The most precious thing we have in life is TIME.
We never have enough of it and it’s always running out.
I personally squandered a lot of time in my twenties and thirties doing all sorts of random things. I was just busy being busy.
It wasn’t until I turned 40 that I realized a couple of big things about TIME.
Here’s a simple idea that made my life simpler and created time:
Find the key 20% in anything I do that is key.
Focus and execute well on that key 20%.
Completely ignore the rest.
That key 20% that is responsible for most of the results is also known as Pareto’s law, named after an ancient Italian Economist who discovered it in the late 1800’s. This is also known as Power Law distribution.
This idea is critical for how you live and how you structure your day, because most of us focus on the 80% that only brings us 20% of the results. Things like:
- Attending pointless meetings
- Checking and answering unnecessary emails
- Doing ineffective things very efficiently
The three most important areas to apply Pareto’s Law of 80/20 in your life are:
- Learning
- Time
- Investing
Learning:
In anything you are learning, identify the core ideas, the core themes, the building blocks. Then build your mental models around that.
Check out Elon Musk, talk about the power of first principles here:
Three simple things to shoot for every day.
- When understanding a new investment or business — ask what are the core assumptions in this business or investment succeeding. Focus on those.
- When learning a new subject — ask what are the core books on the subject I’m trying to learn. Read those.
- Who are the key people I can speak to on this investment, business or opportunity. Speak to them.
Time:
It’s easy to find a lot of things to do. There are always more things you could do, read, see, work on, people to talk to. There usually won’t be enough time for you to manage everything you set out to do.
Here are three ways to apply 80 / 20 approach to your time:
- Have an idea for the big one year and five year goals you want to achieve and then turn those goals into a system, you can read more about having systems over goals here.
- Have an idea of the key things you want to achieve each month and week. Have those flushed out before you get to work and schedule it on your calendar. This is a must. Here’s how I schedule my time.
- Do the hardest tasks when you have the most energy and do the easiest tasks when you are tired. I try to focus on just 3–4 big things every day.
Source: Taylor Pearson
Here’s an Atlantic article on how to structure the ideal workday.
Investing:
When it comes to investing, most portfolios have less than 20% of stocks responsible for 80% of the returns. In fact, based on a study I saw recently, stock returns over a decade look massively like power law distribution.
Source: Philosophical Economics
If investing is really based on power law, you need to:
- Cut your mistakes early — 80% of stocks will underperform (remember the Wall St adage: cut your losses early and let your winners run)
- Know your domain well — don’t try to be an expert at everything. Understand your edge and focus on that. Even Buffett talks about his circle of competence below.
- Ignore 80% of things you hear, ignore 80% of news, say “No” to 80% of the ideas people pitch you.
Once you find the 20% of the ideas, actions and people giving you 80% of the results, double down on those. Then keep doing that every single day.
Call to Action:
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Originally published at medium.com