We love metrics. Numbers give us a sense of control, a feeling we’re making progress. But what happens when we become too obsessed with those numbers? This is where Goodhart’s law comes in, a vital mental model for navigating a world increasingly driven by data. Understanding it can save you from unintended consequences and keep you focused on what truly matters.

1. What is Goodhart’s Law? #

Goodhart’s Law is best summarized as: “When a measure becomes a target, it ceases to be a good measure.” In simpler terms, when you start using a specific metric as a primary goal, people will optimize for that metric – even if it means sacrificing the original intent or quality it was supposed to represent.

The law originates from economics, attributed to British economist Charles Goodhart. He observed this phenomenon while working at the Bank of England in the 1970s, noticing how attempts to control the money supply often led to unintended distortions in the financial system. Although observed in economics, it’s a principle that applies far beyond finance, touching upon every aspect of life where measurement is used to drive behavior.

2. How It Works #

Imagine a rubber band. The underlying goal is stretch. The measure? The distance between your fingers holding the band.

• Intended Use: Ideally, the distance between your fingers (the measure) accurately reflects the stretch (the underlying goal).
• Goodhart’s Law Kicks In: Now, what if your ONLY goal becomes to maximize the distance between your fingers, regardless of the rubber band? You could just grab a longer rubber band! You’ve maximized the “distance” metric, but the real stretch (the original goal) hasn’t changed.

Here’s the breakdown:

1. Identify a Metric: We select a number to represent a complex reality (e.g., number of website clicks as a proxy for customer interest).
2. Turn the Metric into a Target: We decide that increasing this number is the main objective.
3. Optimization Starts: People find ways to boost the metric, even if it undermines the original purpose (e.g., buying fake clicks, creating clickbait).
4. The Measure Becomes Useless: The metric no longer reflects what it was supposed to represent, providing a distorted view of reality. The underlying goal might even suffer.

3. Examples of the Model in Action #

• Education: Schools are often evaluated based on standardized test scores. Goodhart’s Law predicts that schools will focus heavily on teaching to the test, potentially neglecting broader educational goals like critical thinking, creativity, and social skills. They “maximize” the scores, but the quality of education might decrease.

• Sales: A company sets a sales target based solely on the number of deals closed. Salespeople might rush deals, offer unsustainable discounts, or even engage in questionable practices to hit the quota, damaging long-term customer relationships and profitability. The number goes up, but the health of the business deteriorates.

• Social Media: Platforms often optimize for engagement (likes, shares, comments). This leads to algorithms prioritizing sensational, often polarizing, content. Users become addicted to the dopamine hits of engagement, but the quality of discourse and users’ mental wellbeing can suffer. High engagement, but societal costs.

4. Common Misunderstandings or Pitfalls #

A common mistake is thinking Goodhart’s Law means all metrics are bad. That’s not true! Metrics are essential for tracking progress and making informed decisions. The key is to:

• Understand Limitations: Recognize that any single metric is an imperfect representation of a complex reality.
• Avoid Sole Reliance: Don’t become solely fixated on one number. Use a variety of metrics and qualitative data.
• Regularly Re-evaluate: Question whether your metrics still accurately reflect your underlying goals.

5. How to Apply It in Daily Life #

Here are a few practical ways to apply Goodhart’s Law:

• Before setting goals, ask yourself: “What unintended consequences could arise if I focus solely on this metric?”
• When evaluating performance, look beyond the numbers: “What qualitative factors are influencing the results?”
• Challenge your assumptions: “Are our current metrics still relevant? Do they accurately reflect our values and goals?”
• Focus on the system, not just the number: Creating a healthy system that supports your goals is more important than hitting arbitrary numbers.

For example, if you’re trying to lose weight, don’t just focus on the number on the scale. Consider other factors like energy levels, overall health, and body composition. Are you sacrificing your well-being to reach a specific number?

6. Related Mental Models #

• Second-Order Thinking: Consider the consequences of the consequences. Goodhart’s Law is often a result of not thinking through the second-order effects of optimizing for a specific metric.
• Feedback Loops: Goodhart’s Law highlights how metrics can create feedback loops, both positive and negative. Understanding these loops can help you design better systems.
• Incentives: Goodhart’s Law thrives on misaligned incentives. If you incentivize the wrong behavior, you’ll get the wrong results. Understanding the incentives at play can help you avoid unintended consequences.

By understanding Goodhart’s law, you can navigate the world of metrics more effectively, avoid unintended consequences, and stay focused on the bigger picture. Remember, numbers are tools, not masters. Use them wisely!