Sign in Subscribe

Tracking & Measuring

Tracking & Measuring

Episode 010: Tracking and Measuring – Benchmarking (Part 1)

Synopsis In this episode, Jared introduces one of the most powerful strategy tools in the professional investor’s toolkit: Benchmarking. While often dismissed as a "thief of joy," comparison is actually a vital diagnostic tool when used correctly. Jared breaks down the first two steps of the benchmarking process—Tracking and Measuring—and explains why most people fail because they rely on "eyeballing" their progress. From his own "insufferable" history of tracking every gym rep and calorie for years to the critical distinction between Leading and Lagging indicators, this episode provides the framework for observing reality objectively so you can steer your life portfolio with confidence.

Detailed Sequential Outline

I. Introduction: The Comparison Paradox

  • (0:59) Comparison as a Tool: We are often told that "comparison is the thief of joy." While true for the ego, comparison is a non-negotiable strategy tool for a portfolio manager.
  • (1:46) The Sports Stat Paradox: Many people claim to hate tracking data, yet they can recall near-encyclopedic databases of sports stats in their heads.
  • (4:31) Stop Comparing Like a Middle Schooler: The wrong use of comparison involves stoking the ego, envying others, or measuring self-worth. The right use involves aligning investments with priorities and setting a trajectory.
  • (5:16) The Three Pillars: Benchmarking consists of three distinct but related activities: Tracking, Measuring, and Benchmarking. This episode covers the first two.

II. Pillar 1: Tracking (Paying Attention)

  • (7:18) Observing Reality: Tracking is simply the act of paying attention to the cause-and-effect relationships in your life.
  • (8:02) Objectivity is Key: You should track quantifiable data (bank balances, mile times, revenue) rather than subjective feelings.
  • (8:34) The Brain is a Bad Hard Drive: A key part of tracking is recording data. Our brains are unreliable at storage; we bias information when we try to recall it later. Whether it's a spreadsheet or a journal, it must be written down.
  • (9:50) Missing the Progress: Tracking isn't just for identifying "trouble areas." It is vital for identifying progress, which is one of the most powerful motivators for continued investment.
  • (10:13) The Law of Attention: What you track, you pay attention to. What you pay attention to grows.

III. The Obsessive Trap: Jared’s Personal Audit

  • (11:37) Can You Over-Track?: Yes. Jared shares his own history of obsessive data collection:
    • Time: Tracked 15-minute intervals, 7 days a week, for over a year.
    • Gym: Recorded every rep, set, and heart rate zone for years.
    • Food: Has not missed a single day of tracking calories and macros in over 1,600 days.
  • (13:36) The Rule of Results: You don't need to track everything. You only need to track the areas where you actually want outsized results.

IV. Pillar 2: Measuring (Accuracy vs. Eyeballing)

  • (14:02) Decoupling Measuring from Tracking: You cannot track objectively without a standard unit of measure.
  • (15:11) We All Measure (Mostly Poorly): No one truly "doesn't measure." We just use inaccurate tools.
    • Inaccurate Food Measuring (16:33): "Eyeballing" portions or using "fullness" as a guide. (Example: The depressing reality of what a true 2-tablespoon serving of peanut butter looks like).
    • Inaccurate Time Measuring (18:22): "Feeling busy," or using terms like "soon" and "someday."
    • Inaccurate Health Measuring (19:39): Relying on the mirror or BMI (which doesn't distinguish between muscle and fat mass).
  • (21:34) Accurate Career Measures: Move past "busyness" or "hours worked" (the child staring at a textbook for an hour hasn't done an hour of homework). Focus on skills developed, products delivered, and value created.

V. Why Measurement is Mandatory

  • (24:19) Choice vs. Compulsion: Measuring is not optional. If you don't do it voluntarily, you will eventually be forced to do it via a crisis (a poor health diagnosis, a financial blow-up, or a relationship divorce).
  • (25:32) Quiet Negativity: Accounts go negative quietly and then implode loudly.
  • (28:52) The Self-Lying Problem: The easiest person to lie to is yourself. We are the least objective when it comes to our own performance. Measurement shines a light on these blind spots.

VI. Leading vs. Lagging Indicators (The Windshield vs. The Rearview)

  • (32:31) Lagging Indicators (Results): These are outcomes of work done upstream.
    • Examples: Weight on a scale, bank balance, stock price, last quarter's sales.
    • The Trap (31:24): Driving your life based solely on lagging indicators is like driving a car while looking only at the rearview mirror. It tells you where you were, but nothing about what is coming.
  • (41:37) Leading Indicators (Inputs): These are the habits and investments performed today that cause the results.
    • Examples: Daily nutrition, gym reps, savings rate, time spent on task.
    • The Solution (42:07): Using leading indicators in your decision-making is like looking through the windshield. It allows you to steer and navigate what is ahead.
  • (43:13) The Formula for Success: A high stock price is a lagging indicator of excellent management (leading). A fit body is a lagging indicator of consistent lifting (leading).

VII. Summary & Closing

  • (44:10) Verify, then Focus: Track lagging indicators only to verify that your leading indicators are working. Spend 90% of your energy on the inputs.
  • (44:34) Next Time: We move to the final step of the process—Benchmarking—and apply these tools to the ultimate result.

