Broken Systems: VC Investment & Data

Let's pretend this is your company
Yesterday I referred to VC's as soulless. Better phrasing would have been: VCs act in accordance with a set of priorities that reduces other people's humanity. This is what sexism does, it's what racism does. It's not a good thing. When VCs look at a venture, they want to see numbers - growth trajectories, monetization, ROI. They condense every person at the company and all the nuance of values, goals, and purpose into the exact same box as every other company. We are made identical. Our unique texture is disregarded.
This is your company trying to satisfy VCs
The issue with looking exclusively at those numbers is that to get funding, companies focus exclusively on those numbers - this is the nature of prioritization. And then suddenly it's not just the company's texture that's obliterated - it's the product's too. And here is what's most problematic. When a product's success is defined only by its numbers, its systems and mechanics are optimized to increase numbers. Not better people's lives. Not solve problems. Not exist for 100 years. Increase numbers. That means your users become just clicking wallets or convenient billboards… and at that point, well, you've gone and dehumanized your entire player base. People get grouped into cliche target demographics, and optimizing those means catering to lowest common denominator likes and dislikes. Layer after layer after layer of complexity, depth, and humanity is scraped away, until you have a silicon mold product designed for silicon mold clickers to appease silicon valley VCs to whom money isn't a means to an end - it is the end.
This is your company after VCs
The current investment system, through my eyes, incentivizes creating generic, dehumanizing products at the expense of company culture and values, product innovation and human benefit, and in the end, the perception of people as complex individuals. And when the entirety of the internet treats us like nothing more than mindless click machines - well… how do you think we're going to behave?

Fixing It

Systemic issues are notoriously hard to fix, but data seems like a good place to start.

Question Our Success Metrics

Right now, these are the most common success metrics I see:
  • Traffic (Daily Active Users) - This is pure 'how many people play the game' - it encourages flamboyant advertising and extreme spam. It's so short-sighted that most products I know who optimize it turn into mangled, multi-limbed, pop-up plagued monsters.
  • Engagement (DAU/MAU) - This isn't measuring whether or not a product is good (ethically, I'm defining good as "life-enhancing"). This is measuring whether it's addictive. Whether you can train people to keep coming back to it. Optimizing this encourages products that players become dependent on. That's kind of how abusive relationships work.
  • Retention (Of players who played on a given day, how many showed up: the next day, a week later, a month later [D2, D7, D30 retention, respectively]) - This can foster the same thing as engagement, but what I appreciate is D30. Most games are designed for quick hit/steep spike curves. Simply acknowledging that you want a game to last at least 30 days is a big step up for a lot of companies. It also encourages a long view - less local maxima and more finding a coherent picture of what players want.
  • Monetization (ARPU) - Unfortunately, optimizing ARPU means switching monetization tactics. Companies used to just charge players one time for the full and complete experience. Now players get a small fraction for free and are constantly nickeled and dimed every step of the way. Not the best experience.
  • NPS (Net promoter score: likelihood that a user will recommend product to others) - I actually think NPS is brilliant. NPS measures a product's relevance and impact on a player. People don't recommend bad experiences. They recommend useful, fun, engaging, and exciting experiences. Measuring NPS is what's difficult, and is what's kept it from being a staple.

Creating New Data

The onus is on companies to start measuring more than just quantity. Getting qualitative data normally means surveys, focus groups, user studies. The data is complex, and can take weeks to aggregate and decipher. That's why we need to start finding new ways of measuring how experiences affect people. Why couldn't JOY or REVELATION be metrics? Learning? Compassion? (Financial Security? Marriage Health?) Until we start creating those metrics, we're never going to design for them, try to improve them. Until we start measuring what makes a good experience - we're just going to be creating spammy, addictive, abusive ones. Numbers aren't irrelevant or evil. They're vital, and we need to be more responsible with them.

3 Responses

  1. Depressing, honest, and yet inspiring post. The most baffling for me is why so many VCs and businesses don’t seem to care that the *only* robust path to a sustainable business today is to have one that consistently benefits people in the way that leads them to tell those they care about the most, “you really need this. Trust me. Get/play/do this.” Instead, they resort to bribing customers and potential customers to be “loyal” (hint: if you had to pay for it, it wasn’t actually loyalty), or they target the subconscious brain bugs that keep us “engaged”.

    So here we are, in the midst of an engagement arms race while simultaneously learning just how fragile and easily-manipulated our own cognitive resources are.

    In my fantasy world, patient VCs realize and seek out long-term strategies where the Venn diagram of GOOD FOR COMPANY and GOOD FOR CUSTOMERS overlaps, a lot. And by “good” we mean long view / things-you-won’t-regret not just lowest price, immediate gratification, etc. Sadly, the gamification consultants have convinced themselves and many others that — thanks to dopamine — if people are compelled to participate and “engage” then they must be experiencing FUN and thus, it is “good” for them.

    So relieved you are out there fighting the good fight on behalf of customers/users/players, and those who are trying to design life-enhancing (or at least not life-draining) experiences.

  2. Excellent post. Fortunately VCs are not the only means of funding. If we want to change the funding paradigm, we need to move beyond VCs. Or create our own fund :-)

    Your short list of what metrics to use is an eye opener. Joy and revelation, mystery and accomplishment, the “Oh wow” found on the other side of a secret door, enthrallment … these are great metrics for measuring user experience. How about results based metrics too? Measuring how many people were so inspired by your creation that they actually acted on it. How many solutions were created, how many people were inspired enough to get to work on something, how many revolutions were started.

  3. Interesting post. I the issue does not entirely lie with VCs, as they are focused on monetary gains and the metrics used are easily transferable into dollars and revenue growth. VCs are accountable to their LPs, who as much as anyone are focused on returns. As Jay mentioned, VC is not the only means of funding. It is to be used for rapid and fast scaling, when reaching a large number of users in a short time and getting your product to market fast is what will make your company succeed. The problem with investing in companies is that everything is measured monetarily, as shareholder value is generally reduced to mere returns…

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