The 5/25 and 80/20 rule 0 60

Warren Buffett as we all know him not only thinks about securities all the time but also spends some valuable time making the world a better place and life easier.

His 5/25 rule originates from an anecdote from one of Warren Buffett’s employees. The story goes like this…

Warren Buffett one day approaches his pilot, after realizing that he had worked for him for the past 10 years. Buffett wanted to discuss his pilot’s career goals and wanted to help him achieve them. “The fact that you’re still working for me, tells me I’m not doing my job” said Buffett. To map out the pilot’s goals, he was asked to conduct a simple exercise by Buffett, it would later go on to change the way he viewed his priorities forever…

The first thing in the exercise was to list out 25 things that the pilot wanted to achieve in the foreseeable future. Secondly he had to arrange them in the order of importance (descending) and circle the top 5. During the exercise, he found out that prioritising his goals were undoubtedly more challenging than listing them. Buffett later asks his pilot :

What are you going to do with the remaining 20 items?

The pilot replies with :

Well the top 5 are my primary focus, but the other 20 come in at a close second.

He goes on…

They are still important so I’ll work on those intermittently as I see fit, as I’m getting through my top 5. They are not as urgent but I still plan to give them dedicated effort.

At this point Buffet’s expression changes a little and responds sternly :

No, you’ve got it wrong. Everything you didn’t circle just became your ‘avoid at all cost’ list. No matter what, these things get no attention from you until you’ve succeeded with your top 5.

Avoid at all cost!? His pilot certainly wasn’t expecting that.

Buffett’s 5/25 rule states the importance of selective focus. There’s more competition for our attention than ever. Choices have never been more abundant than any other time in history and it’s unlikely we’ll be constrained any time soon. In fact, our options are likely only going to expand as we advance further. More the people, more the diversification among them, more the desires, therefore resulting in more choices.

It’s the primary reason why most of us will never reach the level of competency needed to reap the rewards of being a superstar like Warren Buffett himself. Each time we pursue a new course of action, we incur an opportunity cost. It takes our time and attention away from the things that are most important to us. Your odds of success improve when you direct your focus into a singular pursuit. You have to double down on a few things and rack up the hours trying to get really good at that. The 5/25 rule is another example of how simplicity makes life better and easier. Warren Buffett doesn’t mean to say that you have to lead a boring life doing the same thing over and over again. Once you have mastered the 5 circled goals, move on to number 6 and beyond but mastering your tasks could take years and needs all the effort and concentration, because we spend time on these only during our free time and we all have other commitments which are out of our control.

If all of us were asked to do the same exercise as his pilot was, most of us would struggle. The result is that we have a list of items that will almost never get completed. This list only weighs on our mind, and fills us with stress, guilt and overwhelm. It’s a result of the ‘any benefit’ mindset. If you observe carefully, you would realize that you put some things on your list of 25 only because you believe you’re going to benefit something from learning or mastering it and not actually because you want to do it. It is that feeling where you believe you can do a lot more things at once than you actually can concentrate on and feel like “If I learnt how to play a guitar, I could participate on stage events and become popular”, when that’s not what you actually want to do. You add those extra goals in that list of 25 only because you feel a dopamine hit.

Pareto’s principle, popularly known as the 80/20 rule tells us that the majority of outcomes are driven by a small number of things that we do. Chances are that anything that falls outside your top 5 will have little impact on your life. Rather than add on, take the time to eliminate.

Time and attention are two of the most finite resources. There will always be more good opportunities than we realistically have time for. We shouldn’t pounce on every one of them, because not all will be right for us. It doesn’t matter how good an opportunity is if all it does is advance goal number 25 for us. If we force ourselves to eliminate options, we would find that only a few things truely matter to us. We would be better served if we ignore distractions and do more of what really matters.

Use the ‘Pomodoro technique’ to shut down all external distractions. The pomodoro technique involves concentrating for a short time span separated by shorter breaks. Break down your work intervals into 25 minutes separated by a 5 minute break and after every 4 sessions, take a longer break. Ideally 10–12 sessions a day could help you master almost anything within 6 months – 1 year.

Another place where most of us fail is during the dip in the transition cycle

When we experience the opportunity to learn something new, we enter into what’s called the ‘Honeymoon phase’. This is where we experience releases of dopamine as we experience new things, we’re hardwired to appreciate and seek out novelty because it makes us feel good. Once the ‘Honeymoon phase’ is over we experience the dip and our progress begins to plateau or diminish and this is when most of us quit. If you can predict the dip is coming when you’re learning something new it’s easier to fight through it because you know the dip exists and it only lasts temporarily.

