13 Quotes from Richard Koch (The 80/20 Master) to Upgrade Your Life and Business

Richard turned ~$4M USD from his LEK consulting firm into ~$500M USD through various ways, mainly private equity investing.

He works with Perry Marshall on some projects behind the scenes and his book The 80/20 Principle revived Pareto’s principle from the dead and turned it into a phrase nearly everyone knows.

He’s one of my favorite thinkers alive today. Primarily because of his ability to clearly articulate principles and phenomena that allow us to leverage our time better.

On the power of focus

Strive for excellence in few things rather than good performance in many

You’ve heard that saying about how sunlight just warms the earth, but when focused through a Fresnel lens has the energy to melt obsidian and steel?

That’s the power we have when we’re able to focus and think critically on solving problems of high value.

Zen mind, beginner’s mind

Point 2 is the quite amazing insight from Kuhn quoted at the start of this blog – the best thinkers about an important issue are those who are relatively new to it.

Zen mind, beginner’s mind. Innovation tends to occur from someone outside of that industry. Uber vs Taxi industry. AirBnB vs hotel industry. Henry Ford got the assembly line idea from the meat-packing industry.

This is why Jay Abraham mentions how important it is to study innovations outside of your industry because bringing them into your industry and merging it with your current strategy / operation can lead to very profitable insights.

On thinking exponentially in business

Everything that matters in business is exponential, not linear. Always think in multiples of 10.

80/20 rule at play. 80/20 is fractal. Life and business are skewed distributions, not the Gaussian curve or straight line we think they are.

On the power of targeting

Selling to the RIGHT person is more important than all the sales methods, techniques, tactics in the world.

Same thing with hiring. Like Jim Collins would say, you need the right people, in the right seats on a bus that’s headed in the right direction.

Direct response 101. List. Offer. Copy. In that order. Who you are selling to (aka the List) is top priority.

On working smart > working hard

Yes.

Sales are not profit; profit is not cash. Generate the most cash for least human energy and capital.

The above was his response on someone saying that raising output is not equivalent to wealth creation

Koch’s view is similar to Wall Street Playboys’ view that working hard is more about solving problems than hours input into something.

On honing your ability to think

“It’s not [about] hard work it’s [about] hard thinking”

You can dig a ditch with a spoon, or you can invent a Ditch Witch, or pay others to dig the ditch for you.

A question to use often when stuck on solving a problem is “Am I solving the right problem?”

When stuck on solving a problem it’s because of a few things:

  • Not reasoning from first principles
  • Not accurately and clearly defining/naming the problem
  • Not clear on the desired outcome(s)

The list isn’t limited to those, but you get the point.

I had a problem with finding a Google Tag Manager account for a client because I needed to track an event on a page. My desired outcome was “I want to be able to track this event” but I turned it into “I NEED to be able to find the account GTM is housed under.” No I didn’t.

A simple piece of in-line javascript in an < a > tag solved the real problem.

On leveraging your energy and skillset

Do you take your objectives seriously or do you put average effort into too many things instead of superior thought into a few important things?

Makes for a great journaling exercise.

Another similar quote he says is, “Few people take objectives really seriously. They put average effort into too many things, rather than superior thought and effort into a few important things. People who achieve the most are selective as well as determined.”

Selectivity and discernment.

Happened with me on a campaign recently. Almost went full tilt testing out a new offer (~70% ROI for ~30 days). Learned I didn’t have any competitive advantage, paused it, and stopped burning my money.

Can always restart it later if needed.

On distinct advantages as your Unique Selling Point

Businesses and people who make it big are always highly differentiated – they make you aware of what is unique about them. They put all their energy into areas where they are substantially different from any rival, and in some way superior to them.

On hiring A-players

Only hire the very best people in your field. If you make a hiring mistake, correct it quickly. When you hire someone new, recruit to improve the average – only hire someone who will be in the top 20% of the firm. Do whatever is necessary to hire ‘A’ players and to keep them.

See here for a full article on this subject.

On distinguishing yourself in a field and life

What could you achieve that would make you proud, that no one else could do with the same ease?

What seems easy to you but hard to others, is probably a unique skill / “talent stack” to you.

On business strategy

A Business Strategy should not be a grand and sweeping overview. It should be more like an under view, a peek beneath the covers to look in great detail at what is going on…

On dominating and not having competition

The standard view is that businesses should strive to maintain a lead over their rivals. But this is wrong. A lead is something that connects two parties. You shouldn’t be seeking a lead. An ever-growing distance from competitors is easier to achieve than an ever-growing lead over them, and is much more valuable. To gain a lead, you do things better. To put distance between you and them, you go in a different direction – ideally the opposite one. Find out more here

This is similar to Peter Thiel’s view that you should aim for a monopoly instead of having competitors. Koch has stated this differently as you should be #1 in your field, and if you aren’t, carve out a space where you can be, and stake your claim. Even if it’s very niche like “#1 Keto ______ for diabetic women over 35 who are trying to get pregnant.”

On how to win in business

Business is really just a book of bets, but one where it is possible to beat the house – the required rate of capital return. By all means act soberly and try to assess the odds but don’t be afraid to show flair or to go against conventional wisdom. Respect what the market is saying, even if you don’t completely understand it. Back what is working better than it ‘should’. Deploy intuition and sheer brass neck?. This is not just the way to make business more fun. It is also the way to win – at least in the long run.

Recommended Richard Koch books to upgrade your life

The 80/20 Principle

Shows you how to apply it to cut the crap, and do more with less.

The 80/20 Manager

If you manage people or run a business, there are 10 interesting leadership/management styles, each with various strengths.

Here’s what Perry Marshall had to say about it:

Perry Marshall review on 8020 Manager

The Star Principle

Wonder how Richard flipped all that dough? By investing in companies that fits the criteria he outlines in star principles. Extrapolate the criteria to other things like selecting an affiliate offer to promote, hiring an employee, etc.

Simplify

Want to dominate your market? It’s not easy, but it can be simple.

For fun, see this Salesletter written by Perry Marshall (or his copywriter John), it’ll show you why you want to turn your business into a star company by simplifying your offer to the market.

Here’s a snippet:

Perry Marshall review on 8020 Manager

Get after it.