Tag Archive for 'metrics'

Measuring success

In March this year, I posted my still evolving thought process on what success is. In the post, I said how success, like religion, is a personal thing and so there is no right answer. But I proposed a framework to think about the question: whereby I defined success as having three dimensions, which have no minimum or maximum value but simply are a constant pursuit of development. Those dimensions are existence, freedom, and impact and which I suggest you read before continuing with this post.

The problem with that framework, is it actually is still too broad. And where it lacks in detail, it also lacks in something fundamental: metrics to measure success. Six months later, this is how my thought process has evolved — still evolving, but I hope can stimulate your own thinking about your life.

On the pursuit of existence
You can define existence as a variety of ways, but I think a fundamental concept is your life expectancy as well as the quality of it. How long can you live, in years, to your full ability — being the ultimate (never ending) goal.

Number of years you are alive I think is a pretty self-explanatory thing to say as a goal: 75 years is better than 50 years. Less obvious, is how able you are: a 65 year old on life support due to lungs, kidneys and liver issues from poor dietary habits, is by no means the same as a healthy 65 year old. If life span is the number to measure this dimension of success, then your health is the factor to create an expected value: 65 years at 25% capacity versus 65 at 95% is 16 years versus 62 years. Literally, a life time apart.

Which is why your nutrition matters: look after yourself in your 20s and you’ll be doing better in your 40s, not just in life span but life quality. Drinking soft drinks at 30 once  a day hurts your  long term health quality and will reduce your life span expected value. We forget that, and it’s only when people get older do they regret not thinking about this (so I’m told).

But then there is a flip side to being a health freak:  being 30 worrying about what you eat hurts you in different ways, like your freedom and experiences. More on that below.

On the pursuit of freedom
Whether you claim to chase money or not, the point is moot: money is what makes the world go around because it’s what we’ve agreed to be a mutually exchagable form of value. Money simply represents value, and its accumulation has value not from the paper bills/plastic notes/lumps of metal itself that money is printed as but what it represents: purchasing power to save your time (not a representation of your capital base, which is materialism).

In society, we are so focussed on the material and the bigger numbers but we forget the character of what matters. But its key to understand income  — recurring monetary inflow — is such a key concept to success, because it enables freedom: without the ability to pay for food and shelter, you’re going to spend the rest of your waking time trying to find solutions to these issues, an opportunity cost.

When I spent nine months backpacking around Europe in 2005, I observed how people travelling, like how I had become, are very primitive in their activities: look for a new hostel to sleep in, find a new place to eat food.  I was quite literally, a cave man. Even with cash to pay for these, the search took time. Now imagine you need a summer job as a working holiday to experience the travel, and you’ve just knocked out more time outs during the day to experience your “travel”. Travel might be temporary, but rephrase what I said now for regular life and the point remains. “Living” means surviving as its most basic, but we can do better than that as humans.

When it comes to measuring success on freedom, understandably income should be considered a core benchmark. Not how much you spend, but how much you can make — that spending power gives you not material wealth, but something much more valuable: your time. Income can buy you food, shelter, and the ability to outsource or delegate functions in your life that time would otherwise need to be expended.

However, how much you make is not the ultimate because its not secured. Which is why the ultimate measure of income in capital: after all, capital is simply the accumulation of income. Capital is the result of income, without the need to personally exert yourself from getting the benefit of it; more specifically, capital can been monetised, generating a passive income which is the ultimate in enabling freedom.

Therefore when it comes to success in terms of capital, $100,000 is much more valuable than $10,000, obviously. But a subtle point to remember, is that to get the value of capital it either is locked up making a passive income (say, in real estate with a rental) or it’s liquid so that it enables the ability for you to use that purchasing power for your life.

One million dollars in the bank that can be withdrawn tomorrow? Very successful. One million dollars invested in a property making a 10% return? Also, very successful though not very liquid:but that’s ok becayse it’s generating $100,000 a year in passive income, on top of the capital base that grows through capital gain. One million dollars locked up in an stock market investment that can’t be liquidated for a month? Not good — but very good if it generates a 10% return on say, the stock market in that month.

