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

by Douglas W. Hubbard

When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the state of science.

Like many hard problems in business or life in general, seemingly impossible measurements start with asking the right questions.

committees were categorically rejecting any investment where the benefits were “soft.” Important factors with names like “improved word-of-mouth advertising,” “reduced strategic risk,” or “premium brand positioning” were being ignored in the evaluation process because they were considered immeasurable.

It’s not as if the proposed initiative was being rejected simply because the person proposing it hadn’t measured the benefit (which would be a valid objection to a proposal); rather, it was believed that the benefit couldn’t possibly be measured.

In an equally irrational way, an immeasurable would be treated as a key strategic principle or “core value” of the organization. In some cases decision makers effectively treat this alleged intangible as a “must have” so that the question of the degree to which the intangible matters is never considered in a rational, quantitative way.

one could make the case that a proposed investment supported it, then the investment was justified—no matter the degree to which customer relationships improved at a given cost.

The approach I will talk about applies to any uncertainty that has some relevance to your firm, your community, or even your personal life.

start with the idea that if you care about this alleged intangible at all, it must be because it has observable consequences, and usually you care about it because you think knowing more about it would inform some decision. Everything else is a matter of clearly defining what you observe, why you care about it, and some (often surprisingly trivial) math.

Why do we care about measurements at all? There are just three reasons. The first reason—and the focus of this book—is that we should care about a measurement because it informs key decisions. Second, a measurement might also be taken because it has its own market value (e.g., results of a consumer survey) and could be sold to other parties for a profit. Third, perhaps a measurement is simply meant to entertain or satisfy a curiosity (e.g., academic research about the evolution of clay pottery).

Decision makers usually have imperfect information (i.e., uncertainty) about the best choice for a decision.

These decisions should be modeled quantitatively because (as we will see) quantitative models have a favorable track record compared to unaided expert judgment.

Measurements inform uncertain...

For any decision or set of decisions, there is a large combination of things to measure and ways to measure them—but perfect cer...

I have known managers who simply presume the superiority of their intuition over any quantitative model (this claim, of course, is never itself based on systematically measured outcomes of their decisions).

don’t confuse the proposition that anything can be measured with everything should be measured.

Applied Information Economics: A Universal Approach to Measurement

Define the decision. Determine what you know now. Compute the value of additional information. (If none, go to step 5.) Measure where information value is high. (Return to steps 2 and 3 until further measurement is not needed.) Make a decision and act on it. (Return to step 1 and repeat as each action creates new decisions.)

measure what matters, make better decisions.

Part I: The Measurement Solution Exists.

Part II: Before You Measure.

Part III: Measurement Methods.

Once we have determined what to measure, we explain some basic methods about how to conduct the required

Part IV: Beyond the Basics.

Success is a function of persistence and doggedness and the willingness to work hard for twenty-two minutes to make sense of something that most people would give up on after thirty seconds.

you should start thinking about measurements as a multistep chain of thought. Inferences can be made from highly indirect observations.

Fermi might say, “Yes, there are a lot of things you don’t know, but what do you know?”

some of the things that might initially seem immeasurable were measurable with a little more resourcefulness.

all of the reasons for perceived immeasurability ultimately boil down to a very short list.

concept, object, and method.

Concept of measurement.

Object of measurement.

Methods of measurement.