Chapter 13 of How to Measure Anything, Finding the Value of “Intangibles in Business” Third Edition is the second chapter in the final section of the book. Hubbard titled Chapter 13: New Measurement Instruments for Management. Hubbard shifts gears in this chapter to focus the reader on the new tools that our dynamic, electronically-tethered environment has created. Here is a summary of the chapter in a few bullet points:
- Everyone creates data that is trackable and measurable.
- The internet is a measurement instrument
- Prediction markets are a way to synthesize
One of biggest takeaways of the post-Snowden era is that our technology provides businesses and governments with the ability to track us. All those options for tracking provide different mechanisms for data collection and measurement. The use of GPS is just one example. For example, recently I attended a friend’s wife’s surprise birthday party. Her husband used the GPS on her phone to track her approach the house so that everyone could hide at the appropriate moment (we also should have put the guacamole away before she got home). This is the heart of big data. We have no shortage of data to measure those items that we once thought of as intangible.
The internet is one of the most ubiquitous measurement instruments ever devised. An interesting example of using internet behavior to measure real world behavior is the use of Google searches prior to primary elections to determine how late-deciding voters are behaving. Bloomberg Business published an article on February 11 indicating that Google searches nailed the New Hampshire Primary. Nate Silver of FiveThiryEight has also indicated he uses Google search data as an input into his models. The internet is a data magnet and a measurement tool. Less Orwellian examples abound in the A/B testing field. The article, 3 Real-Life Examples of Incredibly Successful A/B Tests provides examples of using the internet as a measurement tool to reduce uncertainty.
Prediction markets are a tool to harness the opinion of crowds; they aggregate the knowledge of the group of people. Most prediction markets use either exchange or betting mechanisms to attach a value to a decision. My favorite two prediction markets are BetFair (the UK betting website) or PredictWise. Both “markets” use different approaches to aggregate a wide range of opinions. Prediction markets provide a better forecast than almost any of the individual participant in the markets can deliver. Hubbard points out that in prediction markets prices seem to match the probability of occurrence. Involving money (BetFair for example) incentivizes people to do research on their trades or bets.Chapter 13 drives home the point that the evolution of technology provides a wide range of new possibilities to measure what once might have thought of as intangible. Between tools like GPS, the internet and prediction markets it is difficult to find anything that is truly intangible. For example, EA Games use of an A/B test to determine that direct pre-order promotional offers did not drive more business by measuring behavior. Not all of the new measurement tools are accepted as Hubbard points out in the sidebar on the DARPA “Terrorism Market” Affair. In this case, the prediction market was shut down before useful data was collected. None of these new measurement tools are magic but they are often useful for translating the intangible into the measurable.
Past installments of the Re-read Saturday of How To Measure Anything, Third Edition
Chapter 1: The Challenge of Intangibles
Chapter 2: An Intuitive Measurement Habit: Eratosthenes, Enrico, and Emily
Chapter 3: The Illusions of Intangibles: Why Immeasurables Aren’t
It is time to begin the selection process for the next’ish book for the Re-Read Saturday. We will read Commitment – Novel About Managing Project Risk by Olav Maassen and Chris Matts based on the recommendation of Steven Adams first then move to the next book. As in past polls please vote twice or suggest a write-in candidate in the comments. We will run the poll for three weeks.