The 80/20 Principle – Richard Koch
Sunday, July 4th, 2010What is this book? A business textbook? A self-help guide? A social manifesto?
In fact it is all three, in that order, and arguably decreasing in effectiveness as it moves from one to the next. It might be mischevious of me to say that it achieves 80 per cent of its effectiveness in 20 per cent of its pages – presumably an argument that neither author Richard Koch nor the book’s most passionate exponents would find it all that easy to contradict – but also not entirely untrue. If Koch had applied his own advice, and concentrated on the most effective section, I suspect I wouldn’t have come away from it feeling nearly as ambivalent and irritated as I did.
But there’s no getting away from the fact that at the core of this manual is an extremely powerful concept, one that has been leapt upon by business and self-improvement evangelists across the globe. For those who haven’t come across it before, The 80/20 Principle is a book evangelising and popularising an notion first suggested by an Italian economist, Vilfredo Pareto, in the early part of the 20th century.
Put very simply, Pareto noticed that 80 per cent of outcomes seemed to come from 20 per cent of causes and that this principle seems to apply in a remarkable number of circumstances, turning on its head our basic hope and assumption that the universe is fair and balanced. Koch, a management consultant and entrepreneur associated with the financial success of an impressive number of household-name brands, spends the first part of his book writing an exhaustive and utterly uncompromising account of how you use this knowledge to move resources around your business. It is simply about identifying and concentrating on the 20 per cent of people, products, services and customers that make you 80 per cent of your profit and dispensing with the rest.
Koch hates bureaucracy, needless complexity and management-heavy organisations and argues that simplicity (as opposed to operating on a small-scale, something quite different) is the key to business profit, in the simple entrepreneurial tradition of concentrating your resources where the opportunities are. And this is not based on one man and his blog-style business, as practised by many of Koch’s loudest contemporary exponents. This is large-scale, get your hands dirty manufacturing business. People looking to turn their lives around in 30 days won’t enjoy this section, although it is arguably the most detailed and effective in the book and pretty much a must-read for the serious business student.
So much for the business chapters, where Koch’s pedigree is unarguable and his expertise very evident. Next we move on to the lifestyle section which is an easier read but less focused and, in my view, somewhat less effective. It discusses the applications of the 80/20 principle to lifestyle and comes up with some absolutely sound but also slightly disturbing conclusions. His most valuable piece of advice here, in my opinion, is the one that states you shouldn’t let an employer control your time but rather be freelance or self-employed. His strategy for personal effectiveness is that, in the face of the world’s current time management fetish, we are all swimming in free time as soon as we stop doing all the things we hate or that are a waste of time to us.
If that includes your job, then quit. If you find you are spending time with people who you find difficult or stressful, then don’t. If your spouse is holding you back from achieving your dearest lifetime ambitions, then divorce them. I found this to be clear-sighted, potentially effective advice but also recognised its extremely uncompromising nature. It takes a brave and individualistic person to quit their job and go it alone, and I speak from the perspective of having done it more than a decade ago, and never having looked back. It takes an even braver and more individualistic person to cut the family and social ties that are not benefiting them. And here we get to the point when the book started to lose me.
The warning sign is the middle section’s increasingly ruthless focus on individualism. In the final section Koch moves from personal effectiveness to the potential benefits of the 80/20 principle to society and this is where the trends starting to become apparent above bare their dark soul to become out-and-out neoliberalism and free-market worship of the most unpalatable sort. I’m no statist advocating wholescale regulation either, but someone who can see both the benefits and the limits of allowing markets to function freely. Among Koch’s statements in this section include the notion that privatisation of schools is obviously the most effective way to run them and the claim that the state as a provider of services is dead (so I’ve imagined the NHS then).
Almost worst of all is the idea that the free market is responsible for a massive increase of the standard of living of a large number of people (true, as far as it goes) with no consciousness of the other half of the equation – hideous rates of social inequality in the US and the UK and hideous environmental damage which the unregulated free market is making worse and more dangerous with every day that passes.
Personally I wish Koch had stuck to business advice and reined back on the neoliberal manifesto. Then I might have come away from this thinking I had read a life-changing book. As it is, I am rather more sceptical – not necessarily a bad thing, since the author advises his readers to question every idea they meet.