Structuring
Pareto principle (80/20)
A small share of causes often drives a large share of results.
Last reviewedWhat does Pareto principle (80/20) mean?
It is a rule of thumb, not a law, and the split is rarely exactly 80/20. Use it to decide where to look first, then check the real numbers.
Example
The Pareto principle is the observation that a small share of causes often accounts for a large share of the effect, for example a few customers bringing most of the profit.
Where does it come up in case interview prep?
Related terms
- HypothesisYour best early guess at the answer, which you then test.
- MECEBuckets that do not overlap and together cover everything.
- Issue treeA branching diagram that breaks a problem into smaller parts.
- Driver treeAn issue tree built from the numbers that drive an outcome.
- Sensitivity analysisChanging one assumption at a time to see which matters most.