Vilfredo Pareto, an Italian economist found that 80% of the land in Italy was owned by 20% of the population. This 80/20 distribution became popular for occurring over and over again in many scenarios. For example, about 20% of the world’s population control about 80% of the world’s income. The 80/20 rule by Pareto is the same as Buffett’s 5/25 rule (5 is 20% of 25). You could infact verify it with your own daily life events, you would approximately wear only 20% of the clothes in your wardrobe 80% of the time, if you were to have 5 shoes, you would wear only 1 of them 80% of the time. About 20% of a business’s clients account for 80% of their revenue. This might not always be the case though (but it predominantly is), that being said one can use this to analyze your life and optimize it. For an example, if you have an exam tomorrow but decide to start only the night before. Say you have 10 topics for the exam, pick the 2 topics that would maximize your result, meaning spend time on learning that 20% of your syllabus to earn 80% of the marks. You can use the remaining time, if you have any, to learn the remaining 80% of the syllabus that would fetch you only 20% of the marks, you at least get the important things out of the way and have managed to maximize your result in a minimum time frame.

The Pareto’s principle gave rise to one of my most personal favorite papers to have ever been published. It refers to the phenomenon as ‘The champagne glass effect’.

The paper goes on to explain with deep picturization on how the champagne glass represents the 80/20 rule and how the bowl on top represents the top 20% of the people who have a part of 80% and the rest 80% of the glass, the stem supporting the bowl’s weight with less than 20% of it’s entire weight.

Hope the answer helped you and gave you an insight. Peace 🙂

 

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Reading “can reduce stress”. 0 1909

Reading Reduces Stress

"Reading was proved:

  • 68% better at reducing stress levels than listening to music;
  • 100% more effective than drinking a cup of tea;
  • 300% better than going for a walk and
  • 700% more than playing video games.
  • Reading for as little as 6 minutes is sufficient to reduce stress levels by 60%, slowing heart beat, easing muscle tension and altering the state of mind."
  • — Dr. David Lewis - 'Galaxy Stress Research,' Mindlab International, Sussex University (2009)

I have found love, romance, sadness, melancholy and happiness in between pages of these books. Ask anyone who reads books, novels and non-fiction content. They will tell you that these books help them relax and detoxify their mental state. As an avid reader myself, I find great joy in finding myself in the world of books. The best part is even you can too.

Reading a book is very easy, all you need to do is sit at a place and open the book and start off one word after another and slowly progress to lines and then paragraphs. Reading will slowly become a habit and become a routine part of your life provided you start enjoying them.

The best ways to deal with stress is to start this wonderful and angelic habit of reading books.

1) As you draw your attention from the troubles of the outside world, the window into another world of words open up to infinite possibilities.

Your thoughts that are on overdrive after a hectic day can slowly move away into something far more soothing as your thoughts now switch to the book, the words and the characters are the things on your mind, you lose focus of the things that were meddling with your patience before.

Reading Lowers Incidence of Dementia:
“Our study showed that being engaged in more reading and hobby activities and spending more time each week reading is associated with a lower subsequent risk of incident dementia.”
— Tiffany Hughes, Chung-Chou H. Chang, Joni Vander Bilt & Mary Ganguli, from “Engagement in reading and hobbies and risk of incident dementia”

2) Books can help you create that “ME TIME”

When you have a book in hand, you find time to think about everything that life has to offer. May be some new information or a character or a plot that really touches you. You find yourself thinking, suddenly drawn away from the book and focus on the things that really matter to you. These words can help you focus on things that really matter to you, either directly or indirectly. Reading Deepens our Understanding of Ourselves

3) Let go of reality and catch the wild Imagination express.

It happens at times, that you cannot quite comprehend and understand the situations that life throws at you, you need a break. You can find the fix in grabbing a fiction novel that you find, you can find that recluse in the world of imagination and laugh, cry and feel for the characters. As you hold the book you can feel its pages take you to another world, you can smile 🙂

4) It can help you find yourself

Books can lead you down paths that you never would have dared to go to, down adventures that can thrill you, also to quiet places to mull over your actions and at times find inspiration from people. It can help you find yourself in times when confusion and chaos rule your mind.

The research shows that choice, control, and the implementation of reading as a social activity are key to building a nation of those who love to read versus a nation of those who can read.

Apart from these, you will find patience, a sense of assuredness and a great deal of calmness once you start to make reading as a habit.

Personally, it has given me a window into a world full of possibilities, from a reader into a writer. The reading habit changed me for good.

Written By
Sunil Sathyendra

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