But simply attaining capital is not life accomplished because if inflation rates are 9%, then that 10% return on real estate and stock is actually only a 1% return. That passive income (or rather, purchasing power) now is only 1% of the capital base. And that’s fine because capital has value in immediate liquidity (also purchasing power), but sometimes it’s worth trading short term liquidity to grow that capital base otherwise inflation will catch up and any income dependent on that capital will actually erode in value. Capital generates passive income, but that capital needs to be secured through investment to not have it be eroded.

Therefore the ultimate measure of capital is lifetime cashflow in real purchasing power. You can try to accumulate it, and you want to grow it above inflation. But once you’ve done that, you’re now getting greedy: the time cost in your life now actually impacts on your freedom, the whole point of capital accumulation, passive income and purchasing power. But as you dance with growing your capital base , income stream, and ultimately freedom, let’s not forget being busy we dream of more time, but when you have too much time on your hands it can be downright depressing. Enter impact.

On the pursuit of impact
Impact, like existence and freedom, is a core tenent to life about what I think matters if you want to define success. Impact not only gives you purpose but it gives you direction in life. Impact boost your self esteem. Better still, impact benefits your surroundings better than how you found it.

However impact is a hard thing to quantify. Is it number of people you “impacted” and what does that mean? As a raw score, sure helping one person once a day is better than helping one person once a month. But nothing in life is free: “helping” often comes with a benefit for the other party, such as profit for the business merchant, conversion for the religious zealot, or an orgasm for the sexual expectant.

If you go though life travelling the world, you leave an impact through the people you meet; if you toil yourself to build a business, you leave an impact through the products you create. But when impact is simply measured by “number of people”, it’s actually not all that solid: their needs to be not a mutual exchange, but a net positive where an interaction outputted more than what was entered with.

So what makes it a net positive? When you’ve really touched someone. But you can never know if you did that, so failing that we need to make sure one person was touched by the impact: you. You might have spent three months suffering, but that story will inspire, educate, and benefit 1000 other people in a profound way — and we may never know until your funeral, though you remember those three months. You might travel speaking to one hundred thousand people, of which only 1% where meaningful conversations: but no one remembers your name to prove it, but you remember the experience.

So when it comes to measuring impact, it’s not just number of people but number of people’s who’s lives you have touched. And by touch, it’s not a number but a meaningful impact that comes from your own life experience. One hour a day in a homeless soup kitchen is a different kind of impact from one hour a day building a game that someone plays on their smart phone. And neither is better than the other, so long as someone’s soul was touched; the most important one, being your own.

Meaning, whatever it is you’re doing, you’re leaving an impact by touching the lives of other people, but one person who we can measure is your own in the form of experience which is the only number that we can reliably count.

Success: measured
For those that think in numbers, success as a number  = (Number of years you are alive times by how able you are due to health) multiplied by (capital base times by return) multiplied by (number of people impacted times percentage that were truly touched). That gives the theoretical optimum to the ultimate thing.

Otherwise said, if you have a long healthy long life and you have a lot of purchasing power to buy freedom, then you have more time to impact which ultimately leads to the only thing that matters: number of life experiences (which along they way, benefited others as well that increased their own existence, freedom, and impact).

And that, I believe, is a what a rich life is.

Delicious will go down as one of the great tragedies

As Marshall Kirkpatrick eloquently wrote, I’m also another person disappointed that Yahoo! is shutting down Delicious, the social bookmarking site that helped generate the Web 2.0 trend. But this reflects a deeper problem at Yahoo.

How Yahoo’s spreadsheets miss the point
As a “heavy” user myself, it may be ironic to say that I never visit the site; I often will not bookmark a site for month’s. And yet, it hits me like a shot to the heart to hear that it will be shut down. Why? Because it’s so valuable to me. The amount of times I’ve been able to rediscover content I’ve previously read has alone made it valuable — the tagging innovation that Del.icio.us pioneered makes my search for hard-to-recall content much more efficient. But there was even a time, where the most popular links of delicious were my homepage: the quality of the content being shared justified my daily attention in the same way other aggregators have to me like how techmeme.com have.

