202504011627 - Goodhart’s Law

Defined

"when a measure becomes a target, it ceases to be a good measure."

Goodhart's Law: Shopify CEO Tobi Lütke highlights the principle that "when a measure becomes a target, it ceases to be a good measure." He explains that metrics lose their usefulness when they are optimized as goals, as this distorts the broader objectives of a complex business.
Avoiding KPIs and OKRs: Shopify intentionally avoids rigid frameworks like KPIs and OKRs because no single metric can fully capture the complexities and tensions within a company. Instead, they adopt a balanced approach to decision-making.
Data-Informed, Not Data-Driven: Shopify values data and has invested heavily in analytics systems but avoids over-reliance on quantifiable metrics. They focus on unquantifiable elements like taste, quality, passion, and craftsmanship, which Tobi believes account for 80% of a product's true value.
Human Judgment Over Metrics: Shopify compares its approach to a Pilot using a cockpit—metrics serve as support tools, but decisions are ultimately made by humans. This allows the company to address both quantifiable and qualitative aspects effectively.
Criticism of Quantifiable Optimization: Tobi critiques the tendency to prioritize highly quantifiable metrics for immediate gratification, arguing that this leaves much of a product's value unaddressed. He advocates for embracing intangible qualities that drive deep satisfaction and long-term success.

Answer from Perplexity: pplx.ai/share