The Pareto Principle for Startups

Often, startups are an all-or-nothing proposition. It either works out or it doesn’t. In my view, the Pareto Principle for startups is actually that 20% of the work input is responsible for 99% of the reward.

I would like to draw a distinction between the 20% of work that leads to 99% of the reward and the remaining 80% needed to round out the reward to 100%. Both are needed to achieve 100% — startups are an all-or-nothing proposition after all — but they are very different. And what I am seeing all too frequently is would-be startup founders approaching 20% work using strategies they learned from doing 80% work.

How are they different? Well, let’s look first at 80% work, because everyone understands it.

80% work

  • You seek to achieve good performance by traditional standards. In Agile project management, this might be velocity. In academia, this might be publishing papers in top-tier venues. In startups, you may want to see if you can engineer a chart that looks like a hockey stick.
  • You participate in rituals, like showing your face at the office from 9 a.m. to 5 p.m., and take heed of tricks and tools of the trade.
  • You seek the approval of others. You care a lot about what your peers and bosses think.
  • You stay on task. To do this, you think narrowly and avoid being distracted by inputs that do not directly impact you. Rigid structure helps.
  • The more hours you work, the more you get done.
  • You don’t really need to collaborate. You can work alone. Your whole day could be achieved by a series of Pomodoros.
  • The work itself is not intrinsically rewarding, so you seek accolades such as raises, promotions, or compliments.
  • You follow the herd or an authority figure.
  • There are few decisions to make.

20% work

  • You don’t follow. You seek out the truth, which is usually an ongoing activity, and come to your own conclusions. If someone has a PhD, they should actually be able to explain themselves to you even more clearly than the average person. If they can’t, they are likely not completely right. You extract the truth from what they say anyway.
  • No single decision matters. Good decision-making overall over many decisions matter. The rate of decision-making is high.
  • People will not understand. They will not approve. You will not look good by traditional standards. And you don’t care. You are rewarded by doing the right thing.
  • Staying on task may not be the right thing to do. You need to seize opportunities. You need to seek out inputs and be distracted by them. Some structure helps, but it is easy for it to become too much and become stifling.
  • 20% work is about doing the right things, as opposed to doing a lot of things. Working more hours does not necessarily increase the likelihood that you will succeed. In fact, it may decrease it if it makes your thinking narrow and your judgment cloudy.
  • Collaboration is better. Your actions and ideas need to blend with others on a long path toward greater truth. You need to mute your desire for self-aggrandizement.

You may be skeptical at this point, not of the points that I’ve made but of me. I will be the first to admit that I am not a success in the conventional sense. I will not be making a case for myself in this forum. I hope that at least some of my readers will be able to evaluate my words on their own merits, not based on who said them.

I want you to ask yourself: Why aren’t you skeptical of Y Combinator? They have not produced nearly as many hits as they are acting like they have. I am more inclined to listen to Joel Spolsky than all but a handful of partners at YC.

And consider that that many people are willing to work just as hard as startup founders do: lawyers, doctors, accountants, …. If it were so straightforward to build a successful startup, as Y Combinator would have you believe (e.g. talk to users, build product) [1], then there would be fewer of them and more acquisitions and IPOs. They would gladly shift to another profession that would yield an improved outcome, especially one that allowed them to work on something they may care about more.

20% work is subtle. You wouldn’t know it if you saw it, and no one at this current time is able to tell you what it entails. Even Einstein did not understand how he came up with the theory of relativity. I think he was able to do so because he worked at the patent office and was forced to process a wide range of inputs.

Throughout his life, he remained good at 80% work. He probably got better and better at it. But he became worse and worse at doing 20% work. In fact, he became incapable of it. I will end this presentation with a quote from Wikipedia.

“Although he continued to be lauded for his work, Einstein became increasingly isolated in his research, and his efforts were ultimately unsuccessful. In his pursuit of a unification of the fundamental forces, Einstein ignored some mainstream developments in physics, most notably the strong and weak nuclear forces, which were not well understood until many years after his death.”

[1] You should in fact talk to users and build product. And you should do it like Emmett Shear did. These are necessary but insufficient practices.

Appendix: Related Work

Stephen Hawking’s Productive Laziness