Definition: We place a higher significance on things we own than on identical items that we don't.
Insight: We tend to cling on to possessions, often hoping that they will be valuable to us in the future. We do this because of Loss Aversion and the Endowment Effect - we fear loss and value our own possessions more highly that identical items that we don't own.
Reference: Vilfredo Federico Damasa Pareto, Italian economist, studied the distribution of wealth in Italy in 1800s and discovered that 20 percent of the population owned 80 percent of the land. In his garden he discovered that 20 percent of pea plants contained 80 percent of the peas.
Example: 20 percent of business customers contribute 80 percent of revenue.
Example: 20 percent of products and services contribute 80 percent of profits.
Insight: By focusing energy on top customers you can cut expenses on serving less profitable customers, and free up time and energy to bringing in more profit with stronger customers.
Principle: Focus on serving top 20 percent of customers.
Insight: The time you give yourself to complete a project is how long it will take to complete.
Insight: As income increases we spend every extra penny we earn.
Reference: Cyril Northcote Parkinson: Available resources (time & money) expand to fill the space made available for them.
Principle: Live within your means - do not expand lifestyle in response to income increases.
