FORMULA FOR SUCCESS IN LIFE & MARKET

In the late Seventies the Income Tax Department introduced the concept of *ABC ANALYSIS* as the research showed that miniscule % of assessees paid more than 80% of the Tax. Consequently,  the methodology of scrutiny assessments was introduced.

*This was in line with the principle of 80/20 discovered by  Wilfredo Pareto, an Italian  economist, in the year 1897.* This is now referred to as *Pareto's Rule as per which 80% of the output results from 20% of the input*,  80% of the consequences flow from 20% of causes and 80% of results come from 20% of effort. Joseph Juran referred to this 20% as the *VITAL FEW* and the 80% as *TRIVIAL MANY*

Sir Isaac Pitman, who invented shorthand, discovered that just 700 common words make up two thirds of our conversation. A student covers 80% of his syllabus in 20% of his study hours.

About 20% of the customers contribute to 80% of growth, profitability and satisfaction. 20% of products and services account for 80% of the turnover. 20% of employees generate 80% of productivity.  The opinion of 20% define the society.  The output of 20% of the population defines the economy of a country.

If you have 24 sales people,  4 will be great, 6 will be mediocre and the balance 10 will simply be hanging around.  The sales managers make a mistake of working with the under producers and non performers trying to get them to be more productive while that of performers go unattended and are taken for granted. So focus on the strong and make them stronger. *80/20 thinking is the secret of achieving more with less.*

Strive for excellence in a few things rather than good enough performance in many.There is a tragic amount of waste everywhere.  Almost four fifth of everything that is happening in your life is yielding very little in return.  Too much focus is on 80% which yields only 20%. Revisit  your thinking. Revamp your Outlook. 20% of your time actually defines what you are and what you will be in life. Focus on the 20% and 80% of everything in your life will be taken care of.

NOW THINK IN TERMS OF MARKET.

80-20 RULE Applies over here too. 

You only need 20% of Good winners to improve your bottom line.  Not all of portfolio will perform,  similarly it's said... Even if 80% times your stop-loss are getting hit it's OK as when the 20% times you had not kept,  that's are the one which have given biggest losses. 

Think what's your 80/20..

The best piece of financial advice was given to me by my professor of Economics.

Situation 1:

It is late night and you are walking home from office after a long and tiring day.

You are thirsty but your water bottle is empty. Your house is still far and you know that if you don’t drink water soon, you will not be able to walk.

Suddenly, you see an open shop in the distance. A convenience store!

You approach the owner and ask for a bottle of water.

He hands over a bottle of water to you

You are delighted to hold the bottle in your hand and a sense of happiness surrounds you.

You check the bottle for the MRP indication. It is Rs.10, you remove the cash and hand it over to the owner.

The owner looks at you and says “The price will be Rs. 20”

You look at him in disbelief. You know your legal rights and that the owner is unethical and wrong. There is no way out at the moment, and you eventually pay him Rs.20.

Situation 2:

It is again late night and you are walking home after a tiring day. You feel thirsty but you remember you have ample water with you.

So you remove your water bottle, quench your thirst and continue your journey home.

On the way, as you pass by a convenience store, the owner approaches you and says, “Today, we have an irresistible offer and you just cannot miss it. A water bottle of MRP Rs.10 is available at Re.1 only!!! Hurry up, offer expires midnight!”

You look at him, smile and walk away.

So what do we learn?

The principle is simple;

If there is a genuine need, it is okay to pay even Rs.20 for a thing costing Rs.10.

but

if there is no need, it is not okay to pay even Re.1 for a thing costing Rs.10, no matter how good the offer seems!

This is such a basic principle that we always tend to ignore it.

So before you proceed to pounce on that next great online offer before it expires, ask yourself - “Do I really need this?”

This always helps me keep things in perspective while purchasing anything and is undoubtedly the most valuable financial advice that I have ever received.

And I would like to end by quoting Tyler Durden -

*"We buy things we don't need, with money we don't have, to impress people we don't like"*