How to Measure Anything: Finding the Value of Intangibles in Business

by Douglas W. Hubbard

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The fa...

Such critics are working with a set of vague preconceptions about the difficulty of measurement.

Let’s make some deliberate and productive assumptions instead of ill-considered presumptions.

One way to underestimate the amount of available data is to assume that only direct answers to our questions are useful. Eratosthenes

Enrico Fermi

If

Like many managers confronting a measurement that appears to be difficult, they would not have gotten past the perceived obstacle of having little or no data.

Most scientific

irrelevant. I could say that each project is unique, therefore data about previous projects tells me nothing

This would be similar to your life insurance company

The Uniqueness Fallacy.

This fallacy

Examining different situations may not be perfect, but it is an improvement.

when you know almost nothing, almost anything will tell you something.

When it comes to methods to gather new data, try working with the assumption that the first approach you think of is the “hard way” to measure.

Assume

that, with a little more ingenuity, you can identi...

The Cleveland Or...

for ex...

costly, first proposal, less smart

It started counting the number of standing ovations.

cheap, better proposal

a lot less effort

So, don’t assume that the only way

to reduce your uncertainty is to use an impractically sophisticated method.

Build on the “You need less data than you think” assumption

The Great Schism

This article seems to say that Bayesian believes probability is the uncertainty of the observer themselves, while frequentists define it as a type of idealized frequency limit—the proportion of times something would occur only in a strictly repeatable process in a purely random fashion and over an infinite number of trials.

definition for probability.

frequentists

define it as a

Bayesians would argue that none of these conditions apply in the real world.

while we will treat uncertainty as the state of a person, not a state of a thing,

uncertainty as an actual feature of the particle itself, not just a state of the observer.

answer the following:

What is the decision this measurement is supposed to support?

does this thing matter

“product quality,”

Are you using the information to decide on whether to change an ongoing manufacturing process?

how bad does quality have to be before you make changes to the process?

When I asked bank managers what decisions these reports supported, they could identify only a few cases

where the elective reports had, or ever could, change a decision.

many reports simply had no bearing on decisions,

those reports must, therefore, have no value.

found quite a few that had no effect on any decision.

the information value of those reports was zero.

Sometimes the stated measurement implies a decision that is nonsensical.

the value of IT

the value of clean drink...

The real question