In this episode we are joined by Perry Marshall, an advertising, sales and marketing guru, on the 80/20 Rule, buying time and solving tough problems.
Perry is endorsed in FORBES and INC Magazine, and is one of the most expensive business consultants in the world.
He founded the $5 million Evolution 2.0 Prize, with judges from Harvard, Oxford and MIT. The prize aims to solve the biggest mystery in biology.
His reinvention of the Pareto Principle is published in Harvard Business Review. NASA’s Jet Propulsion Labs at the California Institute of Technology uses his 80/20 Curve as a productivity tool.
His Google AdWords book laid the foundations for the $100 billion Pay Per Click industry, and the techniques he pioneered are standard best practices. Ultimate Guide to Google AdWords is the world’s best selling book on internet advertising.
He’s consulted in over 300 industries and served as an expert witness for marketing and Google AdWords litigation. Perry has a degree in Electrical Engineering and lives in Chicago.
We talk about:
- What the 80/20 rule actually is
- How to buy back time by saying no and through more efficient meetings
- The 80/20 productivity curve
- Solving tough problems and appearing superhuman
Thanks to Ted Prodromou for connecting us with Perry.
Key Quotes from Perry Marshall
What the 80/20 Rule actually is
- I would imagine that the majority of people listening have heard that 20% of the people have 80% of the wealth, and 80% of the people have 20% of the wealth, and that's the Pareto principle. And it's true across pretty much all countries. And that is what most people understand to be 80/20.
- So the deeper part of 80/20 is it's not just this business or economic rule of thumb; it is a law of cause-and-effect vastly across nature. It is everywhere. In fact, you have confronted 80/20 every single day of your life. It's the size of craters on the moon and it's the dirt on your carpet! It's the apps in your phone, like 20% of the apps get 80% of the time on your phone.
- The second thing is it's fractal, which means a pattern inside a pattern, inside a pattern, inside a pattern. So 80% of 80% of the people own 20% of the real estate. And 20% of the people own 80% of the real estate. And then 20% of the 20% own 80% of the 80%, and so on. So if you do that math, it works out that 1% of the people own 50% of the real estate – and one person, Jeff Bezos, is worth $150 billion.
- It also applies to time. There is actually lots of time. We are awash in time. We have an abundance of time. 1% of your time produces 50% of all your productivity. So, if you're a commission salesperson, half your income was earned in less than four days last year! What it means is that the productive part is 16 times more effective than the unproductive part.
- Therefore, the 20% who have 80% of the wealth, person-for-person, they have 16 times more money than the 80% who have 20% of the wealth.
How to stop the feeling that there is no time
- The best thing you could do if you want more time is to delete the social media apps off your phone. I do not have Facebook on my phone; I open the browser on my computer and I go to facebook.com! And most people would get back an hour or two a day.
- Now this point I'm making is less about Facebook and it's more about if you are going to be successful, you must police the access that the rest of the world has to you; 1% of the people in your life should get 50% of your attention. Who's that? It's your wife and your children, and your closest friends, and you invest in those relationships because good relationships pay and pay and pay.
- 80/20 starts with what you say no to.
On saying no to things
- If you're at capacity and your boss asks you to do something else “important”, you need to hold your ground. You should invoke 80/20 and say, “If this new project is really so important that it's five times better than these other projects, it is necessarily true that one of these other projects gets crossed off for 3 weeks.”
- One of Warren Buffett's airline pilots asked him what the secret to success was. Buffett says, “Step 1, I want you to write down 25 things that you really, really want to do in your life. Big bucket list or career accomplishments. Step 2, I want you to separate the top 5 from the bottom 20. Step 3, put a big circle around the top five and cross off the bottom 20, and that's how you succeed.”
On making meetings efficient
- What would happen if everybody who calls a meeting was charged for the meeting? What would happen if a department manager has a meeting and the average pay of the person in the meeting was $35 an hour and there's 10 people, so they have to pay $350 an hour out of their department fund in order to get those people in the room. How many meetings would you not have?!
