Vanity upon Vanity.

Last week we started talking about tracking and what founders need to succeed in markets that are superficially wide but not deep. This week, we’ll look at tracking what matters.

The only thing worse than not tracking any metrics is tracking or obsessing over the wrong metrics.

“Our app has 5 million downloads…”

“Our Facebook page has 10 million likes”

Humans have an affinity for vanity metrics precisely because of the psychology behind them. Everyone wants to believe that the work they are doing is making a difference. So it’s easy to read positive causes into noisy data, whether it’s really happening or not.

Daniel Simons and Christopher Chabris call this the illusion of cause — the human tendency to make causal connections between related facts.

“Ah, our app has a gazillion downloads, so we must have the best and most loved/used product around”.

Vanity metrics are like a candy high that give short bursts of excitement but ultimately distract from fundamental issues and contribute very little to the long-term success of the business. They are false signals. They do not tell you if people are using your product, if they are using it how you expect, or if they are using it at the frequency you expect.

With news publications, the numbers that are out there aren’t usually indicative of anything useful. They may show who’s winning but not how or why. When you look at the competition through those lenses, you can’t draw any lessons because whatever startup X did because their decisions are based on hidden factors (operational metrics) which are often excluded in the news. Operational metrics like retention, how long it took for a user to get your service, etc are the unseen gears that drive growth.

One metric that matters

Replace throwing metrics on the wall and hoping one sticks with figuring out the ONE metric that matters to your company per time. Most businesses will need to track multiple metrics but there is always that one that matters and it is dependent on: the stakeholders they are communicating with, the market they operate in, the company stage, and the business model they operate.

Your OMTM could be occupancy, profitability, units moved, or transactions processed. Whatever it is, it must move the needle for your business in practical ways.

Focusing on OMTM forces you to squeeze out as much of it as you can (the obvious caveat being Goodhart’s law: “When a measure becomes a target, it ceases to be a good measure”). As a result, an inflection point occurs and reveals the next metric you need to focus on. E.g, moving from increased website traffic or maximizing conversion.

Vanity metrics aren’t entirely meaningless. They show that there is interest in your company and that could initiate partnerships or investment. They could also be a morale boost for your employees. On the flip side, your employees and even worse — you may start to believe your hype.

Links from the Internets

• Choices. Choices. Choices. [Link]
• This mathematical model could lead to a new approach to the study of what is possible, and how it follows from what already exists. [Link]
• How in touch is your CTO? [Link]
• AI x the nature of the universe. [Link]
• Our productivity has increased due to technological innovations. Shocker. [Link]

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