Updated on 11.19.09

The 40/30/30 Rule

Trent Hamm

Recently, I was reading a great article at The 99 Percent entitled The 40-30-30 Rule: Why Risk Is Worth It. I originally intended to include it in my weekly roundup, but as I thought about the 40-30-30 idea, I found that the connections to careers, personal finance, and life were profound.

What is the 40-30-30 rule? Simply put, it’s an argument that when you prepare for anything in life, only 40% of the preparation is physical – the rest is mental. Thirty percent of preparation is technical skill and experience, and the second thirty percent is the willingness to take risks.

This “rule” comes up again and again in all different areas of life. Here are several examples from my own life where I’ve seen it.

When I’m playing a game I’ve played a lot of times before, I have an intuition as to what move to make next, built from years and years of experience (the 30% that comes from technical skill and experience). However, I also find that it’s very easy to just keep using the same strategy over and over again because I’ve somehow come to the conclusion that it’s the best one. So, if I combine that technical skill and experience with a risky new strategy I’ve devised (the other 30%), I might lose – but I might also devise a way of playing that’s even better.

With investing, I have a good understanding of my own risk tolerance, an understanding built up over a long period of time (the 30% that comes from experience). Howver, I also know that if I don’t push against my risk tolerance a bit and look at new investment opportunities from time to time (the other 30%, risk), I’ll likely miss out on great opportunities.

I also see it in my career, both now and when I worked for a large organization. I would often have a well-worn daily routine that worked and got the things done that I needed to get done (the 30% that comes from experience), but if I really want to excel, I sometimes have to step outside the box a little (the risk-based 30%).

The 40/30/30 rule really does provide a great framework for success, no matter what you do.

Do something worthwhile (the first 40%) means that you’re willing to get up off the couch and do something. Maybe it’s getting ahead in a career. Maybe it’s getting into a new hobby. Maybe it’s simply getting a grip on your investments. 40% of the journey is simply trying.

Keep at it (the next 30%) is simply encouragement to not let a new initiative slide, because the more you work at it, the easier it becomes. Even more important, the more you work at it, the more the basic skills that make up the task begin to become natural to you.

Take risks (the final 30%) simply means to not do things the same way every single time. When you’ve become skilled at something, it’s easy to become wedded to the same routine. Never stop looking at what you do and trying out alternate paths. Not only does this grow your skills (making your basic routine even better), it also helps you to uncover new ways of doing things.

Great… so how do you do this? How can you apply the 40/30/30 rule in your life? The best first step is to figure out the area of your life where you want to improve. Do you want to get out of debt? Do you want to improve your skill at a musical instrument? Do you want to get a promotion at work? Do you want to become a writer?

Once you’ve figured out what you want to do, research it a bit. Figure out what things you’ll need to do to accomplish that goal.

After that, start practicing and building skills. The best way to do that is to start doing the thing you want to master every single day. For me, a thirty day project works well for this. I just commit to doing a certain thing every single day for thirty days (if that’s possible). At the end of it, I’ve usually vastly improved at whatever skill or attribute I was trying to develop.

Quite often, thirty days is enough to establish a positive new routine in your life, so keep it up. Keep doing that thing every day until it becomes truly normal and seemingly effortless.

Then, take a risk. Change what you’re doing a bit. Make it more difficult, or at least different. Explore something new. If you’re taking a walk every day, increase your walking pace a bit and use a stopwatch to slowly trim your time around the block. If you’re trying to break through at work, volunteer for a task that you might have avoided before, like giving a presentation. If you’re playing a game, try a completely different strategy and see how it works. If you’re investing, dig into some new investments that you haven’t looked at before and consider putting some money into them after you’ve studied them.

What you’ll find is that your already-built skill will help carry you through this new challenge and that the rewards of this new risk are great. You end up in better shape, with a better career, with a better gaming experience, and with better investments – or with improvement in anything you’d like to take on in life.

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  1. Daniel says:

    I think that technical skill and experience may be above 30%. From my experiences playing sports in high school, yes some of it came from being in shape and building the muscles I needed to play basketball, but the majority of my success I attributed to the amount I practiced and the amount of time I spent working at it.

    Doing the same thing over and over again helps me and gets me more comfortable with skills that I’m learning. Eventually it becomes second nature and you rise above your peers. As I progressed through high school, I found that less depended on my physical skills and more depended on how smart I was and that my experience outmatched many of my opponents.

  2. Brent says:

    Just where exactly do these numbers come from? I agree that we need to improve our skills, take risks and keep going when things get hard, but I feel like these percentages from sports and the like just give bad impressions, we have the 40/30/30 rule, the 80/20 rule the 90/10 rule etc… Which one is real? the fact is that people are just making it up anyways, you want to make a point, at least use anecdotal evidence.

  3. Kevin M says:

    The fact that the 40/30/30 rule comes from the 99% website cracks me up.

    Shouldn’t it be 40/30/29/1 by that logic?

  4. George says:

    Wasn’t the prior post all about how statistics lie? How funny that you’d follow it with a post like this ;-)

  5. Matt says:

    Thanks for this intriguing post about the 40/30/30 rule. Being a bowler for 33 years, I would agree that once you understand the basics of a sport or game, the mental abilities matter more than the physical. I do take into account my successes within the sport are due to the risks I’ve taken along with the experience I can rely on. You have to combine belief, intent and trust all rolled into one.

  6. I would say that the percentages depend on what you’re talking about. Take getting out of debt for example. That virtually involves nothing physical.

    I think that would be virtually all mental.

    How about losing wieght? To me, that one is probably 60/40, physical/mental.

    You can have the best mental outlook in the world, but if you don’t go exercise, I doubt you’d lose a pound.

    It all seems relative to what the task at hand is.

  7. brad says:

    thanks for posting it, but i wasnt able to draw anything useful from this post at all. basically my misgivings are the same as others, the numbers seem arbitrarily chosen, and dont logically fit some activities.

  8. Chris says:

    To those questioning the numbers: Go read the article. It’s a pep talk from a skiing coach, not an immutable law. The main point is to include the 30% of pushing yourself. “if I wasn’t falling at least once a day in training, I wasn’t trying hard enough.”

    He had been totally focused on improving his speed and avoiding falling (getting it right) and his coach said he was missing the point. By practicing, we can get stuck in a rut and lose sight of the risks we need to take to grow.

    It isn’t about having a nice clean pie chart.

  9. katie says:

    I think this is definitely more useful psychologically than the 80-20 rule. Thanks for the post!

  10. partgypsy says:

    Way too vague to for any utility, rule doesn’t seem to be much more than a feel-good device.
    For one depends on the activity and skill/expertise level. Taking risks may be important in stock picks and winning a gold in snowboarding, but doesn’t have much relevance if you want to knit a kick-ass sweater, play a piano piece perfectly or ace an oral presentation.

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