Quotes to Remember

"I am not here to tell you to stop comparing. I am here to tell you to stop comparing like a middle schooler and start comparing like a portfolio manager."
"What you track, you pay attention to. And what you pay attention to grows in importance."
"We cannot improve what we do not measure. Or said more accurately: we can only improve what we measure accurately."
"Measuring is not optional. If you don't do it, you'll be forced to do it eventually—usually when you're forced to come face-to-face with an accurate accounting during a crisis."
"The easiest person to lie to is yourself. You are usually the least objective when it comes to your own performance."
"Using lagging indicators as your primary driver of decisions is like trying to drive your car only using your rearview mirrors."
"Leading indicators are the upstream cause of the downstream results. Focus on the windshield, not the mirror."

Next Episode: Benchmarking Part 2: "Compared to what?" and the final step in the investor’s feedback loop.

Full Transcript:

Good day, investors.

Introduction: Benchmarking as a Portfolio Management Tool

(0:16 - 0:43)

Good day, investors. Welcome back to vested with Jared Bowers. I am your host, and I am excited to be here because we have another exciting tool of portfolio management to talk about and apply to life.

The Usefulness of Tracking and Measuring

(0:44 - 1:19)

As we continue our stroll down portfolio management lane, looking at all the neat and nifty tools that we have to use and that we should learn to use, today we are going to start our dive into benchmarking. What if I told you that there exist people who track and measure things for fun? Food diaries, workout logs, time-tracking sheets, financial budgets. Nerds and fitness buffs can agree on some things, such as the usefulness of tracking and measuring.

The insufferable Nature of "The Tracker"

(1:19 - 1:35)

That sounds like a chore to many, but someone's yuck is often someone else's yum. And many of you won't be surprised because you are those people. Others won't be surprised because you live with that person, insufferable as they are.

(1:36 - 1:49)

I should say insufferable as we are, because you will not be surprised to know that I am part of that group. And this applies in a lot of other areas. A very common application of this practice is with sports.

Mental Stats vs. Benchmarking

(1:50 - 2:08)

People who have never tracked a dollar or a calorie in their life, or even pay very close attention to where their family is at any given point, somehow have a near-encyclopedic database of sports stats that they have tracked. In their brain, of course. Not written down.

(2:08 - 2:41)

Never written down. Are you crazy? How could you forget something that important? What would be the point of writing it down? And they don't just know the stats on players and teams, and even for specific games and seasons, they know those stats compared to other players, teams, and seasons. These people I described when it comes to tracking and measuring, in different areas of life — food, money, workouts, sports — are all engaging on some level in a practice called benchmarking.

Wealthy Mindset vs. Poor Mindset on Feedback

(2:42 - 3:10)

And if that is not a term you're familiar with, don't worry, you will be soon. We briefly covered this in episode 5, when we talked about how the poor mindset avoids or rejects feedback, never measures, never adjusts, and are narrative-driven, versus the wealthy mindset that doesn't just accept feedback, but actively seeks it out. They track, measure, and benchmark in order to make adjustments and decisions based in reality.

Comparison: The Thief of Joy vs. The Alignment Tool

(3:11 - 3:30)

And we are going to dive into that in more detail today, because benchmarking is a powerful tool in our investor toolkit. Think about benchmarking as comparison. And comparison is good, right? No, actually, we have been taught that playing the comparison game is usually not a good thing.

(3:31 - 3:49)

The thief of joy, comparison has been called. And I do like that phrase, comparison is the thief of joy, because there is truth to it. Benchmarking, comparison, being a powerful tool, if applied in the wrong direction for the wrong reason, will steal your joy.

(3:50 - 4:11)

And we've had examples like this before, haven't we? A moral judgment, good or bad, being applied to a tool, that can be used for good or for ill. Not inherently good or bad on its own, but in how it is used. What we are going to talk about today is that comparison can lead to discontentment, or it can lead to where you actually want to go.

Positive Uses of Benchmarking

(4:11 - 4:43)

A hammer isn't bad, but if someone uses it to keep hitting themselves in the face, I am going to do my best to try to teach them a different strategy, a different use of that tool. And comparison, or as we are going to talk about it today, the practice of benchmarking, can and often is a tool that is used in a harmful way. Playing the comparison game, as the comparison game is often played, in order to measure your self-worth, or stroke your ego, or decide who you envy, or to keep score versus those around you.

(4:44 - 5:04)

Those are negative uses of the tool. Comparing appropriately and properly in order to align your investments with your priorities, make adjustments, determine and set your trajectory, and learn, is on the other side, all positive uses of this tool. And so, I am not here to tell you to stop comparing.

Compare Like a Portfolio Manager

(5:05 - 5:19)

I am here to tell you to stop comparing like a middle schooler, and instead start comparing like a portfolio manager. So let's get into it. Benchmarking is actually three distinct but related activities.

(5:19 - 5:29)

They all go together. We are going to take them one by one and then we will combine them all. Those three activities are tracking, measuring, and benchmarking.

The Triple Layer Feedback Loop

(5:30 - 5:51)

The point of these three components of the benchmarking process is to give you objective data for making necessary adjustments. It also allows you to objectively determine if you really are accomplishing what you want to accomplish. These are alignment and strategy tools, not just motivation or comparison or self-worth tools.

(5:52 - 6:05)

They are three layers of the same feedback loop. And remember, objective feedback is crucial. We should be in a wealthy mindset state where we are intentionally seeking out good, objective feedback that we will use.

(6:06 - 6:17)

The poor mindset, as we know, rejects feedback, avoids measuring, and ignores reality. The wealthy mindset seeks out feedback. It is data-driven.

