Meet Bob. Bob loves to fish.

After thousands of casts, Bob knows the average fish weighs about 10 pounds.

Everything Bob builds from here, he builds on that average. Watch where it comes from.

Bob's water: 100 fish, 1,000 pounds

The same net, cast after cast

The first net goes in shortly

Every cast, counted

Live casts as they come up, and any you add.

Fish per cast

Pounds per cast

The average fish, over every cast so far–pounds sold ÷ fish caught · 0 casts
Fish a cast–the average
Pounds a cast–the average

Keep casting. The average settles and stays put. The bars behind it never do.

Every cast, one by one

The bell-shaped net is lowered at a random spot. Live casts appear here as they come up.

CastWhereFishWeight

The same 100 fish, in four groups

59%5%A5 fish · 56–180 lbs25%11%B11 fish · 10.5–50 lbs11%25%C25 fish · 2–9.5 lbs5%59%D59 fish · 0.5–1.85 lbsThe average, 10 lbs
Most of the weight sits in A and B. Most of the fish sit in C and D. The average Bob fishes by lands in between, where almost no fish is. The average up top is this average: 1,000 pounds spread over 100 fish, 5 of which carry 59% of it.
The math: the four groups

The groups come from Power Law Nested Means, the two-split test. Split the fish at the average weight, 10 lbs, then split each half at its own average. The 16 above-average fish, A and B, carry 84% of the weight. The biggest weighs 180 lbs, the smallest 0.5 lb. That shape is a power law: a few of something carry most of the total. You'll find it in customers, in sales and in revenue.

GroupWeightFishShare of fishShare of weight
A56–180 lbs55.0%59.0%
B10.5–50 lbs1111.0%25.0%
C2–9.5 lbs2525.0%11.0%
D0.5–1.85 lbs5959.0%5.0%
Total100100.0%100.0%

The net is a bell curve lowered over the line. Over the giants it brings up a few heavy fish; over the little ones, dozens of light ones. Cast after cast the throws average about 25 fish and 250 lbs. The averages settle because the water holds a fixed set of fish, the biggest 180 lbs; a true power law with a tail this heavy never settles, however many throws are added up.

Why Bob never notices

There's a reason Bob never notices his average isn't really an average. He isn't fishing one side of the water, where the big ones are. He drops the net into a cube of water and pulls up a lot of fish.

The same 100 fish, in a cube

The first net goes in shortly
SmallerBigger: the bigger the fish, the darker the blue

Every cast, counted

Live casts as they come up, and any you add.

Fish per cast

Pounds per cast

The average fish, over every cast so far–pounds sold ÷ fish caught · 0 casts
Fish a cast–the average
Pounds a cast–the average

Same fish, same net. In the cube the average lands on 10 pounds and the casts bunch tighter. About 25 fish and 250 pounds a cast. That's something Bob can build on.

Every cast, one by one

The same round net every time, cast at the middle of the cube. Live casts appear here as they come up.

CastWhereFishWeight
Extra: the same fish, mixed in flat water

Between the line and the cube: the same 100 fish swimming mixed across one width, and the same bell net lowered at the same spot each time. The fish count evens out, but one giant can still make a cast.

The first net goes in shortly
Fish per cast

Pounds per cast

Live casts appear here as they come up.

CastWhereFishWeight

Bob has a product he can go get, every day

Some casts bring up less and some more, but there's enough consistency to build around. Here's the part that wasn't in the first two scenes: the fish Bob catches aren't worth anything yet. They're caught small. They go into a pool, slide from pool to pool, and only the ones that reach the last pool grow into their size and get sold. Only 1 in 4 make it, so Bob fishes a net four times the size: each $250 cast brings up about 100 fish, and the 25 that reach pool 5 are the same 25 fish, the same 250 pounds, a cast sold at the dock.

The ocean, 900 fish, as they're really caught

Shown at the size each fish will grow to
Until now every fish showed the size it would grow to. From here they're caught the same size, and only pool 5 shows what they grow into.
Getting the catch in$250 a castthe boat, the crew and the fuel, with a net four times the dock's: about 100 fish a cast
Handling the sale$1 a fish soldfor every fish that reaches pool 5 and is sold there, 1 in 4 of the catch
The merchant pays$1.50 a poundat pool 5, once the fish have grown, weeks after the catch: the dock's price

Five pools, the conversion rate between each, and the merchant

The first cast is on its way

Each quick cast is 100 more fish caught, about 25 of them reaching pool 5. The totals settle as the fish add up.

The first fish are still growing.

The average cast, from net revenue at pool 5 to what it leaves
Net revenue at pool 5$375The cast−$250Handling−$25Contribution after acquisition$100
One cast is luck: about 1 in 3 casts don't cover their costs
10 of every 30 casts lose money20 make money

On average a cast brings up about 100 fish; 25 of them reach pool 5 and grow to about 250 pounds, which the merchant buys for $375. The cast costs $250 and handling the sale $25, and it leaves $100: the dock's cast, sold weeks later. Not every cast covers its costs, and one giant can carry a cast a long way.

Put in your own numbers

The same things, whatever the business: what it costs to get the product in, what it costs to carry and sell, what it sells for, and how much of it makes it to the sale.

$
$
$
At Bob's average cast: about 100 fish caught, 25 of them sold out of pool 5 at 250 pounds. The rest of the story runs on Bob's numbers.

About $100 a cast, and $10 for each fish sold, the same as if every fish sold at the dock; a fish caught costs $2.50, but three in four never sell. The difference is that the money is out for weeks before the fish are sold, and nothing in pools 1 to 4 says what a catch is worth. In a business, pool 1 is a new lead and pool 5 is a customer who grows into what they're worth over time.

