James Clear

Featured

The 1 Percent Rule: Why a Few People Get Most of the Rewards

by James Clear    |     Continuous Improvement, Featured, Habits

Sometime in the late 1800s—nobody is quite sure exactly when—a man named Vilfredo Pareto was fussing about in his garden when he made a small but interesting discovery.

Pareto noticed that a tiny number of pea pods in his garden produced the majority of the peas.

Now, Pareto was a very mathematical fellow. He worked as an economist and one of his lasting legacies was turning economics into a science rooted in hard numbers and facts. Unlike many economists of the time, Pareto's papers and books were filled with equations. And the peas in his garden had set his mathematical brain in motion.

What if this unequal distribution was present in other areas of life as well?

Vilfredo Pareto

The Pareto Principle

At the time, Pareto was studying wealth in various nations. As he was Italian, he began by analyzing the distribution of wealth in Italy. To his surprise, he discovered that approximately 80 percent of the land in Italy was owned by just 20 percent of the people. Similar to the pea pods in his garden, most of the resources were controlled by a minority of the players.

Pareto continued his analysis in other nations and a pattern began to emerge. For instance, after poring through the British income tax records, he noticed that approximately 30 percent of the population in Great Britain earned about 70 percent of the total income. 1

As he continued researching, Pareto found that the numbers were never quite the same, but the trend was remarkably consistent. The majority of rewards always seemed to accrue to a small percentage of people. This idea that a small number of things account for the majority of the results became known as the Pareto Principle or, more commonly, the 80/20 Rule. 2

Inequality, Everywhere

In the decades that followed, Pareto's work practically became gospel for economists. Once he opened the world's eyes to this idea, people started seeing it everywhere. And the 80/20 Rule is more prevalent now than ever before.

For example, through the 2015-2016 season in the National Basketball Association, 20 percent of franchises have won 75.3 percent of the championships. Furthermore, just two franchises—the Boston Celtics and the Los Angeles Lakers—have won nearly half of all the championships in NBA history. Like Pareto's pea pods, a few teams account for the majority of the rewards. 3

The numbers are even more extreme in soccer. While 77 different nations have competed in the World Cup, just three countries—Brazil, Germany, and Italy—have won 13 of the first 20 World Cup tournaments.

Examples of the Pareto Principle exist in everything from real estate to income inequality to tech startups. In the 1950s, three percent of Guatemalans owned 70 percent of the land in Guatemala. In 2013, 8.4 percent of the world population controlled 83.3 percent of the world's wealth. In 2015, one search engine, Google, received 64 percent of search queries. 456

Why does this happen? Why do a few people, teams, and organizations enjoy the bulk of the rewards in life? To answer this question, let's consider an example from nature.

The Power of Accumulative Advantage

The Amazon rainforest is one of the most diverse ecosystems on Earth. Scientists have cataloged approximately 16,000 different tree species in the Amazon. But despite this remarkable level of diversity, researchers have discovered that there are approximately 227 “hyperdominant” tree species that make up nearly half of the rainforest. Just 1.4 percent of tree species account for 50 percent of the trees in the Amazon. 7

But why?

Imagine two plants growing side by side. Each day they will compete for sunlight and soil. If one plant can grow just a little bit faster than the other, then it can stretch taller, catch more sunlight, and soak up more rain. The next day, this additional energy allows the plant to grow even more. This pattern continues until the stronger plant crowds the other out and takes the lion’s share of sunlight, soil, and nutrients.

From this advantageous position, the winning plant has a better ability to spread seeds and reproduce, which gives the species an even bigger footprint in the next generation. This process gets repeated again and again until the plants that are slightly better than the competition dominate the entire forest.

Scientists refer to this effect as “accumulative advantage.” What begins as a small advantage gets bigger over time. One plant only needs a slight edge in the beginning to crowd out the competition and take over the entire forest.

Winner-Take-All Effects

Something similar happens in our lives.

Like plants in the rainforest, humans are often competing for the same resources. Politicians compete for the same votes. Authors compete for the same spot at the top of the best-seller list. Athletes compete for the same gold medal. Companies compete for the same potential client. Television shows compete for the same hour of your attention.

The difference between these options can be razor thin, but the winners enjoy massively outsized rewards.