(6:17 - 6:38)

And the wealthy mindset benchmarks appropriately so that they can invest well. If you track, measure, and benchmark well and consistently, you will not be surprised by the outcomes you get or don't get. At the highest level, think of it as we observe reality, compare it to the target, reallocate resources based on that target, and then repeat the process.

Overview of Tracking and Measuring

(6:39 - 6:51)

These are alignment tools. Hopefully this is not going to sound like we need to become neurotic or obsessive, because it can become that. And you'll see how as we go through our discussion on each of these.

(6:52 - 7:07)

Tracking, measuring, and benchmarking are the three steps of the benchmarking process. And for this episode, we are going to dive into the first two, tracking and measuring. Next time, we will discuss benchmarking specifically and then bring it all together for application.

Tracking: Observing Reality and Beneficial Effects

(7:08 - 7:21)

But there is a lot to dig into in this overarching portfolio tool of benchmarking, so covering it in two episodes is going to help. So let's first talk about tracking. Essentially, tracking is paying attention.

(7:22 - 7:36)

It's the observing reality part. Really paying attention to the effects happening around you. The most beneficial effects are the cause and effect relationships where your actions are the cause and the target that you are shooting for is the effect.

Examples of Objective Tracking

(7:37 - 8:01)

And there are all sorts of things that we can and do track. You may want to track different things for different reasons and purposes. Some quick examples would be your bank account balance, your body composition, your 5k or mile time, the revenue of your business, your personal cash flow, your time invested in something, the returns that you generate, whether those be financial or other types of returns.

(8:02 - 8:15)

Ideally, those things we track will be objective. It doesn't help as much to track subjective things that don't have quantifiable measures. There are exceptions when it comes to things like sleep.

The Necessity of Writing it Down

(8:15 - 8:33)

Your subjective sense of how well you slept is the single best measure of your quality of sleep. Again, an exception, but objective measures are usually preferred because they are usually more helpful. And a key part of tracking is the actual recording of the thing that we are measuring.

(8:34 - 8:49)

Let's not miss that part. Not just trying to remember it, but actually recording it, writing it down so that it can be referenced again in the future. We'll talk more about this at some point, but our brains are not a very good place to store this type of data.

(8:50 - 8:58)

We have recall issues. We will bias the information if we try to recall it later. We should write it down and record it somewhere.

Steering Away from Assumptions

(9:00 - 9:16)

That tracking is a key first step. And that can be in a spreadsheet, in a note on your phone, in a journal, but make sure that you actually track it. And we don't need to make any decisions or changes based on what we're tracking, at least not yet.

(9:17 - 9:37)

But without that data, you're going to be steering blind, making assumptions when you are trying to make adjustment decisions in the future. And again, you are going to think that you remember where you were or what you had, what your stats were before versus where you're at right now. And sometimes you'll be right, but most of the time you'll be off.

Measuring Progress and Regress

(9:38 - 9:54)

And it's not just about measuring where we may be off on the downside or identifying where we have trouble areas. We may miss out on realizing the progress that we've made if we don't track it. Yes, we may want to measure to see where we might be regressing on going backward.

(9:55 - 10:13)

But it is maybe even more important to make sure that we are measuring our progress because progress itself is motivating and a very powerful truth and theme of what we talk about. Objective measures of both regress and progress are crucial. And this brings us to our next point.

What You Track, You Pay Attention To

(10:13 - 10:35)

What we decide to track is key because what you track, you pay attention to. And what you track and pay attention to grows in importance and can crowd out the things that you don't track, that you don't pay close attention to. Which is a great thing if you're tracking the right things, but not so great if you are tracking the wrong things or leaving out some of those right things.

The Limits of Data and Tracking

(10:36 - 10:45)

What we track, we pay attention to. We will talk more about that shortly. And those of us with obsessive personalities can especially like tracking things.

(10:46 - 10:53)

It gives us something to do. It gives us something to bite onto. It gives us something to feel like we are being productive at.

(10:54 - 11:01)

And many of us, especially the investment-minded among us, really like data. We love the numbers. We like spreadsheets.

(11:01 - 11:16)

We like lists. But it can go overboard. What you might be hearing me say, and I will try to make sure and clear that I'm not saying as we talk about tracking, measuring, and benchmarking today, is that you should do it with everything.

(11:17 - 11:24)

And that's where the obsessive part can come in. Because to some, that's going to sound like a chore. But to others, it's going to sound exciting.

(11:25 - 11:30)

Ooh, more things I can track. Objective data that I can use. Exciting.

(11:30 - 11:37)

And it is, at least to me. But I want to make clear that we cannot track everything. And we shouldn't.

Jared's Personal History of Over-Tracking

(11:38 - 11:55)

And I can say this with confidence because I have tried quite valiantly. Everything is probably an exaggeration. But when it comes to my life and my lists and my spreadsheets that I've created, it has been, and may still be at times, a bit overboard.

(11:56 - 12:06)

So examples from my life. I, in the past, have done time tracking in 15-minute intervals every single day, seven days a week. And I did that for over a year.

(12:07 - 12:21)

It was a useful exercise, but not sustainable in practice. I may talk about that in the future and what I learned from it. Another example from me, I have tracked every rep of every set of every workout that I did for years.

(12:22 - 12:37)

And if you know how much I work out, that is a lot of tracking. That didn't just apply to the weight room, but it also applied to my cycling. Time spent on the bike, in different power zones, in different heart rate zones, and on the different bikes that I ride.

(12:38 - 12:46)

Indoor, mountain, road, gravel. Again, doing that for years. I still do a measure of that because it gives me useful information.

