What’s worth measuring
When my wife and I were thinking about where to settle, we did what most young parents do: we looked at the schools. And like most parents, we leaned heavily on the rating plastered across every Zillow listing: the GreatSchools score, a number from one to ten, ostensibly capturing how good a given public school is.
Our local elementary school scores below average. We sent our son there anyway, and the gap between the number and the reality is an instructive lesson.
The principal knows every child by name. The student population is genuinely diverse, with a high proportion of immigrant and refugee families. Teacher turnover is low; the support staff is remarkable. We attended a monthly whole-school meeting last week and were stunned by the warmth of the community we walked into. Our son, who has some special needs and was unhappy at his previous school, is now thriving: self-motivated, proud of his work, and eager to go to school in the morning. None of this shows up in the score.
The score isn't fabricated. It's largely a function of standardized test results, which are, in turn, heavily correlated with affluence and English fluency. Having taught in Baltimore through Teach for America years ago, I know a low rating can reflect something real. But in this case, if the principal woke up tomorrow determined to move that number, I'm not sure she could, and I'm certain the school would be worse for the trying.
I've been thinking about the role that metrics play in life, prompted by a recent Derek Thompson interview with the philosopher C. Thi Nguyen, whose new book is called The Score: How to Stop Playing Somebody Else's Game. Nguyen has a useful term for what happens when a simplified measure quietly takes over a richer set of values: value capture. It happens, he writes, when your values are "rich, subtle, or developing," and then an institution or technology hands you a simplified, quantified measure, and that version takes over. We start with something meaningful, like giving our child a good education, eating healthy food, getting in shape, or having a stable financial life, and somewhere along the way, we slap a number on it. Sooner or later, the number starts setting the agenda. The metric becomes the thing.
The examples are everywhere once you start looking. My brother-in-law works for a company where growth targets are handed down from above with little regard for what's happening with actual customers or the headwinds their business is facing. Hitting the number has become its own project that feels disconnected and arbitrary. Nguyen describes the same dynamic in academia, where journal rankings end up shaping what philosophers write about, often at the expense of the questions that drew them to philosophy in the first place. He has a lovely line, borrowed from a discussion of food and health policy, about what gets lost when we reduce a wheel of Brie to its saturated fat content; the number is real, but the deliciousness, the tradition, the ripeness; all of it is lost. It's not that lifespan and heart attack rates are unimportant; it's just that the other stuff is harder to quantify.
I bring all this up because the same dynamic shows up in financial planning.
There's an old line, sometimes attributed to Peter Drucker, that what gets measured improves. I think that's broadly true. The caveat is that you must be careful about what you're measuring, and whether moving the number is genuinely a means to an end or has become the end itself.
In a financial plan, a handful of metrics genuinely earn their keep. Each opens a useful window onto a different part of the picture:
Savings rate: what percentage of income is going toward the future. It's the single most controllable lever most people have, with the highest correlation to future flexibility.
Debt service rate: the share of income going to debt payments. It's an objective read on your financial flexibility and how much room you have to absorb a shock or pivot.
Spending rate: sometimes called burn rate, it’s useful to split this between fixed and discretionary. The fixed portion is what determines how exposed you are if your income drops. Discretionary is where you get to have fun.
Investment allocation: the mix of stocks and bonds, and how concentrated the portfolio is in any single position. It's less a number to optimize than a frame for understanding what you own and the time frame and level of risk it's built for.
Withdrawal rate: the rough share of the portfolio being drawn each year matters especially for retirees. It's a starting point for thinking about spending capacity, though, as I've written before, a static withdrawal rate is a blunt instrument for what is a dynamic problem.
These are all useful metrics. They make legible things that would otherwise be vague. They give us something to monitor, adjust, and talk about. What they don't do, and what no number does, is tell you what the plan is for.
Nguyen's deeper insight is that scoring systems are remarkably good at setting our motivations. His favorite board game designer, Reiner Knizia, says the scoring system is the most important tool in his game design kit, because it tells the player what to want. We can use this. Gamification works; a fitness tracker counting steps, a multi-year Duolingo streak, a savings rate creeping up year over year… these are small, well-designed games that make a hard thing feel manageable, even fun. There's nothing wrong with playing them.
What Nguyen is really arguing for is to step back periodically into the role of the game designer rather than just the player. To ask which metrics we've chosen to care about, what they're capturing, what they're missing, and whether moving them is still in service of something that truly matters. A good financial plan uses numbers, but it isn't governed by them. The savings rate matters because of what the savings are for. The withdrawal rate matters because of what the spending enables.
The numbers are tools. They work best when we reflect honestly on their scope and remember that the most important parts of a financial life (like the most important parts of a school) usually aren't the ones that show up on the rating.
You can read the full Derek Thompson interview with Nguyen here. Also, a huge shout-out to the Mockingcast episode 292 for turning me on to it.