Imagine two women swimming in the Olympics. One of them might be 1/100th of a second faster than the other, but she gets all of the gold medal. Ten companies might pitch a potential client, but only one of them will win the project. You only need to be a little bit better than the competition to secure all of the reward. Or, perhaps you are applying for a new job. Two hundred candidates might compete for the same role, but being just slightly better than other candidates earns you the entire position.

Situations in which small differences in performance lead to outsized rewards are known as Winner-Take-All Effects.

These situations in which small differences in performance lead to outsized rewards are known as Winner-Take-All Effects. They typically occur in situations that involve relative comparison, where your performance relative to those around you is the determining factor in your success.

Not everything in life is a Winner-Take-All competition, but nearly every area of life is at least partially affected by limited resources. Any decision that involves using a limited resource like time or money will naturally result in a winner-take-all situation.

In situations like these, being just a little bit better than the competition can lead to outsized rewards because the winner takes all. You only win by 1 percent or 1 second or 1 dollar, but you capture 100 percent of the victory. The advantage of being a little bit better is not a little bit more reward, but the entire reward. The winner gets one and the rest get zero.

Winner Take All Effects

Winner-Take-All Leads to Winner-Take-Most

Winner-Take-All Effects in individual competitions can lead to Winner-Take-Most Effects in the larger game of life.

From this advantageous position—with the gold medal in hand or with cash in the bank or from the chair of the Oval Office—the winner begins the process of accumulating advantages that make it easier for them to win the next time around. What began as a small margin is starting to trend toward the 80/20 Rule.

If one road is slightly more convenient than the other, then more people travel down it and more businesses are likely to build alongside it. As more businesses are built, people have additional reasons for using the road and so it gets even more traffic. Soon you end up with a saying like, “20 percent of the roads receive 80 percent of the traffic.”

If one business has a technology that is more innovative than another, then more people will buy their products. As the business makes more money, they can invest in additional technology, pay higher salaries, and hire better people. By the time the competition catches up, there are other reasons for customers to stick with the first business. Soon, one company dominates the industry.

If one author hits the best-seller list, then publishers will be more interested in their next book. When the second book comes out, the publisher will put more resources and marketing power behind it, which makes it easier to hit the best-seller list for a second time. Soon, you begin to understand why a few books sell millions of copies while the majority struggle to sell a few thousand copies.

The margin between good and great is narrower than it seems. What begins as a slight edge over the competition compounds with each additional contest.

The margin between good and great is narrower than it seems. What begins as a slight edge over the competition compounds with each additional contest. Winning one competition improves your odds of winning the next. Each additional cycle further cements the status of those at the top.

Over time, those that are slightly better end up with the majority of the rewards. Those that are slightly worse end up with next to nothing. This idea is sometimes referred to as The Matthew Effect, which references a passage in The Bible that says, “For all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.”

Now, let's come back to the question I posed near the beginning of this article. Why do a few people, teams, and organizations enjoy the bulk of the rewards in life?

The 1 Percent Rule

Small differences in performance can lead to very unequal distributions when repeated over time. This is yet another reason why habits are so important. The people and organizations that can do the right things, more consistently are more likely to maintain a slight edge and accumulate disproportionate rewards over time.

You only need to be slightly better than your competition, but if you are able to maintain a slight edge today and tomorrow and the day after that, then you can repeat the process of winning by just a little bit over and over again. And thanks to Winner-Take-All Effects, each win delivers outsized rewards.

We can call this The 1 Percent Rule. The 1 Percent Rule states that over time the majority of the rewards in a given field will accumulate to the people, teams, and organizations that maintain a 1 percent advantage over the alternatives. You don't need to be twice as good to get twice the results. You just need to be slightly better. 8

The 1 Percent Rule is not merely a reference to the fact that small differences accumulate into significant advantages, but also to the idea that those who are 1 percent better rule their respective fields and industries. Thus, the process of accumulative advantage is the hidden engine that drives the 80/20 Rule.

Footnotes

  1. These numbers are covered in Pareto’s book, Cours d'économie politique.

  2. Pareto published this discovery in 1906 in a book titled, Manual of Political Economy. As I noted here, the 80/20 Rule does not mean the numbers involved must be 80 and 20. It's just a shorthand way of referring to the idea that the majority of the rewards go to a minority of the players.

  3. The Pareto Principle shows up constantly in sports. In the National Football League, the top 19 percent of the franchises have won 57 percent of the Super Bowls. In Major League Baseball, the top 20 percent of the franchises have won 62 percent of World Series championships.

