Question
What is leading vs lagging indicators?
Quick Answer
The metrics that predict your future are different from the metrics that describe your past. Most people track the wrong ones — and by the time they notice, the future has already arrived.
Leading vs lagging indicators is a concept in personal epistemology: The metrics that predict your future are different from the metrics that describe your past. Most people track the wrong ones — and by the time they notice, the future has already arrived.
Example: A startup founder obsessively tracks monthly recurring revenue (MRR). MRR is a lagging indicator — it tells her what customers already decided last month. Meanwhile, she ignores product-qualified leads and feature activation rates, which predict what customers will decide next month. When MRR drops, she scrambles to diagnose the cause. But the leading indicators had been declining for eight weeks. The signal was there. She was watching the wrong dashboard. An economist at the Conference Board, by contrast, tracks ten components — manufacturing hours, building permits, new orders, stock prices — not because any single one is definitive, but because together they predict GDP movement seven months before it arrives. The economist is not smarter than the founder. She is measuring earlier in the causal chain.
This concept is part of Phase 7 (Signal vs Noise) in the How to Think curriculum, which builds the epistemic infrastructure for signal vs noise.
Learn more in these lessons