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MEO CLASS 1 · ORAL QUESTION 3

Explain Pareto principle.

Answer

The Pareto Principle, also known as the 80/20 rule, states that roughly 80% of the effects come from 20% of the causes. It's a principle commonly observed in various fields, suggesting that a minority of inputs often leads to the majority of results. 

It's named after the Italian economist Vilfredo Pareto, who first observed this phenomenon in his analysis of wealth distribution.

Key Takeaways for Optimization

  1. Focus on Lever Points: Identify and prioritize the high-impact "vital few" inputs before spending energy on the "trivial many."

  2. Resource Allocation: Shift effort away from low-yield tasks (e.g., spending hours perfecting minor aesthetic details) toward high-yield actions.

  3. Common Misconception: The numbers do not need to add up to 100% because inputs and outputs measure different things (e.g., 20% of effort yielding 80% of results).