In fact, I’ve recently rediscovered this as I experiment with the Rockmelt browser, and I check the most popular links via the widget on the side of my browser.

Delicious via Rockmelt

But notice how I don’t visit the website? I might see what links are popular, but that doesn’t mean I will click on them. I don’t visit the actual delicious website and so the metrics the Yahoo management are reviewing are skewed. If advertising is on the site (the only type of revenue model attempted), it would not convert much. They believe no one is using the service, but the truth is, they are.

I never thought the “network” operating model could suffer due to the fact metrics measuring value can’t be quantified. So it’s completely reasonable why a Yahoo management team thinks it time to shut down this service: low on traffic, low on revenue. Numbers in the spreadsheet say this is a loss: let’s kill it, says the MBA.

What we have here though is a management team who not only are out of touch with how people use delicious (potentially because they don’t get the vision that only the founder truly gets — and he’s long gone), but more important, completely misunderstand how to capture the value of this valuable asset (not property). As a point in comparison, Yahoo acquired the other Web2.0 darling Flickr, which is a service I also have been using for over 5 years. And when I say using, I mean a paying customer that has paid his subscription without hesitation every year (which I will note, there are not many services I pay for which makes this even more impressive). Like Delicious, I store data with Flickr that I may not use for a while — but the way it manages my data has become an invaluable tool for my life.

I worry more about Yahoo and any company it acquires
Yahoo’s management should have implemented a subscription model like Flickr, because it’s obvious that a “book marking” site will never get a lot of a traffic (you can book mark sites without having to need to visit delicious.com). Tools like this don’t make money from traffic; and network business models like this generate value beyond the confines of the web property.
With the news breaking, it will now force an action. Either sell it to people who have now seen their cards (in fact, I’ve had friends of mine not in tech ask me how can they put an offer for this!), open-source it (like how Google reacted when etherpad was going to be shut down), or shut it down as they said they want to and lose the opportunity to capture its value. Of course, they could publicly announce they won’t shut it down, but everyone now knows what they think and it will kill the service due to new users being paranoid about their data. Yahoo! gains nothing with this.

But the sad thing about this, is that it’s forced them to ignore the opportunity of potentially being more innovative with the revenue model. And because they failed to do this, this impacts the company more generally — monetisation is key to sustainability and if you have a management that can’t do that (which presumably, is the reason it’s being shut down), then there’s something even more wrong with this new age media company that as Jeff Jarvis has called, has become the last old-media company.

Yahoo is an amazing company, and companies need to make tough decisions sometimes to grow the company. But not understanding the potential of Delicious will go down in web history as one of the great tragedies — and if Yahoo sells it, one of its biggest blunders.

Update: And just as I clicked “save” on this post, the Delicious blog posted saying they are now going to “sell” it as it’s not a strategic fit, which as I mentioned in my post was one of the likely outcomes. So if it’s not a strategic fit, it begs the question again, what is Yahoo?

Media post article: baby steps

I’ve contributed to the Metrics Insider column on Mediapost. Have a read, and post a comment 🙂

John Hagel – What do you think is the single most important question after everything is connected?

I recently was pointed to a presentation of John Hagel who is a renowned strategy consultant and author on the impact the Internet has on business. He recently joined Deloitte and Touche, where he will head a new Silicon Valley research institute. At the conference (Supernova 2007), John outlined critical research questions regarding the future of digital business that remain unresolved, which revolved around the following:

What happens after everything is connected? What are the most important questions?

I had to watch the video a few times because its not possible to capture everything he says in one hit. So I started writing notes each time, which I have reproduced below to help guide your thoughts and give a summary as you are watching the presentation (which I highly recommend).

I also have discovered (after writing these notes – damn it!) that he has written his speech (slightly different however) and posted it on his blog. I’ll try and reference my future postings on these themes here, by pinging or adding links to this posting.
Continue reading ‘John Hagel – What do you think is the single most important question after everything is connected?’

