Laws and Principles Entrepreneurs Live By

Pareto Principle  | Parkinson’s Law  | Law of Averages  |  Law of Association

4 Laws & Principles every Entrepreneur should know and live by:

The Pareto Principle

The Pareto principle is a very popular law …my guess is that you’ve probably come across it or have even heard of it numerous times throughout your life… however it was most likely referred to with a different name.  If you’ve ever heard of the 80-20 rule, or the law of the vital few, or even the principle of factor sparsity….then you’ve been exposed to the Pareto Principle.  Essentially this law states that, for many events, roughly 80% of the effects come from 20% of the causes.  And naturally this applies to a great many things and events especially concerning to the entrepreneur.  For starters….  as an entrepreneur….you’ve probably wondered why the distribution of wealth is the way it is….observing that just about 20% of the population has much of the wealth, while the other 80% doesn’t.  Who knows, maybe this keen observation on your part is the exact reason you are an entrepreneur…. so you can in fact make your way to the top 20%🙂.  This principle is also very relevant for the entrepreneur for purposes of time management…..20% of the things you do will account for 80% of your results while 80% of the things you do will account for 20% of your results.  I know…a bit depressing when you think about it….but this knowledge can be useful for creating and perfecting your plans of action.  In addition, the principle will come into play when trying to understand why some customers buy your goods and services, and why some….let me rephrase that…many, don’t.  So when 80% of the people you approach with your products, services, or opportunities say no….just keep in mind that it’s not you….and most likely not what you’re offering, and that it’s just a bit of the Pareto Principle at play.  Here is a great link to learn more about this principle and building wealth.

Parkinson’s Law

Parkinson’s Law is something all entrepreneurs should be aware of.  Like the last law… you’ve probably experienced this one in the past but just haven’t been introduced to it formally.  So…I’ll do the honors.  Parkinson’s law was first articulated  in an essay of The Economist in 1955 and has been made more or less mainstream by author/blogger/entrepreneur Tim Ferriss.  The law essentially postulates that…  work expands so as to fill the time available for its completion.  So if you have ever had some friends or co-workers who were given an easy task to do with a somewhat large amount of time to complete….and yet they  somehow managed to stay extremely busy, spending an inordinate amount of time on a task that you could have finished in a day….. well then, you’ve been acquainted to Parkinson’s Law.  This is essential knowledge for an entrepreneur….especially those new to being their own boss and in charge of running their businesses efficiently.  The understanding of this law will help the new entrepreneur combat the programming received while they were an employee who wasn’t 100% vested in how long tasks actually took to complete.  Ultimately, if one truly cherishes their time and leisure, and doesn’t want to be a slave to their business….knowing this law is critical.

Law of Averages

This is a great law for us.  It’s the idea that probability will influence all occurrences in the long run, that one will neither win nor lose all of the time.  For example, If it rains every day this week, by the law of averages we’re bound to get a sunny day soon. This colloquial term is a popular interpretation of a statistical principle called Bernoulli’s theorem.  As an entrepreneur or professional, this law becomes important to you when  you decide to start going after the deals, the partnerships, and the sales.  The more you experience the no’s and failures in the pursuit of your ventures….the more likely you are over time, to experience that crucial yes and ultimate success.  A fantastic example I like to refer to, is the baseball player….  he strikes out 7 out of 10 times….and still get’s paid 5 million dollars per year.  The same success awaits the entrepreneur who  understands that with every no…they inch that much closer to their YES…and indeed their SUCCESS!

Law of Association

This law is often looked over for striving entrepreneurs but is crucial in moving towards the achievements you set for yourself.  Basically this is a law which suggests that we become like the average of the five people whom we spend most of our time with.  Meaning….that everything about you will average out to be similar to those five people whom you are currently spending most of your time with.  For instance,  your income will tend to be the average of your five best friends’ incomes.  If you want to raise the quality of your life, hang out with people who have already been there and done that…and who are living the quality life which you seek. If you want to become a better communicator, hang out with great communicators.  If you want to be more positive, hang around with more positive and up beat people. If you want to be a terrific parent, spend lots of time with men and women who have mastered the art of parenting.  If you want to start making at difference….get around those who are out there making some waves of impact.  So in essence… birds of a feather flock together.  But…do you know why birds of a feather flock together? It’s because they’re all going in the same direction. They share a common vision. So if you’re going after a goal, any goal, go and find the people who have already achieved that goal, or who are well along the path to attaining that goal, and then be with them, hang out with them, camp on their doorstep if you have to.🙂.  Joking aside…this is an important law to live by….so get out there and make some connections with those whose lives you want to be living.  And if you find your self in a situation where making critical associations with people is difficult because of your location, or because you just need some time to gain the courage to reach out, remember that the next best thing to associating with great company is reading great books.  It was Rene Descartes after all who once said “The reading off all good books is like conversation with the finest men of the past centuries”.

To Your Success!

“Our acts can be no wiser than our thoughts…our thinking can be no wiser than our understanding.” – George S. Clason

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6 thoughts on “Laws and Principles Entrepreneurs Live By

  1. Donnie says:

    Fantastic post. Plenty of valuable lessons and applications can be drawn from these 4 concepts.

    Do you think Pareto’s principle applies to the application of these ideas? I wonder if 80% of the people familiar with these laws actually put them into practice 20% of the time, and vice versa…..

    Thanks for sharing!!

  2. Hi Donnie… I am glad you enjoyed the post. So to answer your question…. I’d have to say yes. I’d wager that Pareto prinicple even applies to the application of these ideas. Thanks for taking the time to leave a comment. They are always welcomed🙂

  3. Biz Bug says:

    great site. Take a look at mycomeup.com

  4. […] Pareto Principle  | Parkinson's Law  | Law of Averages  |  Law of Association 4 Laws & Principles every Entrepreneur should know and live by: The Pareto Principle The Pareto principle is a very popular law …my guess is that you've probably come across it or have even heard of it numerous times throughout your life… however it was most likely referred to with a different name.  If you've ever heard of the 80-20 rule, or the law of the vita … Read More […]

  5. Scott G says:

    Good post, but I would be very cautious where you apply your Law of Averages.

    This is akin to the Gambler’s Fallacy. You can read a detailed explanation on Wikipedia, but it basically comes down to this: If you flip a fair coin 8 times and it comes up heads all 8 times, the chance of it coming up heads again is still 50%. Gamblers are likely to bet big against another head in this case (“Tails are due!”), but the coin doesn’t have a memory and it doesn’t care what it just did in the past.

    So be careful applying your Law of Averages to independent events.

  6. Aimee says:

    whoah this blog is fantastic i really like reading your articles. Stay up the great work! You know, a lot of people are looking round for this information, you could help them greatly.

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