(12:47 - 13:03)

I have to-do lists and have-done lists every day, for weekdays and weekends. And I do a lot of tracking and keeping objective measures of different things on those. Or how about this one? Every bit of food that I've eaten, never missing tracking a meal.

Biometric Wearables and Health Screening

(13:04 - 13:24)

Calories and macros, more on this in a bit. And the last example from me, every piece of biometric information that I can reasonably track, and some that are not so reasonably tracked, through wearables, testing, health screening, and I've learned a lot. In some of those areas, I'm still doing it, because I find it useful.

(13:25 - 13:35)

But admittedly, in some of those areas, I am probably overboard. I know that I've been overboard in the past. But, most of the time, it has been for a purpose.

(13:36 - 13:48)

And you may be surprised at the things that you can actually track when you stop to consider it. Which is basically anything that you can have regular and objective measures of. And even many things that have subjective measures.

Measuring: Coupling Data with Reality

(13:49 - 14:04)

And that brings us to our next and very closely related point to tracking, which is measuring. When it comes to tracking and measuring, most of our discussion is going to be spent on the measuring part. But you can't decouple these two.

(14:04 - 14:13)

They are tied together. So, as I'm talking about measuring from here, keep in mind that we didn't set tracking aside. It is integral.

(14:13 - 14:23)

Because you can't objectively track things without having measures for those things. And how we measure those things is important. What measure we use is important.

Measuring Money vs. Consistent Budgeting

(14:23 - 14:34)

We're going to talk through a number of examples to illustrate this. Measuring is very easily applied to money. But just because something is easy to do doesn't mean that more people are going to do it.

(14:35 - 14:41)

We know that when it comes to budgeting. Easy to do. We have all the information.

(14:41 - 14:55)

But few people do it. Money is one of the most objective and most easily measurable things in our lives. Yet, even most people who manage their money well will tend to avoid budgeting or they don't budget very diligently, very consistently.

(14:56 - 15:10)

So, just because something is easy to track and measure doesn't necessarily mean that we're going to do it. What we are measuring has to be important to us and the measuring itself has to be important to us. It is a practice that we actually have to apply.

(15:11 - 15:21)

And we all do it. We all measure in so many different ways in different areas of life. We just tend to do it poorly, inconsistently, and with inaccurate measuring tools.

(15:22 - 15:30)

But measuring is part of life. We may not write it down, which is the tracking part. We may not keep track of it, but we all measure.

Case Study: Measuring Food and Nutrition

(15:30 - 15:36)

Let's talk about some examples. Food. Food is an area that is near and dear to my heart.

(15:37 - 15:41)

Quite literally. Probably yours as well. I love food.

(15:42 - 15:52)

I eat a lot of it. And my, at times, excessive level of weight training and time spent on the bike really pairs well with this obsession. This love of food.

(15:53 - 16:03)

Because the more I train, the more I have to eat. Have to. On my heaviest training days, I'm actually more at risk of under-eating than over-eating.

(16:03 - 16:12)

Which can be detrimental to a lot of things. Muscle growth, recovery, sleep, mood. So that is one of the big reasons why I have tracked my food for years.

(16:13 - 16:31)

My food tracking app tells me that I haven't missed a day of tracking in more than 1600 days. So it's not just the tracking part that's important to me, but it is the accuracy that is also important to me. What is the point of tracking if it's not accurate?

Accurate vs. Inaccurate Measures

(16:33 - 16:44)

Let's talk about accurate versus inaccurate measures. Because I am making the case that we all track. For instance, when it comes to food, very few people are whipping out a food scale. But most of us measure just in less accurate ways.

(16:45 - 16:52)

How full we are, for example. That is a measure that we use. Eyeballing food portions is another measure.

(16:52 - 17:07)

Number of plates? Spoonfuls? That's an interesting one because spoonfuls, of course, can vary based on the size of spoon. But what I'd like to specifically consider is peanut butter. It can be a depressing exercise.

(17:07 - 17:23)

Especially if you are on the side of things where you love peanut butter, but also where you are wanting to be careful about the number of calories that you're pulling in. It can be depressing to realize just how small one serving size of peanut butter really is. Two tablespoons.

The Peanut Butter serv size Depressing Realization

(17:24 - 17:44)

Not how much you can fit on two tablespoons, but how much you can fit in two tablespoons. It is probably half of what you want it to be. If you're trying to be mindful of your calories, eyeballing peanut butter is, I would say, like going to a car dealership and not actually looking at the prices and just scooping up what you want.

(17:45 - 17:56)

It is going to cost you a lot more than you think. But the point of all this with food is that we all measure. We just tend to do it with inaccurate and inconsistent measuring tools.

(17:57 - 18:07)

Accurate ways of measuring are things like, yeah, using a food scale. Measured portions. Using the tablespoon as a measuring device, not just as a scoop.

(18:09 - 18:18)

Structured eating times. Actually counting calories and macros. There are inaccurate ways of tracking food that we eat, or there are accurate ways.

Measuring Time: "Feeling Busy" vs. Objective Logs

(18:18 - 18:24)

But we all measure. Let's talk about time. We all measure time in different ways.

(18:25 - 18:37)

The measuring of time is a really important part of life. And inaccurate measures of time are based on feels, right? Such as, I feel busy. I feel like I put a lot of time into this.

(18:38 - 18:43)

Soon is another inaccurate measure of time. Or someday. I'll do it someday.

