Focus on the 20% Because You Can Replace Lost Money But Not Lost Time
Politics / Social Issues Jul 18, 2012 - 06:41 AM GMTBy: Gary_North
If this were a law firm, you would be wise to hire another.
I define puttering as follows: "Unsystematic work that fills time without accomplishing much output." I define frittering as follows: "The refusal to take advantage of opportunities that have been placed in your hand."
I have known some very successful people over the years. Some have been rich. Others have been influential. All of them have had this in common. They have not puttered. They have also not frittered.
PERFECTION VS. PARETO'S LAW
Vilfredo Pareto in 1897 reported on land ownership in several European nations. About 20% of the inhabitants owned 80% of the land. Over the last century, investigators in many fields have noticed a similar distribution. About 20% of the officers in a police force make 80% of the arrests. About 20% of the clients of a company produce about 80% of the profits.
A man I knew who worked for a midwestern bank had as his job the identification of these 20%, and then the development of services to get them committed to the bank. The bank did not want to lose them. Every bank since 1897 should have hired someone to do this. Yet his position was unique. It had not existed before the late 1990s.
PERFECTIONISM VS. PRODUCTION
It turns out that the best way for a businessman to spend his time is the 20% of his hours in a day that produce 80% of his net income. It may not be easy to identify these activities, but for a successful career, a person must do this.
What we find is that even when people do this, they do not have the self-discipline to ruthlessly abandon the 80%. They keep doing these low-return tasks. This may be pure habit. It may be a commitment to the ideal of perfectionism: to be sure that everything gets done right. The person refuses to decentralize and delegate. He cannot bring himself to let go. The result is that the person does not attain his maximum output/income.
The person who steadfastly refuses to delegate and decentralize is violating the principle of the division of labor. This principle says: "You can't do it all." In some cases, it says; "You can't do it at all." A task may not be a one-person task.
The person who is a perfectionist and who insists on doing an entire project is asking to minimize his output. If, by hiring an assistant, he can double his output and reduce quality only (say) 4% (20% of 20%), this will not matter, if the 4% is related to the 80% of the product's functions that people rarely use.
The computer industry learned 25 years ago that users use only about 4% of a program's features. I was a power user of WordPerfect for DOS, but I used at most 4% of the program. The 600-page manual I own remained a closed book to me.
Conclusion: 80% of a software firm's money should be devoted to the 4% of the features that most users actually use. But this is not how software is designed. Programmers want every feature to be 99.9% reliable. This cannot be done. This is why the firms keep producing updates.
A wise designer would do his best to focus on the key 4%. This takes marketing. Then he should let users identify the bugs. The best way to fix bugs is to see which ones get 80% of the complaints.
PUTTERING VS. PARETO'S LAW
Puttering is the same as perfectionism in this sense: the putterer does not prioritize his work. Neither does the perfectionist.
The putterer differs from the perfectionist in this sense: he has no overall conception of what needs to be done. The perfectionist knows every nook and cranny. He tries to do it all equally well. But the results are the same as if he were a putterer. The final product never gets done right.
The putterer works on lots of projects. He does a little here, a little there. He is not focused on the one project that needs to have the key 20% operating at 96% efficiency, and the key 1% operating at 99% efficiency.
He does not have a time schedule. He does not have a schedule of priorities. He works a little on a major project, but then gets sidetracked on a minor project. The idea that some things can safely be delayed does not amaze him. He delays lots of things. But he has no sense of "first things first."
The putterer is busy. He is not lazy. He never stops working. But his output is unreliable. He is never sure how long it will take him to complete the most important projects. The putterer understands what needs to be done overall. He just does not know the order of production. He has no schedule of priorities. He is therefore always playing catch-up.
He knows that details are important. He just does not know which details are important in which order.
A putterer needs a manager. He needs constant intervention from on high. He needs to be given a schedule and then be held to it. Otherwise, he will get off track. A putterer cannot function well in a self-employment environment.
The putterer's great enemy is time. It gets away from him.
FRITTERERING VS. PARETO'S LAW
The fritterer cannot distinguish a unique opportunity from a poor one. He thinks he is an equal opportunity employer. He uses all opportunities the same way: nonchalantly.
He does not see that life brings some opportunities that are uniquely valuable. They will not come again. The fritterer thinks that life is a stream of opportunities. One is as good as another. There is no need to prioritize. There is no need to select one and concentrate on it to the exclusion of all others.
The fritterer has a problem related to puttering. He lacks a sense of priorities.
The fritterer is less driven by the famous Protestant work ethic than the putterer is. The putterer feels a sense of guilt for failing to be busy. The fritterer doesn't. He thinks that he can ignore details, but still he will be successful.
He misses opportunities. We say this: "He let the opportunity slip through his fingers." This is especially true of money. He cannot handle money. More important, he cannot handle time. Both "get away from him."
