Editing 2899: Goodhart's Law
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First, Cueball introduces and defines {{w|Goodhart's Law}}, which is the observation that when a metric — a {{w|performance indicator|measure of performance}} — becomes a goal, efforts will be unhelpfully directed to improving that ''metric'' at the expense of systemic objectives. | First, Cueball introduces and defines {{w|Goodhart's Law}}, which is the observation that when a metric — a {{w|performance indicator|measure of performance}} — becomes a goal, efforts will be unhelpfully directed to improving that ''metric'' at the expense of systemic objectives. | ||
− | For example, imagine a scenario in which a car dealership is looking to grow profits, and its managers decide to focus on increasing a component metric of profit: how many cars it sells. So they offer a bonus to their salespeople to sell more cars. But then the salespeople offer deep discounts to rack up sales, rendering the car sales unprofitable. This example shows how a ''metric'' (cars sold) can become the ''target'' | + | For example, imagine a scenario in which a car dealership is looking to grow profits, and its managers decide to focus on increasing a component metric of profit: how many cars it sells. So they offer a bonus to their salespeople to sell more cars. But then the salespeople offer deep discounts to rack up sales, rendering the car sales unprofitable. This example shows how a ''metric'' (cars sold) can become the ''target'' replacing the real target, profit growth, if individual incentives are not properly managed. |
Hearing about Goodhart's Law, White Hat suggests eliminating metrics that have become targets. | Hearing about Goodhart's Law, White Hat suggests eliminating metrics that have become targets. |