The Pareto Principle and the Entrepreneurial Journey
Turning Obstacles into Opportunities
Entrepreneurship is as much about action as it is about perspective. A critical aspect of this perspective is understanding the Pareto Principle, also known as the 80/20 rule.
This principle reminds us that not all actions in business are created equal — some will yield tremendous results, while others will have little to no effect. It’s a concept derived from the broader understanding of Power Laws, which suggests that there are areas where we can apply leverage to maximize our impact.
Power Laws are how venture capitalists think about their portfolios. Out of ten investments, one will have outsize results that carry all the other failures and zombies.
The challenging part is that we can’t predict with certainty which actions will fall into the 20% that produce 80% of our results. Like John Wannamaker said, “Half the money I spend on advertising is wasted; The trouble is I don’t know which half.”
This unpredictability requires a willingness to engage in a variety of endeavors, embracing both successes and failures. Throw a bunch of mud on the wall and see what sticks.
IBM’s Watson Sr. once said, “If you want to increase your success rate, increase your failure rate.”…