  4. Global Wealth Report by Credit Suisse. October 2013.

  5. U.S. Desktop Search Engine Rankings by comScore. October 2015.

  6. This pattern shows up in negative ways as well. In 2002, Microsoft analyzed their software errors and noticed that “about 20 percent of the bugs cause 80 percent of all errors” and “1 percent of bugs caused half of all errors.” This quote comes from an email sent to enterprise customers by Steve Ballmer on October 2, 2002. The full quote was, “About 20 percent of the bugs causes 80 percent of all errors, and—this is stunning to me—1 percent of bugs caused half of all errors.”

  7. Hyperdominance in the Amazonian Tree Flora. Science: Vol. 342, Issue 6156. October 18, 2013.

  8. In this case, I mean “better” as in more advantageous. Obviously, this includes factors besides skill and hard work. You can also be “better” in the lucky sense. It is better for a plant to be born in fertile soil rather than on a rocky cliff. Similarly, it is better to be born into a culture that values your skills or into a family that can provide for you. In any case, The 1 Percent Rule still holds: those who maintain small advantages, whether due to luck or hard work, gradually accumulate the bulk of the rewards.

The Paradox of Behavior Change

by James Clear    |     Featured, Goal Setting, Habits

The natural tendency of life is to find stability. In biology we refer to this process as equilibrium or homeostasis.

For example, consider your blood pressure. When it dips too low, your heart rate speeds up and nudges your blood pressure back into a healthy range. When it rises too high, your kidneys reduce the amount of fluid in the body by flushing out urine. All the while, your blood vessels help maintain the balance by contracting or expanding as needed.

The human body employs hundreds of feedback loops to keep your blood pressure, body temperature, glucose levels, calcium levels, and many other processes at a stable equilibrium.

In his book, Mastery, martial arts master George Leonard points out that our daily lives also develop their own levels of homeostasis. We fall into patterns for how often we do (or don't) exercise, how often we do (or don't) clean the dishes, how often we do (or don't) call our parents, and everything else in between. Over time, each of us settles into our own version of equilibrium.

Like your body, there are many forces and feedback loops that moderate the particular equilibrium of your habits. Your daily routines are governed by the delicate balance between your environment, your genetic potential, your tracking methods, and many other forces. As time goes on, this equilibrium becomes so normal that it becomes invisible. All of these forces are interacting each day, but we rarely notice how they shape our behaviors.

That is, until we try to make a change.

…

Motivation is Overvalued. Environment Often Matters More.

by James Clear    |     Behavioral Psychology, Featured, Habits

This article is an excerpt from Atomic Habits, my New York Times bestselling book.

It can be tempting to blame failure on a lack of willpower or a scarcity of talent, and to attribute success to hard work, effort, and grit.

To be sure, those things matter. What is interesting, however, is that if you examine how human behavior has been shaped over time, you discover that motivation (and even talent) is often overvalued. In many cases, the environment matters more.

Let me share an example that surprised me when I first learned of it. …

The Akrasia Effect: Why We Don’t Follow Through on What We Set Out to Do and What to Do About It

by James Clear    |     Behavioral Psychology, Featured, Goal Setting, Procrastination

This article is an excerpt from Atomic Habits. 

In the summer of 1830, Victor Hugo was facing an impossible deadline. Twelve months earlier, the French author had promised his publisher a new book. But instead of writing, he spent that year pursuing other projects, entertaining guests, and delaying his work. Frustrated, Hugo’s publisher responded by setting a deadline less than six months away. The book had to be finished by February 1831.

…

This Coach Improved Every Tiny Thing by 1 Percent and Here’s What Happened

by James Clear    |     Continuous Improvement, Featured, Goal Setting, Self-Improvement

This article is an excerpt from Atomic Habits, my New York Times bestselling book.

The fate of British Cycling changed one day in 2003.

