Measuring one thing to get information about some other, unmeasurable thing.

Some proxies are good, and have a high level of correlation to the thing they are being used to measure-by-proxy. Other proxies are bad, with low correlation to the thing they are a proxy for.

Proxies are subject to confounding variables.

Proxy measures can be either Leading Measures or Lagging Measures.

Example Proxy Measures

• Tylenol consumption as a proxy for overall pain in your life.
  • Confounding variable: you share your bottle of Tylenol without others, who will introduce noise into the signal.
• Infant mortality rate as a proxy for a countries level of health care
• GDP as a proxy for the average standard of living in a country
  • Proxy gap: assumes a relatively even distribution of wealth. If the entire GDP is earned by one person and everyone else in the country makes nothing.

Related Notes

KPIs

Good KPIs

Day 1

The Scientific Method