(18:44 - 19:03)

Estimating time spent from memory, which if we really like something is going to be compressed, we might spend hours on it and think that it wasn't much time. Or if we don't like something, our estimate of that amount of time will expand. Let's say standing in a long line in full sun with your angry toddler to go on a carnival ride.

(19:04 - 19:15)

We may have only spent 5 or 10 minutes on it, but it felt like an hour. Those are inaccurate measuring tools. Now for accurate tools when it comes to time, an obvious one is the clock.

(19:16 - 19:31)

Time tracking and time logs based on objective data from the clock. Another objective measure of how we use time would be doing something now versus putting it off to later. Actually paying attention to objectively the time spent on task.

Body Composition and BMI Inaccuracies

(19:32 - 19:43)

Let's talk about some other health-related or fitness-related topics. How about body composition? We all measure body composition. We just tend to do it inaccurately.

(19:44 - 19:55)

What I mean by body composition is the shape of it. How much muscle versus how much fat. Inaccurate measures, or at least less accurate measures, are things like the mirror, which we all look at every day.

(19:56 - 20:05)

Or how our clothes fit. That's kind of a blend between objective and subjective. An often inaccurate measure is body mass index, BMI.

(20:06 - 20:25)

Pretty accurate on a global scale. Not very helpful on an individual scale because it doesn't differentiate between mass made up of muscle versus body mass made up of fat. Another inaccurate way we measure our body composition is telling ourselves that that extra 15 pounds of weight is definitely muscle.

(20:26 - 20:38)

Subjective measures. Versus accurate measures of body composition would come from things like a scale. A scale doesn't tell you how muscular you are, but it is at least an objective measure.

Objective DEXA Scans vs. Mirror Subjectivity

(20:39 - 20:59)

The tape measure, that is objective, depending on how tightly you pull it. Body scans such as a DEXA scan, which is a pretty quick non-invasive imaging test that can measure bone mineral density, muscle mass, fat mass. That is a more accurate and objective measure when it comes to body composition.

(21:00 - 21:10)

But most of us tend to use more of the inaccurate measures. Maybe because we have access to those. And we can apply similar examples to fitness.

(21:11 - 21:19)

Inaccurate measures would be time in the gym. Number of workouts performed. How sore or sweaty or hungry you are at the end of a workout.

Accurate Fitness Metrics: Power Output and Zones

(21:20 - 21:31)

Versus accurate measures would be mile time. Amount of weight lifted. Number of minutes spent in zone 2. Number of reps to failure at a specific weight for a specific exercise.

(21:32 - 21:35)

Let's talk about our career. Work. Business.

(21:36 - 21:46)

Inaccurate measures are busyness. How overwhelmed you feel. That's an inaccurate but often used measure that we apply in our working life.

(21:47 - 21:52)

Your job title. Not really meaningful on its own. Number of hours worked.

(21:53 - 22:13)

The funny thing about that one is it would seem objective, but hours worked typically has very little to do with actual results. Those of us with kids might have had a child who sat at the kitchen table for over an hour staring at their assignment but not actually ever working on it. They had an hour of homework, right? Except they didn't.

(22:14 - 22:23)

And compare that to accurate measures. Though sometimes harder to measure are things like skills developed and applied. Product or service delivered and delivered on time.

(22:24 - 22:36)

Your compensation trend tied to your results. The actual value that you created that resulted in value coming to you. We measure in more domains than just food, fitness, career.

Relationship Metrics: Avoidance vs. Real Connection

(22:37 - 22:52)

We also measure in relationships. The question is are we using inaccurate or accurate measures in our relationships? Inaccurate measures would be something like "we don't fight." Which oftentimes is mistaking avoidance for actual peace.

(22:53 - 23:07)

Another inaccurate measure might be gushing on social media, whether that's ourselves or our significant other. That is also a bad way to measure the health of a relationship. You may have seen the same correlation that I have.

(23:08 - 23:25)

Oftentimes, the more gushing I see from a couple on social media, the more I feel like I have to worry about them and their relationship. How about other measures like gifts given or money spent or grand gestures? Transactions. Those are basically relationship scorecards.

Meaningful Time and Repair After Conflict

(23:26 - 23:40)

And those are some poor ways that we use to measure in a relationship. And they are often applied in a negative direction. More accurate and more useful measures that we can and should use are things like shared direction and purpose.

(23:41 - 23:53)

Are we aligned? Also, meaningful connection. Not just time spent together, but meaningful time spent together. Not whether we have conflict, but how well we repair and get back on track after conflict.

(23:54 - 24:18)

Do arguments last for days or weeks? Or do you have a healthy conversation and get realigned? So we all measure. We just tend to use a combination of accurate and inaccurate measures in how we do it. So, if we all measure, why not do it purposely and accurately? That is where the usefulness of measuring truly begins.

Why Measuring is Not Optional

(24:19 - 24:30)

We often treat measuring as though it's optional. Measuring in many cases is not optional. If we don't measure, we are either compelled to do it or forced to do it eventually in many cases.

(24:31 - 24:48)

Only the frequency, quality, accuracy, and choice varies when it comes to measuring. Because if we do it infrequently or inaccurately or both, we may be forced to come face-to-face with an accurate accounting at some point in the future. Examples of this would be a poor health diagnosis.

(24:49 - 25:29)

Things that we didn't measure and didn't track leading up to that point, resulting in a health issue that now needs to be very closely and accurately measured and tracked if we have a hope of getting healthy again. How about a financial issue or crisis? The money that we should have accurately tracked and measured has now resulted in a situation where we absolutely need to track and measure to either avoid or get us out of a disaster situation. How about a relationship blow-up? Not paying attention, not tracking and measuring the right things has now resulted in a situation where we really need to pay attention if we want to have something that we can salvage.

