Beware of all green dashboards

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My friend Niklas texted me “yo, Jeff Bezos is talking about metrics on the Lex Friedman podcast.”

My man!

Like a moth to a flame, I tuned in.

Bezos observes how over time companies find themselves blindly managing to a metric. They lose connection with the underlying truth the metric is supposed to serve as a proxy for.

A proxy, in my simple mind, means a “stand in” or “representative” for someone or something else. In this case, the metric is a representative for an underlying theme in the business - like keeping customers happy… or expanding wallet share… or making sure employees like working for you.

I’ve time stamped the clip and quoted it below:

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“One of the things that happens in business, probably anything where you have an ongoing program and something is underway for a number of years, is you develop certain things that you’re managing to.

The typical case would be a metric, and that metric isn’t the real underlying thing. And so maybe the metric is an efficiency metric around customer contacts per unit sold or something like that. ‘If you sell a million units, how many customer contacts do you get or how many returns do you get?’

And so what happens is a kind of inertia sets in where somebody a long time ago invented that metric and decided,

“We need to watch for customer returns per unit sold as an important metric.”

But they had a reason why they chose that metric, the person who invented that metric, and decided it was worth watching. And then fast-forward five years, that metric is the proxy.

The proxy for truth.

Let’s say in this case it’s a proxy for customer happiness, but that metric is not actually customer happiness. It’s a proxy for customer happiness.

The person who invented the metric understood that connection.

Five years later, a kind of inertia can set in and you forget the truth behind why you were watching that metric in the first place…

And so you’ve got to constantly be on guard and it’s very, very common. This is a nuanced problem. It’s very common, especially in large companies, that they’re managing to metrics that they don’t really understand. They don’t really know why they exist, and the world may have shifted out from under them a little and the metrics are no longer as relevant as they were when somebody 10 years earlier invented the metric.

Inertia is a bitch. It’s easier to go along with the way things are, and continually buy into a metric that’s already been vetted and gained valuable social approval, rather than upsetting the apple cart.

So it begs the question - why don’t we want to call BS on a metric?

Note: I’ve always thought that’s a stupid saying - I’ve never witnessed anyone violently assault an apple cart.

So it begs the question - why don’t we want to call BS on a metric?

Why don’t I want to call your metric ugly?

Other than laziness, the biggest reason people don’t want to change the way they measure the business is social discomfort. No one wants to be the buzz kill during a Friday business review who basically says, “Hey you know what we should do? Gut the kitchen we built in 2011 (which has a perfectly good working stove and a decent quartz counter top) and put in some new cabinets.”

But enduring businesses are comfortable having those uncomfortable conversations. In fact, they’re necessary for survival.

Lex asks:

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What does it take to have a culture that enables that in the meeting? Because that’s a very uncomfortable thing to bring up at a meeting…

Bezos jumps in:

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You have just asked a million-dollar question. So if I generalize what you’re asking, you are talking in general about truth-telling and we humans are not really truth-seeking animals. We are social animals.

Let’s take you back in time 10,000 years and you’re in a small village. If you go along to get along, you can survive. You can procreate. If you’re the village truth-teller, you might get clubbed to death in the middle of the night.

Truths don’t want to be heard because important truths can be uncomfortable, they can be awkward, they can be exhausting.

They can make people defensive even if that’s not the intent.

But any high performing organization, whether it’s a sports team, a business, a political organization, an activist group, I don’t care what it is, any high performing organization has to have mechanisms and a culture that supports truth-telling.

One of the things you have to do is you have to talk about that. You have to talk about the fact that it takes energy to do that. You have to talk to people, you have to remind people, “It’s okay that it’s uncomfortable.”

Literally tell people, “It’s not what we’re designed to do as humans.”