Every MBA cohort gets introduced to the Pareto Principle somewhere in the first year: 20% of your inputs produce 80% of your outputs, or 20% of your customers generate 80% of your revenue. It’s interpreted as 20% of your effort yielding 80% of the result. Do less, get more. The pattern is real. The math is tidy. The room always nods. Personally, I hate how popular the 80/20 rule has become.

In many contexts, it is genuinely useful. If you’re running operations at a mature business, eliminating the long tail of low-value work is wise. If you’re debugging software, fixing the 20% of bugs that cause 80% of crashes first is exactly the right call. The Pareto Principle is an excellent lens for identifying waste and the most efficient path to reducing problems in existing systems.

Clayton Christensen warned that the greatest threat to great companies is not bad strategy, but the relentless pursuit of efficiency that pulls every organization toward the average. The 80/20 mindset, applied faithfully, accelerates exactly this drift. You get sharper at the things you already do, and gradually less capable of the things you haven’t yet imagined.

The problem is that founders are not optimizing existing systems. They are trying to create something that doesn’t yet exist, and when applied to company-building for a new idea, product, operations, or business, the 80/20 rule actively misleads.

As a reminder, 80%-90% of startups fail. The “80% outcome” that the Pareto Principle celebrates is not a good outcome for entrepreneurship. It is the median of a distribution full of zeros. Getting to 80% of your theoretical potential doesn’t mean you’ve found product-market fit, built something customers love, or created a business that can survive. It means you’ve done the easy part.

More importantly, the value distribution of outcomes in venture is power-law. We’ve seen this confirmed across decades at Sequoia. The top 10% of investments in a fund outperform and determine whether the fund is good, great, or legendary. The stakes are not spread evenly. They concentrate at the far end of the distribution, in companies that didn’t optimize for the achievable but rather in companies designed to achieve what was once thought magical or impossible.

What this means for founders is more important than for investors, but neither group wants to build an 80th-percentile startup. One may claim that the 80th percentile is objectively good and already hard to achieve, but it is just not good enough in entrepreneurship. We are trying to build one of the ten companies in a decade that redefine a category. The founders who redefined categories didn’t ask how to get 80% of the result with less effort. The 80/20 rule is simply the wrong compass for that journey.

If you want to be great, set your sights on the 90th percentile and above. Getting to 90% is hard enough, but I would argue that it is still the easy part. If you want to be legendary, commit yourself to running the distance of the “last 10%”. The last 10% is 90% of the work and also 90% of the reward.

The next time the 80/20 rule comes up, it’s important to think about whether it is being applied correctly. Perhaps more importantly, ask what you would be working on if you stopped optimizing for Pareto efficiency and committed to running the last 10%?