Crisis Management: Resume and Job Loss

(25:29 - 25:59)

Or what about a job loss? A failure to accurately and appropriately track and measure our work, our output, our contribution, can result in being forced to track and measure a lot of things as we put together our resume, get ready for job interviews, and hope that we can quickly recover from a bad situation. And that is what I mean when I say that measuring is often not optional. If we don't do it, we're forced to do it eventually, maybe just in a different way.

Negative Compounding and Surprising Outcomes

(26:00 - 26:17)

Because our investment accounts of life tend to go negative quietly and then very loudly when they compound in the wrong direction for long enough. And oftentimes, people in crisis are surprised by the outcome. But in most cases, they did not need to be, or at least they shouldn't have been surprised.

(26:18 - 26:44)

Looking in from the outside, you probably know people that these things have happened to. The poor health diagnosis, financial crisis, relationship blow-up, job loss, and from the outside, you probably aren't surprised in many of those cases. But it is so much easier to measure and see the trajectory of other people from the outside versus recognizing those same negative trajectories when it is ourselves.

(26:45 - 26:57)

And this process of tracking and measuring are powerful tools to try to see ourselves more objectively. I don't love being surprised by outcomes. And you probably don't either.

Flipping the Script: recognizing progress

(26:58 - 27:06)

And I know I've been talking in the negative direction for a little while. So let's flip the script. Because this is also true in the other direction.

(27:07 - 27:17)

Measuring and tracking can help us recognize and then capitalize on progress. We can have progress that we didn't notice. You may feel like you're just spinning your wheels at work.

(27:17 - 27:36)

But if you measured your work outputs, your inputs over a quarter, over a year, where you were versus where you're at now, you may be able to see the progress that you made. You may feel like your fitness has plateaued. But with objective measuring and benchmarking, you may see results that are there, even if they're small.

(27:37 - 27:50)

You might see that your power output on the bike is up for the same average heart rate. Or you're squeezing out more reps of that same weight of a lift. Accurate tracking and measuring helps us see progress as well as regress.

The Newbie Gains Phase

(27:51 - 28:01)

Both are important, even if they can be hard to see. Especially in areas developed through years of investing. Most meaningful areas take years to make progress.

(28:02 - 28:12)

Especially after we get through that early beginner phase. The beginner phase, once we truly get started, is super motivating. Because the progress is so clear.

(28:12 - 28:21)

We don't even have to bother measuring and tracking. We can easily see what's obvious. But the real returns come after those newbie gains are behind us.

(28:22 - 28:29)

And if we have the data, we can stay motivated. Even when progress slows down. Okay, switching gears a bit.

Revelatory Nature of Tracking Reality

(28:30 - 28:44)

There are many of us who avoid purposeful and accurate tracking and measuring. And there are also those of us who really like using powerful tracking and measuring tools. And both responses tend to happen for the same reason.

(28:45 - 28:56)

Because tracking and measuring reveal reality. They show us what we cannot deny. Which can boost our motivation and confidence or it can threaten our self-image.

(28:57 - 29:06)

It can reveal the returns of the investments made. We can tell ourselves that we're making progress even when we aren't. If we don't pay close attention.

Blind Spots and Lying to Ourselves

(29:07 - 29:24)

We can tell ourselves that we aren't slipping even when we are. And in the other direction, we can trick ourselves into thinking that we're not making progress even when progress is clearly there. If we don't track and measure something that we claim is important to us, we can lie to ourselves more convincingly in either direction.

(29:25 - 29:37)

And the easiest person to lie to is ourselves. Do not be fooled into thinking that you are objective when it comes to yourself. We are usually the least objective when it comes to ourselves.

(29:38 - 29:49)

That's why we can't see our own blind spots. But other people can see them shining like a spotlight. Just like you can see other people's blind spots so easily.

(29:50 - 30:03)

You may marvel at how those other people can't see it. The better we track and measure what is important to us, the more light we can shine on those blind spots. And here is something to keep firmly in mind.

"We Cannot Improve What We Do Not Measure"

(30:04 - 30:14)

A powerful phrase that I certainly didn't make up. We cannot improve what we do not measure. Or said not as a double negative, we can only improve what we measure.

(30:15 - 30:24)

And I will add this part to it. Measure accurately. And the good news is that you don't need to track and measure in very many places.

(30:25 - 30:35)

You only need to do it in the places where you actually want results. Of course, I hope you picked up on that sarcasm. Yes, tracking and measuring accurately is important.

Comparison Rules: The Neighbor's Bowl

(30:36 - 30:44)

And should be applied anywhere, everywhere that we actually want results. Okay, we've talked about what it is. The importance of measuring and tracking.

(30:45 - 30:51)

How to do it. Accurate versus inaccurate measures. Why we might avoid it.

(30:51 - 31:00)

Now let's talk more about our motivation. Because why we are doing something matters. We need to be careful of that comparison game.

(31:01 - 31:11)

At least as comparison is usually applied and practiced. There's a quote that I'm very fond of from a comedian that I'm not as fond of. But it applies very well and directly here.

(31:12 - 31:26)

And that is, the only time you should look in your neighbor's bowl is to make sure they have enough. Let me say that again. The only time you should look in your neighbor's bowl is to make sure that they have enough.

Pride vs. Victimhood in Keeping Score

(31:27 - 31:41)

And this brings us to the double-edged sword of comparison. We can do it in a way that is rooted in pride and superiority or rooted in victimhood and inferiority. Those are the negative comparison games that I'm talking about.

