A Famous Value-Related Product Principle, and What It Means for Your Life

I would like to share an interesting principle with you...

This principle was first documented around 100 years ago, it’s spanning not only industries but also seems true even for natural phenomena. It has to do with the distribution patterns, and you may have guessed already what's in question.

Regardless of whether you knew this principle from before or not, I believe it will be interesting. As we will look into what it means for product, and more importantly, for our life.

Pareto Principle (a.k.a. the 80/20 Rule)

Named after Vilfredo Pareto – an Italian polymath (sociologist, economist, civil engineer, and more) – this principle states that around 20% of the input, is responsible for about 80% of the output. Pareto noticed that 80% of the land in Italy was owned by 20% of the population, and a funny thing happened: anecdotally, similar distribution was seen across different contexts.

Some of the examples I came by are:

- The rule of thumb is that 20% biggest clients account for 80% of the company's sales

- 20% of the roads serving 80% of the traffic

- Video rental businesses in 1990s, reporting that 20% of the top titles are responsible for 80% of video rental revenues

- 20% of the population consumes 80% of the healthcare budget

And even the natural phenomena

¹

seem to be following the law.

Of course, this should be taken with a grain of salt, in some cases, it wouldn't turn out true at all, or there may be a 10/90 or 30/70 distribution and similar.

Pareto in Product

When it comes to product management, it's assumed, based on the Pareto principle, that 20% of the features cover the needs of 80% of the users (or that 20% of the product brings 80% of the value). This is also true for bugs – as shared in a memo by former Microsoft CEO, Steve Ballmer: Microsoft has learned that 80 percent of the errors and crashes in Windows and Office are caused by 20 percent of the entire pool of bugs detected.

In all fairness – as mentioned earlier – we shouldn't take this as a literal truth or something written in stone. It should be more of a reminder to focus on value, an antidote against overengineering, and one of the tools in your toolkit to help prioritize. (Best combined with other tools, and taken with a grain of salt.)

Pareto in Life

To me, this principle is a reminder to be more conscious of my time, attention, and energy. To think about what brings the most value, and de-prioritize what doesn't.

We're not machines of course, and personally, I'm someone with a lot of projects and interests, which I pursue and often don't finish, or I overfocus on something which honestly does not bring the highest value or is not of the highest priority. I doom scroll and binge watch. I tend to overdo things, or even worse – don't start them as I feel I will not be able to fully finish them, and emotionally, it's all or nothing and a certain percentage won't cut it.

(Think of: dirty dishes piling up, and me not doing them as I don't feel I can finish the whole pile. And while we're at it, I should also clean the cooktop and throw away the expired food from the fridge. And as I can't do everything, I don't do anything. And just a tiny bit would actually bring a ton of value: maybe it would be easier to pour myself a glass of water if I washed the huge casserole? And not to speak of the increase in motivation and positive loop when you get things done. Each item you cross off (or even better move the card from doing to done) – is a positive and motivating event that can unstuck you or give you a boost.)

On the flip side, prioritizing means saying no to stuff; and saying no is never easy. Personally, I find it difficult to 'give up' on ideas and side-projects and it took me years to learn to not overburden myself, not focus on doing everything, and by doing this: not fail in most of the stuff I was working on at the same time, and end up burnt out on top.

(Limiting your work in progress (a.k.a. WIP) is an important principle from Kanban and Lean, and it really changed my life – but it's a separate story. Please let me know if I should prioritize it and write about it sooner. Simply respond to this email, or leave a comment.)

A tool is (just) a tool...

The Pareto is one interesting, and perspective-changing principle, but at the end of the day, it is just a principle. One of the many good and perspective-changing principles, oftentimes contradicting each other.

Before we open Pandora's box by asking what is value (it will be a long and important discussion, but for later) – I wanted to mention a few other prioritization tools.

This one is for fellow product humans, aspiring product humans, and simply curious humans out there.

As a ground principle, everything revolves around value. And then the main question is how we make the tradeoffs. Even though this may sound banal, if we really boil this down, it's a matter of what you give and what you get:

• complexity or effort versus value;

• risk versus value;

• shortest time highest value first;

• and everything in between

There are methods to quantify this, such as weighted table / weighted scoring, or a super sleek approach developed by teams at Intercom: RICE (looking into Reach, Impact, Confidence, and Effort).

Finally, two tools for decision-making, which are great for life:

• Action Priority Matrix – to make the most of your opportunities

• Covey's Time Management Matrix – to deal with urgency and importance.
  
  

Any principles I’m forgetting? What tools do you use to help navigate products and life?


Milos

1. Check out this cute research on bird sightings titled "Even birds follow Pareto's 80-20 rule": https://rss.onlinelibrary.wiley.com/doi/10.1111/j.1740-9713.2014.00725.x