How do I Become Rich: The Magic of the 80/20 Rule

Article by Markus Michaelsen
























It’s easy to say that rich people just had a lot of luck, or that they are genetically predisposed to being wealthy. Sure!

The truth is, people who made something out of themselves have developed a logical and intuitive understanding of certain how to get rich (wie werde ich reich) principles. The understanding of those principles is what allows these folks to move forward – in kind of a blind trust that they will reach their goal eventually – where the vast majority of people would give up. It’s not easy to get rich. But nonetheless: The principles that govern success and wealth are relatively easy to understand – and to apply.

One of the most important principles is the so called 80/20 rule (also called the „Pareto-principle”). It states that 80 percent of success (e.g. income in form of money), come from 20 percent of the actions which one takes to gain that success. In entrepreneurship and business they estimate that about eighty percent of the profits come from just twenty percent of the sum that was invested in the first place.

People who work hard on their success and who eventually become successful are especially good at applying that rule properly. With the Pareto law you can eliminate every unnecessary action in a step-by-step process. That leads to an enormous time and efficiency optimization. That’s what explains the phenomenon that rich people oftentimes seem to actually work less than people who work in a „normal” job as an employee.

Alright, but how exactly can we apply the Pareto principle to our how to get rich (wie werde ich reich) idea?

One of the most used strategies is the weekly 80/20 analysis. Doing that, it’s critically important that at the end of every given week you have access to certain data that you personally tracked:

1. A detailed overview of the weekly (and daily) work and the time that it took to do it (potential cause)

2. An overview of the results in that time frame, like profits and new costumers (potential effect)

3. A cause/effect diagram which helps to visually connect point 1. and point 2.

When you have all these data and your diagram you can start to analyze how to optimize certain processes at work. You can eliminate and optimize for best results.

Example of an „elimination”: Over the week you checked your e-mails about three to four times a day. This activity took about one hour per day of your work time. If you can’t contribute a concrete positive effect to this habit (like profit or getting a new costumer), than you have to reduce your e-mail checking activity to a more responsible level.

Example of an „optimization”: At the beginning of the week you took some time off to have some „non-profitable” costumer talks. At the end of the week you notice an increase in sales to a few of these costumers. Even though you only took a bit of your time off to talk to them, you could gain a noticable amount of profit from it. In that sense you could decide to invest more time in costumer relations, because it seems to be a much better use of your time, than to check e-mails every so often.

The 80/20 principle is especially important to the how to get rich (wie werde ich reich) question, because it focuses on the optimization of that which leads to riches and the elimination of that which doesn’t.

If you want to find out more about this topic check out http://wiewerdeichreich.org/ and the blog.

About the Author

M. Michaelsen is a freelancing author for different online magazines and websites. His main interest lies in social dynamics in entrepreneurship and the general field of success.












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