The gist of it:

Pareto's Principle, also known as the 80/20 rule, is a concept that approximately 80% of the effects or outcomes result from 20% of the causes or inputs.

In other words, a small portion of the factors or efforts often contributes to the majority of the results.

How to use it:

Pareto’s principle can be used both in business as well as everyday life.

Learn to quickly identify the 20% of factors or inputs that will generate 80% of the results. This allows for more efficient resource allocation and decision making.

For example:

What do you spend 20% of your time doing that gives you 80% of your happiness?
-> Focus on these activities, do more of them.

What are the 20% of relationships that you have that account for 80% of your happiness?
-> Focus on these relationships to maximise your happiness.

What’s the 20% of food you eat 80% of the time?
-> Identifying the 20% of the food you eat 80% of the time gived you a clear picture of your diet. To eat healthier, just switch the 20% of food you eat to healthy variants.

What are the tasks you spend 80% of your time doing at work that bring in 20% results
(e.g. Writing long email responses, taking more time than necessary on a simple presentation)
-> Work expands to fill the time allotted. We should avoid being overly perfect on low value tasks and instead prioritise the few important tasks that account for 80% returns.

Which 20% of your customers contribute to 80% of revenue
-> Focus on deepening your relationship with these customers

Think about the changes in your personal and work life you can do today based on the 80/20 rule.

Deep Dive

In the early 1900s, Italian economist Vilfredo Pareto noticed that every year, 20% of the pea plants in his garden produced approximately 80% of the peas. He later expanded this principle to macroeconomics by showing that 80% of the wealth in Italy was owned by 20% of the population.

In the 1940s, Management consultant Joseph M. Juran further applied the 80-20 rule to quality control for business production. He demonstrated that 80% of product defects were caused by 20% of the problems in production methods. By focusing on and reducing the 20% of production problems, a business could increase the overall quality of its products. Juran referred to this phenomenon as "the vital few and the trivial many."

Pareto’s principle (or the 80-20 rule) states that 80% of the output of results will come from 20% of the input or action.

At its core, Pareto’s principle is about identifying how to best use resources and assets efficiently to create maximum value.

In a business context, this means 80% of your company’s profits come from 20% of your sales.  So, it would help if you focus your energy on those clients who make up the 20% of your highest sales.

For a student, this could mean trying to identify which parts of a textbook will create the most benefit for an upcoming exam and focus on those first.

For a working professional, it would mean identifying how to get 80% of the days work done in 20% of the time.

The Pareto Principle helps you realize that the majority of results come from a minority of inputs and helps you focus on allocating time and resources where they can have maximum inpact.

20% of workers contribute 80% of results
-> Focus on rewarding these employees.

20% of bugs contribute 80% of crashes
-> Focus on fixing these bugs first.

20% of your marketing messages account for 80% of your campaign results.
-> Focus on optimising those messages to drive conversions.

On the flip side, it also highlights the cost of perfection - You would need 80% effort to close the 20% gap to get something perfect.

In economics terms, there is diminishing marginal benefit; Each additional hour of effort spent on something is adding less to the final result. By the end, you are spending lots of time on the minor details.

Sources:
The 80/20 Principle and How It Can Change Your Life
The 80-20 Rule (aka Pareto Principle): What It Is, How It Works
Understanding the Pareto Principle (The 80/20 Rule)