Goodhart’s law explains why so many people aren’t happy

Goodhart's law
Bad measurement causes failure in business and life 

Goodhart’s law is named after Charles Goodhart, a British economist and former professor at the London School of Economics. Goodhart’s law simply states “When a measure becomes a target, it ceases to be a good measure.”

“When a measure becomes a target, it ceases to be a good measure.”

Charles Goodhart

Most businesses are a victim of this. Everywhere I’ve worked, revenue has been the target. Many CEOs are renumerated on their company’s stock price so Earnings Per Share (EPS) becomes the target instead of customer satisfaction or producing quality products. One of the biggest victims of financialization has been Boeing. With accountants replacing engineers and unprecedented amounts of company buybacks to boost the share price. Eventually, you will fail when using a measure as a target.

Living to work

Unfortunately, work is survival for the less fortunate population. There’s also the fortunate above-average earners. I live in London so I’m surrounded by them. It’s fair to say, those of us stuck in the rat race are examples of Goodhart’s law. The measure of money becomes life’s target, more money equals more stuff and more stuff is what life becomes about. More gadgets, more fancy meals, more clothes. The obvious consequence of this strategy is that work becomes all-consuming.

Dilbert helping explain Goodhart's law

Working to live

If you’re a neuroscientist working on groundbreaking discoveries or Elon mask trying to relocate the Earth’s population to Mars, then I get it. However, if you’re the majority that works in an office, days filled with emails and pointless meetings then you have no excuse. A much better way to live your life is to have meaningful hobbies. Work is dull, you’d need to be a psychopath to enjoy office life. Instead, focus on what you can control. Have things to look forward to outside of work, whether that be yoga, books, meditation, sports, climbing, camping, cooking. Whatever it is, just make sure you have something. The more interests you have the more interesting you become, work isn’t one of them. No one wants to hear your dull work stories or about your new home, clothes or car.

Using better measures for life

Money is certainly a measure, we need it to survive but it’s only one and by no means the most important one. Money is quantifiable and partly the reason so many obsess over it. Imagine if neurological and biological technology was so advanced that you could open an app and see your happiness and health score. People’s priorities would change. Status is the driving force around many of our actions. This force makes us want to continuously earn more and put us higher on the ladder but if you were low down on the happiness and health ladder then your ego would want action. Because fuzzy measures like health and happiness are hidden it means they are often forgotten in favour of increasing your money score.

Wrapping up Goodhart’s law

I wrote a post recently that covers other life measures: health, relationships, purpose, experiences and mastery (you might have different ones). In my highly unscientific evaluation, I gave myself a score of 64 out of 100 (so room to improve). The point being: money is a measure but just one of many so don’t make it your life’s target, ’cause you’ll end up sad and boring to boot.

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2 thoughts on “Goodhart’s law explains why so many people aren’t happy

  1. I do think that everybody is difference, but maybe we can measure things that make us happy- a “happyness index” in some way. For me, it’s, yes, money coming in is above money going out, but it’s also exercise, not being stressed, eating good food (even just at home), all of this together gives me “happiness”. If I increased the money bit (which I did a few years ago)- it meant that I directly had less time for exercise/cooking/food. I was more unhappy. I do find this balance needs constant adjustment though- it’s not like I have come up with some fix that always works for me. But, that’s life right?

    1. Good point. GDP is a perfect example of a measure becoming a target. In fact, Bhutan became the first country to test a national Happiness Index and New Zealand is the latest to follow.

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