What Gets Measured Gets Managed—But Also Distorted

“What gets measured gets managed” sounds like discipline. In practice, it’s incentive design.

The moment you choose a metric, you’re not just tracking behavior—you’re shaping it.

Most assume measurement improves outcomes. It doesn’t. It redirects behavior toward the metric—whether that aligns with the real objective or not.

A metric is a proxy. Proxies simplify reality.

But once the proxy becomes the target, decision-making shifts from maximizing outcomes to optimizing the proxy. That’s where distortion begins.

In portfolios, this shows up immediately.

• Measure returns, and risk-taking expands.
• Measure volatility, and exposure contracts.
• Measure drawdown, and behavior shifts toward preservation and recovery math.
• Measure defined downside—portfolio risk—and position sizing becomes the control system.

Same capital. Same market. Different measurement → different behavior → different outcomes.

The failure isn’t lack of measurement. It’s misaligned measurement.

Optimizing Sharpe can mean underexposure during asymmetric opportunities.

Minimizing volatility can mean avoiding necessary risk.

Chasing returns can mean ignoring downside until it’s realized.

The metric becomes the objective. The objective gets lost.

For capital with consequences—especially after a liquidity event—the shift is structural.

You’re no longer optimizing for growth alone. You’re managing permanent capital.

That changes what should be measured.

Not just returns. Not just volatility.

1. Defined downside relative to total portfolio risk.
2. Recovery math from drawdowns.
3. Exposure across regimes.
4. Optionality—how much upside remains if you’re right.

Measurement isn’t passive. It’s a control system.

If you measure the wrong thing, you don’t just get noisy data—you get systematically distorted decisions.

And that distortion compounds. 

Mike Shell is the founder and chief investment officer of Shell Capital Management, LLC, a registered investment adviser. He serves as portfolio manager of ASYMMETRY^® Managed Portfolios, a separately managed account program with trade execution and custody provided by Goldman Sachs Custody Solutions.

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