The Pareto Principle is the observation that most things in life are not distributed evenly. The principle was suggested by Joseph M. Juran. The Principle was named after the Italian economist Vilfredo Pareto, who observed that 80% of wealth in Italy was owned by 20% of the Italian population. After Pareto made his observation and created this formula, many others observed that this principle can also be useful in their own areas of expertise. The Pareto Principle helps us realize that the majority of results come from a minority of inputs. For example, if we apply this to sales, Pareto principle says that 80 percent of sales are made by 20 percent of the salespeople in a company and 20 percent of sales are made by the remaining 80 percent salespeople. This simply tells us that 20 percent of the salespeople make 80 percent of the sales and earn 80 percent of the commissions, while 80 percent of the salespeople make only 20 percent of the sales and share only 20 percent of the commissions. So, if ten salespeople in the company are making $1,000,000 in sales, this means that two of the salespeople are making $800,000 of sales or approximately $400,000 each, while eight of the salespeople are making $200,000 of sales, or $25,000 each. Here’s another example, as it applies to sales, this principle says that 20 percent of your customers contribute 80 percent of revenue and 80 percent of your customers contribute only 20 percent of revenue. We can also say that 80% of your problems and headaches are caused by just 20% of your problems or 20% of your advertising will produce 80% of your campaign’s results or 20% of your effort can produce 80% of results and examples go on. How is this useful you ask?  Pareto principle reminds us to focus on the 20%. So, in solving problems, first, solve those problems that give you 80% of the headaches. In business, if you’re the manager, focus on the 20% of the workers that contribute 80% of the results and focus on rewarding these workers. In investing, if you invested in 10 companies, focus on the two companies that give you 80% of your investment income. Of course, these are just examples, the ratio can be 90/10, 70/30 or 60/40 and this may not be the best strategy in every case. The point is to realize that you can often focus your effort on the 20% that makes a difference, instead of the 80% that doesn’t add much.