Most people are overconfident—calibration corrects this.Learn to assign realistic confidence intervals (e.g., “I’m 90% sure the answer is between X and Y”).Track how often you’re right when you say “90% confident.”Training in calibration massively improves estimation accuracy.

Calibration: Aligning Confidence with Reality

A repeatable, structured process makes measurement work in any context.Define the Decision – What are you trying to improve?Determine What to Measure – What variable reduces uncertainty in your decision?Model the Value of Information – Prioritize your efforts.Calibrate and Gather Data – Smart, small, fast.Analyze and Update – Apply Bayesian logic and statistical tools.Apply the Result – Make the decision.Iterate and Improve – Every decision is a feedback loop.

The Measurement Process

“If a decision is worth making, it’s worth measuring something to improve it.”

Final Core Belief from the Book

The belief that some things (like innovation, risk, or employee satisfaction) are unmeasurable is a myth.If it matters, it’s measurable to some degree.Uncertainty can always be reduced.Measurement is not about perfect precision—it’s about reducing ignorance.

The Myth: “You Can’t Measure That!”

Don’t measure everything—clarify the decision you’re trying to improve.Start with the decision context.Ask: “What would I do differently if I had this information?”Convert vague terms (like “success,” “engagement,” “risk”) into specific observable outcomes.

Defining What You Really Need to Know

You don’t need massive datasets—a few smart observations can go a long way.Sampling: Small samples can reveal a lot.Expert Estimation: When calibrated, expert judgment is useful.Use Bayesian updating to incorporate new data into prior beliefs.Simple tools: surveys, simulations, bootstrapping, Fermi problems.

Simple, Low-Cost Measurement Methods

Measurement = Observations + Reduction in Uncertainty.A measurement is any observation that helps you make better decisions.Even a small reduction in uncertainty can be highly valuable.Use range estimates (90% confidence intervals), not fixed numbers.

The Concept of Measurement

Some measurements are worth more than others—VOI tells you which.VOI = how much a measurement reduces your expected loss or improves your decision.If a piece of data wouldn’t change your choice, don’t bother collecting it.Focus on high-uncertainty, high-impact variables.

Value of Information (VOI)

Now updated with new research and even more intuitive explanations, a demystifying explanation of how managers can inform themselves to make less risky, more profitable business decisions This insightful and eloquent book will show you how to measure those things in your own business that, until now, you may have considered "immeasurable," including customer satisfaction, organizational flexibility, technology risk, and technology ROI.<ul><li>Adds even more intuitive explanations of powerful measurement methods and shows how they can be applied to areas such as risk management and customer satisfaction</li><li>Continues to boldly assert that any perception of "immeasurability" is based on certain popular misconceptions about measurement and measurement methods</li><li>Shows the common reasoning for calling something immeasurable, and sets out to correct those ideas</li><li>Offers practical methods for measuring a variety of "intangibles"</li><li>Adds recent research, especially in regards to methods that seem like measurement, but are in fact a kind of "placebo effect" for management – and explains how to tell effective methods from management mythology</li></ul>Written by recognized expert Douglas Hubbard-creator of Applied Information Economics-How to Measure Anything, Second Edition illustrates how the author has used his approach across various industries and how any problem, no matter how difficult, ill defined, or uncertain can lend itself to measurement using proven methods.

The Myth: “You Can’t Measure That!”

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2. What You Do

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