# Intangible Returns

How strict prioritization processes cause malaise, and why you should take gut instinct more seriously in your planning process.

It’s Monday morning.

Your calendar notifies you that Monthly Planning is starting now, so you fire up Zoom, and next thing you know you’re staring down a big list of ideas in a spreadsheet with your team.

The problem is simple: prioritize the list, so you can pick the best things to do next. But, how? This is one of the most important and challenging decisions every manager faces.

Many high-performing teams use some form of an expected value calculation to prioritize the list, which, if adhered to too strictly, could cause problems.

Here’s how it works:

1. Quantify the impact you think the project would have if it works. For example, you might have an idea for a new landing page design that you’d like to A/B test. You think it could boost conversions by 10%, and at your current scale that’s worth roughly \$10k in MRR.
2. Assign a probability between 0–1 of it actually working. In this case, you know a similar design in a different landing page had a 10% conversion boost, so although it’s hard to know for sure, you feel reasonably confident in the idea. You think there’s a 50% chance you’ll get the 10% bump.
3. Multiply the impact by the probability to get “expected value”. So \$10k MRR * 50% = \$5k MRR of expected value.
4. Estimate the costs. You estimate it’ll take 15 hours worth of design and engineering effort to run this test, and as a rough rule of thumb you peg your team’s time at \$200 per person/hour. So \$200 * 15 = \$3,000.
5. Arrive at a “net estimated value” figure. In this case, \$5k MRR - \$3k in costs = \$2k “net estimated value” in the first month, and an ongoing 10% improvement every month after that (for as long as the landing page stays relevant).

Once you do that, deciding what to do is easy! All you have to do is sort your spreadsheet by “net estimated value” in descending order, and start at the top.

Easy, right!

Of course, it’s much more complicated than this in reality.

First, it’s impossible to know for sure what the impact would be and how probable that impact is. The process of thinking it all through helps, but only so much. I’d bet on an experienced leader’s gut instincts any day over an amateur’s expected value calculation.

Second, it’s worth noting that ideas are connected to each other — they’re interdependent. So even if your spreadsheet says the “Landing page A/B test” has a higher expected value calculation than “fix the bug in our analytics querying interface” you might need to do the latter before the former, for boring, logistical reasons. And this is an artificially clean example. In reality, product teams have a seemingly infinite set of options to choose from, depending on the way they look at it. For example, would it be better to just run a single A/B test on that one landing page, or should we rethink our system for shipping landing pages entirely?

Fortunately, it’s easy enough for most teams to navigate these two challenges with a little bit of common sense and finger-in-the-wind estimations. You don’t need precision mathematics to run useful expected value calculations. I’ve seen teams use rough shorthands like “low / medium / high” for impact and cost, and it basically works.

But there’s a more subtle problem with expected value that instinct alone often fails to address: how to prioritize the intangibles.

Specifically, if you lock into a narrow cost/benefit mindset when prioritizing your ideas, it’s unlikely that you’ll prioritize projects that only have an intangible connection to growth.

For example, imagine you were running Substack, and you had this feeling that your typography was just “ok” — not bad, but not nearly as good as it could be. And maybe you’d like to make publications just generally feel nicer. How do you estimate the expected value of this idea? You might feel fairly certain that users will appreciate the change, but how does that translate to revenue growth? It’s entirely unclear. And so in your next planning meeting, it’s going to be quite difficult to choose this instead of a landing page A/B test.

It’s fine to work this way for a little while. But if you exclusively prioritize tangible growth opportunities for too long, it adds up, and your users and employees will increasingly suffer from a generalized malaise. There will be lots of things, big and small, that just feel like a drag.

The example I gave above was typography, so it may seem like intangibles are mostly a design thing, but it applies in every domain. Engineers want to make the codebase nicer, and the website faster, and to use more modern tools. CFOs want a cleaner workflow for expense management. The folks in Sales want a better CRM. CEOs want to write a thoughtful internal strategy memo — but their hands sweat when they consider the energy it would require of them. Maybe a quick team lunch presentation will do?

Every part of the business, customer-facing or not, wants to prioritize these sorts of quality-of-life improvements. But they’re not sure if they should. And they’re definitely not sure if that other project from the other department is worth it.

So, in order to cope with this reality, every organization needs to develop a philosophy for how they like to allocate resources to these intangible boosters.

This is not easy.

One solution that I’ve seen work is to dedicate a certain amount of time and energy for the intangibles, and prioritize these ideas separately from the main work streams. For example, Medium once had (maybe still has?) a tradition called “Jank ‘n’ Drank” where, on Tuesday evenings, folks would convene to fix the small stuff that bothered them.

Jank, in their case, was defined as: “Long-standing bugs, slightly broken user experiences, processes that could be automated or improved, visual imperfections in the product, development environment annoyances, hacky code that’s on the verge of causing that one bug, again, and other tasks clinging to the bottom of a to-do list.”

This kind of solution works well for fixing little things, but what about larger intangible boosters?

For example, if you were running Substack right now, how would you prioritize something like building a theming system that let publishers have more control over the design of their publications?

It would be a lot of work, but it would also have a potentially large impact if even a small percentage of high-earning publications decided to use (or stick with) Substack because of it. The problem is that it’s hard to measure, let alone predict, the impact of this idea. So when you’re weighing it against a project that will have a more tangible, measurable impact on growth (like a referral incentive system, or a Twitter discovery page) it’s hard to justify building the theme engine.

But it’s important to recognize that intangible ideas aren’t necessarily lower-value than more tangible ones, it’s that they are less directly and obviously tied to revenue. If you’re only focused on the ideas that seem obvious, and ignoring those that you’d love to do but feel obliged to ignore, you’re probably suffering from a version of the streetlight problem, which goes like this:

A policeman sees a drunk man searching for something under a streetlight and asks what the drunk has lost. He says he lost his keys and they both look under the streetlight together. After a few minutes the policeman asks if he is sure he lost them here, and the drunk replies, no, and that he lost them in the park. The policeman asks why he is searching here, and the drunk replies, "this is where the light is"

Finding good ideas that can help grow a business is a similar process, except instead of searching for a single item, you’re gathering a bunch of them that are scattered all over the ground. Sure, you can pick up some value directly under the streetlight, but there’s also a lot of great stuff out there in the dark, too. If you don’t let your intuition guide you outside the light of conventional wisdom, your product and business will take on a sort of conventional, uninspiring shape. It will feel stingy. And, ultimately, you will miss out on a lot of value.

If smart people feel an instinct to build something, it’s worth taking those hunches seriously. Just because a project may be hard to justify to a committee doesn’t mean it should be ignored. Sure, some of these ideas will turn out to be a waste of time. But then again, so do many of the tangible projects that looked so good in an expected value calculation.

You don’t know what you don’t know!

So, next time you’re in a planning meeting, or, even better, deciding how to structure a planning process, remember to speak up for the intangibles.

They might return more value than you realize.