Half the problem has been solved with time spent

On Thursday, I attended the internal launch of the Australian Entertainment & Media Outlook for 2007-2011. It was an hour packed with interesting analysis, trends, and statistics across a dozen industry segments. You can leave a comment on my blog if you are interested in purchasing the report and I’ll see if I can arrange it for you.

One valuable thing briefly mentioned, was the irony of online advertising.
Continue reading ‘Half the problem has been solved with time spent’

New measurement systems need a purpose

Chris recently proposed a new measurement system for attention, after yet another call to arms for a new way of measuring metrics. This is a hard issue to gnaw at, because it’s attempting to graple at the emerging business models of a new economy, which we are still at the cross roads at. Chris asked us on the APML workgroup on what we thought of his proposal, which is interesting, but I thought it might be better to take a step back on this one and look at the bigger picture. Issues this big need to be conceptually clear, before you can break into the details.

Television, radio, and newspapers are the corner stone of what we regard as the mainstream media. For decades, they have ruled the media business – with their 30 second advertising spots, and “pageviews” (circulation). Before the information age, they were what the ‘attention economy’ was. None of those flamin’ blogs stealing our attention: content and advertising flowed through to us from one place.

The internet is enabling literally an entire new Age of humanity. A lot of the age-old business models have been replicated, because we don’t know any better, but people are abandoning them because they are realising they can now do so much more. So the key here is not to get too excited on what you can do – rather, we need to think why what we need to do.

Let me explain – advertisers sold their product on a TV/radio commercial, and a newspaper page, because it guaranteed them that a certain amount of people would see it. Advertisers advertise because they want to do one thing: to make money. It’s just how capitalism works – profit is god – so do what you can to make higher profit.

But back then, the traditional mainstream media was the only way they could reach audiences on an effective scale. However advertising on the Sunday night movie is the equivalant to dropping a million pamphlets out of a plane, hoping that the five customers you know that would buy your product, end up catching it. Back then, no one complained – it was the best we could do. It sucked, but we didn’t know any better.

The internet changed that.

Advertisers can now target their advertising to a specific individual. They don’t care anymore about advertising on a mass scale; what they would rather is advertising on a micro scale. Spending $20,000 on 10,000 people you know that want to buy your product, has a much better Return on Investment than $2,000,000 on 1,000,000 people – of which 10% don’t speak the language of your ad, 20% aren’t the target group for your ad; and 30% are probably offended by your ad and will ruin it for the 40% they you were targeting in the first place.

Sound crazy? Well Google making $10 billion dollars doing just that is crazy.

So now that we have cleared that up – let’s get back to the issue. We now know one of the reasons why we need measurement: advertisers want to target their advertising better. Are there any other reasons? Sure- sometimes people want to measure what their audience reads for non-monetary reasons – they could just trying to find out what their readers are interested in, so they can focus on that content. Statistics like that is not narcissism – it’s just being responsive to an audience. Or then again, it could be pure ego.

So when it comes to measuring content, there are two reasons why anyone cares: to make money, or to see how people react to your content. However it’s the first type that is causing us problems in this issue. And that’s because how long someone spends on your content, or how many people view your content, is no longer relevant as it was in the mass media days. What is relevant is WHO is reading your content.

I don’t think you can have a discussion about new ways of measuring the way content is consumed, without separating those two different motives for measurement. I like Chris’s proposal – knowing how long someone spends reading my blog posting is something I would find interesting as a blogger. But that’s pure ego – I just want to know if I have a readership of deep thinkers or random Google visitors that were looking for a picture about shorts skirts. (As an aside – one of my pictures is the number one Google image result for “women in short skirts” – thank God it goes to my Flickr account now, the bandwidth that used to eat up was crazy!)

So before we come up with new measurement systems, lets spend more time determining why we are measuring. Simply saying we are better measuring what consumers are giving their attention to, is only part of the problem. We need to first determine what value we obtain from measuring that attention in the first place.