The organization, which was the governing body for professional cycling in Great Britain, had recently hired Dave Brailsford as its new performance director. At the time, professional cyclists in Great Britain had endured nearly one hundred years of mediocrity. Since 1908, British riders had won just a single gold medal at the Olympic Games,1 and they had fared even worse in cycling’s biggest race, the Tour de France. In 110 years, no British cyclist had ever won the event. 2

In fact, the performance of British riders had been so underwhelming that one of the top bike manufacturers in Europe refused to sell bikes to the team because they were afraid that it would hurt sales if other professionals saw the Brits using their gear.3

Brailsford had been hired to put British Cycling on a new trajectory. What made him different from previous coaches was his relentless commitment to a strategy that he referred to as “the aggregation of marginal gains,” which was the philosophy of searching for a tiny margin of improvement in everything you do. Brailsford said, “The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improve it by 1 percent, you will get a significant increase when you put them all together.”4

Brailsford and his coaches began by making small adjustments you might expect from a professional cycling team. They redesigned the bike seats to make them more comfortable and rubbed alcohol on the tires for a better grip. They asked riders to wear electrically heated overshorts to maintain ideal muscle temperature while riding and used biofeedback sensors to monitor how each athlete responded to a particular workout. The team tested various fabrics in a wind tunnel and had their outdoor riders switch to indoor racing suits, which proved to be lighter and more aerodynamic. 5

But they didn’t stop there. Brailsford and his team continued to find 1 percent improvements in overlooked and unexpected areas. They tested different types of massage gels to see which one led to the fastest muscle recovery. They hired a surgeon to teach each rider the best way to wash their hands to reduce the chances of catching a cold. They determined the type of pillow and mattress that led to the best night’s sleep for each rider. They even painted the inside of the team truck white, which helped them spot little bits of dust that would normally slip by unnoticed but could degrade the performance of the finely tuned bikes. 6

As these and hundreds of other small improvements accumulated, the results came faster than anyone could have imagined.

Just five years after Brailsford took over, the British Cycling team dominated the road and track cycling events at the 2008 Olympic Games in Beijing, where they won an astounding 60 percent of the gold medals available. 7 Four years later, when the Olympic Games came to London, the Brits raised the bar as they set nine Olympic records and seven world records.8

That same year, Bradley Wiggins became the first British cyclist to win the Tour de France. 9The next year, his teammate Chris Froome won the race, and he would go on to win again in 2015, 2016, and 2017, giving the British team five Tour de France victories in six years.10

During the ten-year span from 2007 to 2017, British cyclists won 178 world championships and 66 Olympic or Paralympic gold medals and captured 5 Tour de France victories in what is widely regarded as the most successful run in cycling history.11

How does this happen? How does a team of previously ordinary athletes transform into world champions with tiny changes that, at first glance, would seem to make a modest difference at best? Why do small improvements accumulate into such remarkable results, and how can you replicate this approach in your own life?

…

Footnotes

  1. Matt Slater, “How GB Cycling Went from Tragic to Magic,” BBC Sport.

  2. Tom Fordyce, “Tour de France 2017: Is Chris Froome Britain’s Least Loved Great Sportsman?” BBC Sport.

  3. Richard Moore, Mastermind: How Dave Brailsford Reinvented the Wheel (BackPage Press, 2013).

  4. Matt Slater, “Olympics Cycling: Marginal Gains Underpin Team GB dominance,” BBC.

  5. Tim Harford, “Marginal Gains Matter but Gamechangers Transform,” Tim Harford.

  6. Eben Harrell, “How 1% Performance Improvements Led to Olympic Gold,” Harvard Business Review; Kevin Clark, “How a Cycling Team Turned the Falcons Into NFC Champions,” The Ringer.

  7. Technically, the British riders won 57 percent of the road and track cycling medals at the 2008 Olympics. Fourteen gold medals were available in road and track cycling events. The Brits won eight of them.

  8. “World and Olympic Records Set at the 2012 Summer Olympics,” Wikipedia.

  9. Andrew Longmore, “Bradley Wiggins,” Encyclopaedia Britannica.

  10. Karen Sparks, “Chris Froome,” Encyclopaedia Britannica.

  11. “Medals won by the Great Britain Cycling Team at world championships, Olympic Games and Paralympic Games since 2000,” British Cycling.

Forget About Setting Goals. Focus on This Instead.

by James Clear    |     Continuous Improvement, Featured, Goal Setting, Habits

This article is an excerpt from Atomic Habits, my New York Times bestselling book.

Prevailing wisdom claims that the best way to achieve what we want in life—getting into better shape, building a successful business, relaxing more and worrying less, spending more time with friends and family—is to set specific, actionable goals.

For many years, this was how I approached my habits too. Each one was a goal to be reached. I set goals for the grades I wanted to get in school, for the weights I wanted to lift in the gym, for the profits I wanted to earn in business. I succeeded at a few, but I failed at a lot of them. Eventually, I began to realize that my results had very little to do with the goals I set and nearly everything to do with the systems I followed.

…