The danger of cumulative graphs (aka vanity metrics)

fig-1-total-messages

fig-2-monthly-messages

The two charts above graphically illustrate the danger of cumulative graphs. Total messages is a nice graph to look at and share with people because unless the business is literally dead it is always moving up and to the right. This is what makes it a vanity metric. But it’s dangerous because it makes it hard to see what’s going on in the business. I posted these graphs because the ‘Total Messages’ is a particularly deceptive chart. Even an experienced eye looking at the ‘Total Messages’ probably wouldn’t notice the problem until August or September, whereas anyone looking at the ‘Monthly Messages’ chart would have seen the problem in July. Less experienced folk might be looking at the ‘Total Messages’ in December and still miss the fact that there was a problem.

The lesson, of course, is to stay away from cumulative total graphs. They might be good for motivational purposes but they run the risk of fooling people, including CEOs, into thinking things are ok when they are not. As an investor when I see cumulative graphs I wonder if someone is trying to bamboozle me. Then I wonder whether the entrepreneur might be fooling herself.