- The worst time to have a meeting is Monday morning. When people come in from the weekend, the truth is they're usually rested, they're refreshed, they're sharper on Monday morning than they are on Friday afternoon. So here's what happens in most companies. You come to work at 07:30, there's a meeting at 09:30. So by 8:00 you finally get yourself together and you start working on something really important and now you've got an hour and a half. Now it's 09:30 and you have to stop it. The meeting was supposed to go to 10:30, but it actually goes to 11:10 because of all this nonsense. Now it's 11:10. At about 11:45, you finally get back into your project and then at noon you're taking lunch, and you don't get anything done. And so on.
- So, to counter this, I said no meetings before late Monday afternoon, ever. I made Monday my productivity day. I actually look forward to Monday because I like the stuff I'm doing. Like it's important stuff, it's creative stuff, it's forward thinking stuff and it's not meetings. We have meetings on Thursday afternoon.
On the Bell Curve and the 80/20 Curve
- Everybody's seen a bell curve. You take a history test in school and the lowest score was a 58 and the highest score was a 99, and they had 15 people who got a C+ and 18 people got a B-. So, the Bell Curve always tells you what most people did, while 80/20 says the majority is never the most productive.
- In my book, 80/20 Sales and Marketing, I introduced something called the 80/20 curve. If I've got 60 kids that took a history class, how much horsepower does each person in this class have? How much time do they spend on history? How interested are they in history? And I'm gonna rank them from top to bottom. Well, that rank looks like a steep exponential curve because as you get towards the number one kid in the class, it just goes super sky-high.
- You could do the same with shoes. On a Bell Curve, it will show that most people have about 7 pairs of shoes. But that doesn't tell you who's buying the shoes. The 80/20 curve says, “Hey, 5% of these people are buying two-thirds of the shoes.” That's who you sell to.
On company bonus structures
- An 80/20 way of doing bonuses would mean you would say that 20% of the people brought 80% of the mojo in this company, which is true. And 4% of the people brought 64% of the Mojo. If everybody had the same salary, 4% of the people should get two-thirds of the bonus money pot.
- Now if you distribute money that way, you will get the top performers in the top positions. If you distribute money equally, the performers will leave and the losers will take over.
On high performers and low performers
- My friend has this thing he calls the 20/120 rule. It applies to everything. It says that the top 20% of employees produce 120% of the results, while the bottom 20% undo 20% of the good that the winners do, and they bring us down to 100%. So what it means is at a minimum, you should fire 5%, if not 10%, of everybody.
- At GE, Jack Welch said every year that they are getting rid of 10% of everybody. So all department managers have to figure out which people they had to get rid of because they're going.
- A bad employee costs a company 4 to 14 times their salary.
On solving tough problems
- One of the things that I have always done is head straight into the wind. I actually go for the hardest, most fundamental problems that I know how to tackle, and often I get myself in over my head.
- You do that for 20 years, your friends will start to think you're superhuman, but I'm just in the habit of doing the hardest thing I can find.
- So if you can sit at your desk and go, “So what is really actually the hardest problem this company has right now? What is the biggest problem? What is the elephant in the room? What has nobody had the courage to deal with?”
- People don't realise how easy it is to get a job. You know how? You find a person who has the authority to write a check and you go, “So what's your biggest frustration right now?” And they tell you and you go, “Okay, I can do that.” If a CEO has a bunch of headaches and problems, you can say, “Okay, I cost $90,000 a year, and I will make that problem go away. Hire me for a six-week temporary trial and see if I'm telling you the truth.” You'll get the job.
- One of the biggest mistakes you can make is when you're trying to get somebody to make a decision or buy something, but that person can say no, but not yes. For example, if you're applying for a job and you're going through the HR department, you are talking to somebody who can say no, but cannot say yes. So you bypass that. If that's the engineering department, you call the Engineering Manager and you talk to them.
The final message of wisdom and hope for the next generation of executives
- You should read something written before Gutenberg every day. If something was written before the printing press was invented, then the way we got it was people with pens and scrolls, made copies of copies of copies of copies, and hid them in urns and caves so that when Rome gets burned to the ground, that civilization is not lost. It's wisdom literature. Wisdom literature is not what toothpaste should I use; it's the deepest stuff of culture. It's what does a father really want to pass down to his son? If you read something written before Gutenberg every day, and delete social media from your phone, in two months, your brain will be in a totally different space.
Resources mentioned in the episode: