actually worth about 80% of the contracted pay. This is why a lot of contractors flat out don't do 80% of the job they're hired for.

conversely even on the best paying jobs most of your time is spent on the lowest paying work.

20% of your employees do 80% of your work.

80% of the work any employee does takes 20% of their day.

80% of your lawsuits and complaints will come from 20% of your clients.

80% of your recommendations will come from 20% of your clients.

the rule is an approximation, but it's a fairly accurate one. There are valuable clients and worthless ones. There are valuable employees and worthless ones. There is valuable work time and worthless time.

how a person manages that is their own business, but I don't waste time on people that don't pay.

I wish it cost $1 to make $4. That is an amazing rate of return. Big organizations are lucky to make 8%.

>80% of /biz is shitposts or cryptoshills

>20% is decent conversation.

>>1569252
>Big organizations are lucky to make 8%.
>Big organizations

small businesses make much larger percentages.

perhaps we could even say that 80% of businesses make 20% of sales but 20% of businesses make 80% of profits above 10%?

>>1569246
>how a person manages that is their own business, but I don't waste time on people that don't pay.

Because you have a limit on time and an abundant supply of clients that will pay, or because the opportunity cost of losing large chunks of your free time isn't personally worth the margins to you?

>>1569276
both.

I took my $8k per month and turned it into $80k.

I took my 100 hours/month of work and turned it into 6.

money is nice but it's no good without the time to enjoy it. Which is more valuable, money or time? Strike a balance. You should have enough money and enough time.

>>1569252
Big organizations have higher costs.

the pareto principal is a meme

>>1569244
So you'd trust North Koreans then m8?

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62KB, 500x375px

>>1569139
it's logic put in a complicated sheme

ofcourse you'll get better results if you put more effort into work. it's about REAL effort, REAL work.

for example, a person who is about to trade stocks out of the blue vs a person who has spent time learning about it.

but it's a flawed theory, it's a joke, there is no law about percentage equals percentage it's just to visualise the consept