metrics

Businesses typically optimize to a single metric. Mature companies might optimize toward earnings and growth businesses to revenue, whereas startups like to optimize to user growth or engagement.  That’s not to say that some of these metrics are unaligned.  Surely one can grow revenue and profit at the same time, though the two are not necessarily related. Businesses can grow profit by simply cutting cost, without growing revenue by a single dollar. But that is to say these metrics can be inversely related, meaning as one goes up the other goes down.  Chasing “bad” or unprofitable revenue, for instance, will grow your top line but decrease earnings. This is why a single metric must be defined and targeted, to ensure the business outcome most desired for the company at that point in time.

The same can be said about life. We all live with a list of priorities that may be in competition with one another. Financial wealth and leisure time, for example, are often at odds. Yet we get caught in a balancing act, trying to “have it all” or trying to optimize to multiple metrics at the same time. This strategy waters down both attempts and can cause you to fall short on both goals. Though it can be tough to so fully commit, the utility maximizing strategy would be to go all-in on one metric and optimize to your full capacity. Say your top priority today is wealth – in the short-term, you will be best served making rational decisions that maximize financial gains. Then in the long-run, if your priorities change, you can start maximizing leisure gains at the expense of monetary. Shifting priorities is fine. Losing focus is not.

The other issue is envy.  When the financial gainer compares how much free time they have to the leisure maximizer, they may become jealous.  And vice versa when it comes to money. But these are not fair comparisons. For an honest benchmark, you can only compare metrics to someone with the same priority levels. Although comparing free time with a leisure maximizer is a fool’s errand, if your leisure time is considerably lower than a fellow money maximizer, then there may be a problem. Proper benchmarking can thus reveal when circumstances are below par and hence when you may need a lifestyle change. The moral here is to not feel envious of someone who is better off than you in an area you care less than them about. Living a happy life is about figuring out what we care about and focusing our energy into making it happen. Benchmarking can be useful but comparing yourself to others might drive you mad.