(31:42 - 31:59)

We need to avoid keeping score in these wrong ways. We need to avoid comparing to others to feel better about ourselves or in some masochistic way of feeling bad about ourselves. That comparison game, that keeping score is going to steal our joy.

(32:00 - 32:16)

The intent and purpose of comparison should be about what we are trying to achieve. The wealthy mindset of motivation and pursuit. It is about identifying the things that are important to us, tracking and measuring those things accurately so that we can make adjustments and do better.

Indexing on the Wrong Things (Lagging Indicators)

(32:17 - 32:32)

And we also have to be very careful about measuring the wrong things. If we index on the wrong things to track and measure, it will result in our focus being off and getting outcomes and results that we did not intend on getting. Let's talk about money here.

(32:33 - 32:52)

Some people focus on getting rich as the main goal that they're aiming for. But nearly all the people that I've known who index on money as the key measure of success tend to end up with very mediocre results. Because this focus may push you toward making choices and allocations that are away from what you actually want to achieve.

(32:53 - 33:13)

Because money is a lagging indicator of problems solved for other people and value generated for those that you interact with. And I'll be talking more about lagging and leading indicators in a little bit. Instead, when it comes to money, the focus should be on building skills that we can apply to help more people.

Get-Rich-Slow vs. Get-Rich-Quick

(33:14 - 33:33)

Crushing it every day at work for the purpose of doing an excellent job for your customers and for your company, not just for a bigger paycheck. Making a bigger impact in the world for a cause that you care about. Money is often part of the motivation, but the focus needs to be on the value-adding things that will result in more money.

(33:34 - 33:56)

That correct focus will result in money being earned as a byproduct much faster than those whose ultimate goal is just to get rich. What I tell my students, many of whom want to, quote, get rich, is this. Focus on building expertise in something valuable and then use that expertise to help as many people as possible.

(33:57 - 34:07)

That is not a get-rich-quick scheme. That is a get-rich-slow strategy. But the get-rich-quick schemes have a pretty poor long-term payoff.

(34:08 - 34:18)

Close to zero from what I've seen. The get-rich-slow strategy has a much higher success rate. I'd say closer to 100% for the people who take it.

Short-Term vs. Long-Term Customer Satisfaction

(34:19 - 34:28)

I know which one I would rather choose. Indexing on the wrong thing happens everywhere. Consider publicly traded companies.

(34:28 - 34:43)

Most of them have a tendency to focus on the short term, quarter by quarter. Because they are required to report quarterly earnings. And those companies often end up over-indexing on the quarter at the expense of the long term.

(34:44 - 35:08)

What they should be doing is steering the company based on years and decades rather than just the next quarter. And the companies that do focus on the long term, maximizing customer satisfaction, number of problems solved, quality of product, investing in the business, incurring costs in the short term for long-term benefit. That focus almost always results in better quarterly performance over time.

Conflict Avoidance in Relationships

(35:09 - 35:22)

That's a bit or a lot ironic, isn't it? Those who maximize for long term tend to do better in the near term as well. Indexing on the wrong things also happens in relationships. And it can happen pretty easily.

(35:23 - 35:40)

We talked about gifts given or received as a measure of value in a relationship. That is a fraught road to go down. And another interesting one that we touched on earlier, a lack of fighting or arguing, which is often an indication of conflict avoidance rather than an indication that things are going well.

(35:41 - 36:07)

Oftentimes an argument is exactly what is needed to reveal what a relationship needs and to be able to align the investments that each person is making. A better measure in that case would be asking the question, do we have real disagreements over real things that we then talk through and come to an understanding on? This is much different than having stupid fights over little things. Over-indexing on the wrong thing happens all the time in fitness.

Over-Indexing on the Scale

(36:08 - 36:22)

Focusing on a number on a scale is probably the most common one. When the goal is to lose weight, a number on a scale is actually a pretty bad thing to over-index on. Because the progress in that case cannot continue forever.

(36:22 - 36:37)

Good luck losing weight forever. And a lot of those examples may be good things to measure and pay attention to, but we don't want to pay more attention to these things at the exclusion of the other things that matter more. The things that actually get the results.

Portfolio Fundamentals vs. Short-Run Price returns

(36:38 - 36:50)

I've made it this far without talking much about portfolio management of money. Hey, I'm just as surprised as you are. A lot of what I do as a portfolio manager would be accurately described as tracking and measuring.

(36:51 - 37:09)

And that goes far beyond just price returns. When it comes to the way that I manage my portfolios for myself and for my clients, yes, I care a lot about the returns, the price returns, but only in the long run. I care about other things a lot more than I care about price returns in the short run.

(37:10 - 37:30)

These other things are the profitability of the companies, their margins. Are they making more or less money per dollar of revenue brought in? How has that changed over time? I care about their balance sheet strength, their debt load versus their cash flow. But I also focus on measuring a lot of things that go beyond just the dollars and cents.

Alignment with Management and Customer Satisfaction

(37:31 - 37:50)

Can they weather a downturn? Because one will come. I care a lot about alignment with management. Are they aligned in the same direction as me as a shareholder? Do they have the majority of their net worth in the stock of the company that they manage? I care a lot about how satisfied and happy their customers are.

(37:51 - 38:07)

Will their customers be very upset if that company disappears tomorrow? The answer better be yes. Do the customers generally want more of the product or service that they offer? The answer also better be yes. Not always the case with certain companies.