The putterer keeps working. The fritterer doesn't. The putterer is always active. The fritterer isn't.
The putterer has a labor theory of value. He thinks that he will get by because he never stops working. The fritterer is not equally diligent. His attitude is this: "There's always more where that came from."
Both of them care little about deadlines. The putterer cannot bring himself to meet them. The fritterer does not care to meet them. He has no sense of "now or never."
In this life, entropy rules by default. Things get chaotic unless we actively intervene. It takes capital to reverse this regression to the mean: chaos. The fritterer does not perceive the power of entropy. He needs to pay attention.
The fritterer, unlike the putterer, does not know that details are important. The putterer cannot prioritize them. The fritterer does not recognize their importance. He sees no priorities at all.
It is possible to fritter away time. Television is a great temptation here. The opportunities that time provides are easily squandered. Sometimes, they cannot be recovered.
The friterrer's great enemy is money. It gets away from him. But time is also an enemy. It is easy to fritter away opportunities.
GUESS
My friend Jimmy Napier has a slogan: "When someone puts a million dollars in your hand, close your hand." It is good advice. He has lots of horror stories of people who have had that happen to them, and who have failed to close their hands. I had that happen once. It was a lot more than a million dollars. I closed my hand. If I had held on, I might have made $20 million a year later. That has never bothered me. I knew Jimmy's advice was right. If I had lost the million, that would have bothered me. The opportunity could never come again. Both my wife and I won the FCC's cellular lotteries. We both won 40% of a city.
I spoke with an old friend last week. He is rich. He made his money as an entrepreneur. His son is on the road to becoming rich. The son runs a business that grew by 50% over the last year. It consistently grows at 25%. It is very successful. It is 17 years old.
In 2008, he had a chance to expand the business. His father warned against it. The crisis was upon the economy. In the fall, Lehman Brothers went bust. The son took his father's advice. As it turned out, the expansion would have been profitable. Did the son do the right thing? Yes. He did not let a growing business blow up.
That was not frittering. The opportunity did not slip through his fingers. That was guessing. We do not always guess right. But if we do not putter, and if we do not fritter, guessing is more likely to produce good results than bad results. Without frittering and puttering, a bad result can be overcome.
The essence of entrepreneurship is guessing. Successful entrepreneurship is guessing right. This takes experience. It also takes something that cannot be imitated. It takes the ability to guess right more often than one's competitors. If it could be taught systematically, the rate of return would fall to the rate for equally risky ventures.
Guesswork is basic to life. We cannot know the future perfectly. But if we discipline ourselves to respect priorities, we will not fall into the traps of puttering and frittering.
WHERE DO YOU START?
Which is your problem: puttering or frittering? One or the other will be the heaviest anchor on your success.
If it's puttering, then you must pay close attention to these issues: (1) your long-term goals, (2) your ability to prioritize them, (3) your ability to budget time, (4) your ability to review the output of your efforts in relation to your goals. You know that you must get a lot of things done. You don't know which have chronological priority.
If your problem is frittering, you must pay close attention to these issues: (1) your long-term goals, (2) your ability to prioritize them, (3) your ability to budget money, (4) your ability to review the output of your efforts in relation to your goals. You know that you must get a lot of things done. You don't know which have monetary priority.
Time and money are always in tension. There is a time cost of money and a money cost of time. The faster you want to accomplish something, the more you will have to pay. If you are short of money, you had better be long on time. This is the situation faced by youths. Old people face the reverse.
Some people can balance a checkbook, but they run late. Other people get there on time, but at a high cost. Are you either? Both? More one than another?
Start dealing systematically with the one you would prefer to postpone. Procrastination kills.
If you have problems budgeting time, you need to buy a time-management package. There are lots of them. Any will work. They take real discipline to master. I have never used one. When you write 9 articles a day, you do not need one. Your deadlines serve as the hammers. It does not matter when you write them. You must write them.
As for money management. I have set up a site that can help you: www.DeliveranceFromDebt.com. It would be a good idea to buy Quicken and use it.
CONCLUSION
Time can get away from you. Money can get away from you. You can replace lost money. You cannot replace lost time.
I think puttering is the greater threat. The putterer has time-management problems. They are difficult to overcome. It is possible to fritter away time as well as money. But money forces its attention on us. We have budgets to meet. That's why money management is easier for most people than time management. People forget how little time they have. When it comes to time, there's not more of that. When the account says "insufficient time," the process ends. It's not like "insufficient funds."
Gary North [send him mail ] is the author of Mises on Money . Visit http://www.garynorth.com . He is also the author of a free 20-volume series, An Economic Commentary on the Bible .
© 2012 Copyright Gary North / LewRockwell.com - All Rights Reserved
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