Money and Debt, Understanding the Cycle

In this "New World Order" we have seen many things come to pass. Increasing debt and decreasing employment has put most the World Economy in a tailspin and from Tokyo to Dubai defaulting or bad loans have most governments scrambling to recover before possible financial collapse. Most of us have been unknowing (and unwilling) participants in this centuries old "juggling act"....time to educate yourself and opt-out.

The 80-20 Rule...

The 80-20 Rule-Pareto's Principle

In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. In the late 1940s, Dr. Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto's Principle. While it may be misnamed, Pareto's Principle or Pareto's Law as it is sometimes called, can be a very effective tool to help you manage effectively.

Where It Came From

After Pareto made his observation and created his formula, many others observed similar phenomena in their own areas of expertise. Quality Management pioneer, Dr. Joseph Juran, working in the US in the 1930s and 40s recognized a universal principle he called the "vital few and trivial many" and reduced it to writing. In an early work, a lack of precision on Juran's part made it appear that he was applying Pareto's observations about economics to a broader body of work. The name Pareto's Principle stuck, probably because it sounded better than Juran's Principle.

As a result, Dr. Juran's observation of the "vital few and trivial many", the principle that 20 percent of something always are responsible for 80 percent of the results, became known as Pareto's Principle or the 80/20 Rule.

What It Means

The 80/20 Rule means that in anything a few (20 percent) are vital and many(80 percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80 percent of the wealth. In Juran's initial work he identified 20 percent of the defects causing 80 percent of the problems. Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world.

You know 20 percent of your stock takes up 80 percent of your warehouse space and that 80 percent of your stock comes from 20 percent of your suppliers. Also 80 percent of your sales will come from 20 percent of your sales staff. 20 percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your production. It works both ways.

How It Can Help You

The value of the Pareto Principle for a manager is that it reminds you to focus on the 20 percent that matters. Of the things you do during your day, only 20 percent really matter. Those 20 percent produce 80 percent of your results. Identify and focus on those things. When the fire drills of the day begin to sap your time, remind yourself of the 20 percent you need to focus on. If something in the schedule has to slip, if something isn't going to get done, make sure it's not part of that 20 percent.

There is a management theory floating around at the moment that proposes to interpret Pareto's Principle in such a way as to produce what is called Superstar Management. The theory's supporters claim that since 20 percent of your people produce 80 percent of your results you should focus your limited time on managing only that 20 percent, the superstars. The theory is flawed, because it overlooks the fact that 80 percent of your time should be spent doing what is really important. Helping the good become better is a better use of your time than helping the great become terrific. Apply the Pareto Principle to all you do, but use it wisely.

Manage This Issue

How can the Pareto Principle help me in life and business?

- Have a product range? Have a look at how much of your profit comes from each item. Put your effort into the 20% that give you 80% of your sales - your winners.

- Selling products or services? Most likely, 80% of your sales come from 20% of your customers- the ones who make the big purchases and are repeat-buyers. Cherish that 20%.

- Have a sales force? Have a look at how much of your profit comes from each person. Make sure you reward and retain the 20% that are your winners.

- Have an affiliate program? Find the top 5-20% who give you 80% of your income, and make sure you support, encourage and reward your winners.

- Do advertising? Have a look at where the sales come from. Then identify the few ads that really pull, and the few places where you run them that really produce. Then refine your winning ads, and run them in those few places that give you the best results.

- Check your web traffic logs! Which keywords are bringing you the most traffic? Which search engines? Which websites? You'll find that a small number of keywords, search engines and websites give you the lion's share of your traffic. Nurture them, and build on those strengths!

These are only few examples of the use you can make of the Pareto Principle.

Pareto's Principle, the 80/20 Rule, should serve as a daily reminder to focus 80 percent of your time and energy on the 20 percent of you work that is really important. Don't just "work smart", work smart on the right things. F.J.Reh

Ownership starts from within....

Welcome, this is the first of many "conversations" I will give on developing and maintaining the Entrepreneur/Employer/Business owner Mind. The only requirements I have to ensure your success is:
Open-Mindedness (a closed mind cannot develop)
Motivation (potential is wonderful, but without action..the word becomes stagnation)
Consistency (you must till the soil, plant the seed, and tend the crops...to reap the harvest.. in other words success is not a one-step process)
Intelligence (don't be intimidated, I didn't say degreed/You have to know your product, client, market, field, self, resources, etc. to last in this World Economy)

I will also offer this disclaimer,
I will not promise, give, reference, or show you anything that I haven't read, experienced, seen in action, or has not worked for myself and/or people I personally know.
The purpose of this blog is actually just to change a paradigm/ bridge a gap between the job, employee, worker mindset to the business owner, employer, boss mindset and this is a tool to begin and hopefully maintain that process.

Is there anything wrong with the employee/worker mentality?
Absolutely not, if you are financially comfortable, love what you do, and exactly where you want to be in life, heading exactly where you want to go. This blog is not intended for you and I respect the fact that all the pieces of this puzzle called "Life" was placed exactly where they needed to be for you.

Now, for the rest of us.
Most of us at this very moment are fortunate in many ways in our lives, but there still are the things causing:

• stress
• anxiety
• relationship issues
• parenting problems
• financial issues

Like any other "illness" we have to discuss the symptoms, to properly diagnose what is wrong with us individually, to properly cure ourselves of our "afflictions"....My Dad used to say "It ain't easy." When I was going through some challenge in life and I figured out a formula (from my experiences) for Life as I saw it. Life is all about OPTIONS, the more you have the more likely you dreams, ideas, needs, wants, will become a reality. This, my friends, is what this blog is really all about, expanding your options....


Open-Mindedness (....eliminating fear)

I will begin this topic quoting Robert Kiyosaki's book "Rich Dad, Poor Dad"....."If you want to learn to work for money, then stay in school. That is a great place to learn to do that. But if you want to learn how to have money work for you, then I will teach you that. But only if you want to learn."
"Wouldn't everyone want to learn that" I asked.
"No," said rich dad. "Simply because it's easier to learn to work for money, especially if fear is your primary emotion when the subject of money is discussed."

This sums up most of Capitalist America, "if fear is your primary emotion when the subject of money is discussed." Changing this thinking is the first step to where we diagnose the root of most of our primary ailments. Fear is quite a strong illness when it comes to our financial health..Much like the medical profession big $$$ is made off of our fear or lack of knowledge to cure ourselves. In terms of finance we are raised, taught, and guided directly into debt like it's a good or normal thing..Credit is not normal, it's exploitive, in history it was called "indentured servitude". If you think it's normal. How does it feel to owe one neighbor? 4 neighbors? 20 neighbors? To get products for which you do not presently have the $$$ for....when that becomes "normal" what becomes of the mentality of the people? Are you the debtor or creditor on your job? In your marriage/friendships? Can everything be broken down into owing and what's owed to you? Do you see just from this brief example how we are boxed into stressful situations in Life, where the "fear" comes from.

Now, in contrast....to have the $$$ to pay for exactly what you receive without a balance, food, clothing, shelter basic needs all paid in full, let's not forget...mortgage, school tuition/loans, vehicle(s), comforts (HDTV, Vacations, Dream car) in a society that pays in full for all of these items. Do you see the contrast in even imagining the reduced level of stress, tension, anxiety? See people the formulas are simple enough, it's the road out of the so-called, "Abyss" of debt that we seemed trapped in.


.....to be continued