(38:08 - 38:23)

That is an interesting thing to pay attention to. I spend a lot more time indexing on and tracking and measuring those things, these fundamentals, than I do the price returns. Ultimately, I do care about the price returns.

The Gravity of Fundamentals

(38:24 - 38:48)

But focusing on fundamentals is what will eventually result in great price returns over time. If I stay maniacally focused on profitability, strength of the company, alignment with management, how well they are serving their customers, in addition to all the other fundamental measures, it doesn't matter what the price is in the short term. The price will be higher in the future.

(38:49 - 39:03)

That is how I can be confident that future returns are coming. Barring disaster, barring unexpected events, and those are always a risk. But if I check all of those fundamental boxes, I don't have to worry.

(39:04 - 39:15)

And I certainly don't have to worry about short-term returns. And by the way, sometimes my short-term returns are not great. But the right focus on the right things removes the worry.

Avoiding FOMO and the Gambling Machine

(39:15 - 39:34)

As long as I am indexing on and measuring and tracking the correct things, and then making decisions based on those things, my portfolio will be good in the long term. If I over-index on price, if price was my main driver, I would be like most stock market traders. I would be chasing fads.

(39:34 - 39:54)

I would be feeling all the FOMO in the short term. With this mindset, if I didn't own something that was flying up in price, I would be paying attention to what is doing well from a price standpoint, at the exclusion of what is actually doing well from a fundamental standpoint. This would eventually result in poor returns for me and my clients in the long run.

(39:55 - 40:18)

But the vast majority of people that are investing in the stock market, more accurately that are playing in the stock market, using it more as a gambling machine than an ownership machine, they are vastly over-indexing on one single thing, price right now. Short-term returns. The people who are most worried, spend most of their time focused on short-term returns.

(40:19 - 40:30)

And they are more reactionary as well. They tend to get less stellar results over time. Most of my clients understand and are aligned with our approach of focusing on the fundamentals.

Lagging vs. Leading Indicators

(40:30 - 40:44)

And because of that, they are not worried. They are quite confident, even during periods of market turmoil and falling prices. They know that the price is going to reflect those fundamentals in the long term, regardless of what they do in the short term.

(40:45 - 40:59)

And they get better results because of that. And if these good versus bad measures can be summed up, it would be as lagging versus leading indicators. Lagging indicators are those outcomes that are the result of something that happened upstream.

(40:59 - 41:12)

Investments that have been made. The results of what have already been invested. Weight on the scale, company sales, stock price, unemployment rate, bank account balance, applause.

Rear-View Mirrors vs. Windshields

(41:13 - 41:31)

Those can be good things, but they are the result of what came before, not the cause themselves. Using lagging indicators as your primary driver of decisions is like trying to drive your car only using your rear-view mirrors. They do not give you an indication of what is coming.

(41:32 - 41:58)

Lagging indicators just tell you what has happened. On the other hand, leading indicators are the inputs and investments that you make, the habits that are actually performed, the fundamentals of the companies that we talked about, reps put in, systems put in place and followed, deposits that are consistently made, that then result in the eventual outcomes. Focusing on leading indicators is what gets you the results.

(41:59 - 42:14)

Leading indicators are the upstream cause of the downstream results. Using leading indicators in our decision-making is driving your car looking through the windshield. You are not looking at what has happened, you are looking at what is ahead and what is coming.

Upstream Causes of Downstream Results

(42:15 - 42:31)

And those leading indicators are where our focus should be. Yet, we tend to over-index on the lagging indicators in life. Stock price doesn't tell us anything about what is coming in the future or anything that might happen in the future.

(42:31 - 42:46)

All it is telling us is what has already happened. The weight on the scale is a lagging indicator of what has gone into your mouth and the movement that has or has not been performed. The sales that you had last quarter is a lagging indicator of work that was put in in the past.

(42:47 - 43:08)

Let's not over-index on lagging indicators. And not coincidentally, those lagging versus leading indicators tie very closely with accurate and useful versus inaccurate and unuseful measures that we can track. Leading indicators are the investments that are being made that are going to result in the lagging indicators that are desired.

Leading Indicators: Habits and Intentionality

(43:09 - 43:30)

Because the stock price is the result of excellent management, customer satisfaction, quality product and service. The weight on the scale is the result of good nutrition, time and energy invested in the gym. The lack of conflict in a relationship is the result of time and effort invested intentionally, honest conversations, apologies given and received.

(43:31 - 43:56)

The salary and the bonus at work is the result of ownership taken, problem solved, quality output, skills developed, reputation built. The money that you have in your bank account and in your investment account is the result of the leading indicators of your savings rate, your patience, your asset allocation and your risk management. How you feel at the end of the day is a lagging indicator of your daily habits.

Closing: Determining Intended Impact

(43:56 - 44:19)

The gratitude that you have, time, effort and money invested in alignment with your purpose, which are the leading indicators that actually get you the desired result. Here's my encouragement to you as we close this out. Yes, track and measure lagging indicators, but only for the purpose of determining whether your leading indicators are having their intended impact.

(44:20 - 44:33)

And pay closer attention to those. Those inputs and investments that cause the result, not just the results themselves. We have set the stage today for what is the first half of our dive into benchmarking.

(44:34 - 44:45)

Next time, we are going to get into that final step. Tracking and measuring are the tools that give us the information that we need. Benchmarking is applying it for the ultimate result that we are targeting.

(44:46 - 45:17)

Okay, thank you for investing in yourself and in those around you. I will talk to you next time.