The math: the funnel and the sale

contribution after acquisition per cast = $1.50 × pounds sold from pool 5 − $250 − $1 × fish sold

cost per fish sold = $250 ÷ fish sold · invested = $250 + $1 × fish sold

Every slide has a grate: 71 in 100 fish make it and 29 slip through, so 1 in 4 of the catch reach pool 5. The net here is four times the dock's: the same $250 cast brings up about 100 fish, and the 25 that reach pool 5 are a fair draw from the ocean, the same 25 fish and 250 pounds a cast the dock sold, so with enough fish caught, every 100 that reach it hold the same mix as the 100 fish in scene 1: 1,000 lbs, 5 A-tier fish and 59 D-tier fish. Pool 5 shows the latest 100 fish to reach it, and as new fish come in, the merchant buys the oldest, at the dock's $1.50 a pound. Nothing is spent on a fish that doesn't make it, and the $1 to handle a sale is the only variable cost, so the money is Story 1's: the average cast takes $275 to bring back $375. Operating expenses, the dock, the boat payments and the rest of the overhead, don't change from one cast to the next, so they stay out of it and get paid out of it.

Is this worth putting money into?

Bob needs money to grow, so he takes the numbers to investors. For every dollar you put in, over the long haul, 36 cents comes back on top of it. They're excited, with one eye on the calendar: the money goes in at the catch and comes back weeks later, when the fish are sold out of pool 5.

Your $27,500, one cast at a time

Cast 0 of 100
0.001.002.003.00Paid back: 1.00 (100%)1255075100Casts fundedOn average: 1.36 (136%)8 in 10 investors land in the shaded band
Casts funded0of 100
Invested$0$250 a cast + $1 a fish sold
Net revenue$0what the merchant paid at pool 5
Revenue return–net revenue ÷ invested
Contribution return–revenue return − 1
The first cast goes in shortly.

One cast on its own is a gamble. A hundred casts aren't. Over 100 casts, 8 in 10 investors land between 1.27 to 1.45 per $1. They put the money in.

The chance you haven't been paid back yet
After 1 cast35%, about 1 in 3After 5 casts12%, about 1 in 8After 10 casts4%, about 1 in 22After 20 castsunder 1%, about 1 in 135After 50 castsalmost never, under 1 in 20,000
What $27,500 brings back over 100 casts
A slow 100 castsRevenue return 1.27 (127%)
$27,500 invested · $35,000 net revenue
Contribution after acquisition $7,500Contribution return 0.27 (27%)
The average 100 castsRevenue return 1.36 (136%)
$27,500 invested · $37,500 net revenue
Contribution after acquisition $10,000Contribution return 0.36 (36%)
A lucky 100 castsRevenue return 1.45 (145%)
$27,500 invested · $40,000 net revenue
Contribution after acquisition $12,500Contribution return 0.45 (45%)

Grey is what's invested. The bar runs on to net revenue, so the colored part past the grey is the contribution after acquisition.

But any investor group reads the numbers the same way. The boat is the big cost, and nothing is being done to support it. What if the boat had bait? What if the fish swam toward the net?

The math: the revenue return

invested = $250 × casts + $1 × fish sold out of pool 5

revenue return (R2M) = net revenue ÷ invested · contribution return = revenue return − 1

$27,500 funds 100 casts: $25,000 for the casts and about $2,500 to handle the 2,500 fish sold out of pool 5, of about 10,000 caught. On average it brings back $37,500 of net revenue, a revenue return of 1.36 (136%), and $10,000 of contribution after acquisition, a contribution return of 0.36 (36%). After 1 cast, 8 in 10 investors land anywhere from 0.50 to 2.31; after 10 casts 1.09 to 1.65; after 100, 1.27 to 1.45. Sold at the dock, the same casts return the same 1.36 (136%) per $1; what changes here is when the money comes back. Each investor here funds 100 casts drawn from 20,000 no-bait casts, and the band is where 8 in 10 of 4,000 investors land. These follow The Numbers, Defined, the page every number on this site uses.

The bait team asks Bob who to design it for

"Bob, you've fished this water for years. You're the reason we're all here. You know these fish better than anyone. Who should the bait be built for?" The answer is the fish everyone has been planning around: the average one. Ten pounds, right in the middle of the bell.

The fish the bait was built for

59%5%A5 fish · 56–180 lbs25%11%B11 fish · 10.5–50 lbs11%25%C25 fish · 2–9.5 lbs5%59%D59 fish · 0.5–1.85 lbsThe average, 10 lbsthe fish the bait was built for
It sits in the center of the bell, where almost no fish is. The real fish are the ones behind it: a few big green ones on the left, a crowd of little pink ones on the right.

They build it. Bait costs $10 a cast, on top of the $250, so it's part of the acquisition cost. And it works.

The ocean, 900 fish, bait in the net

The first cast goes in shortly
What's in the net, on average: 4 casts with no bait and 4 casts with bait

No bait

4 casts bring up 100 fish

Giants 5
Big 11
Small 25
Tiny 59

With bait

4 casts bring up 110 fish

Giants 5
Big 14 +3
Small 32 +7
Tiny 59
Fish sold from pool 5, per cast
Contribution after acquisition per cast, once the fish are sold

More fish, about 100 to 110 caught a cast and 25 to 27.5 sold, and once they've grown, bigger fish, because the bait sits in the middle and the big volume of little fish is way over on the right. About 28% more B fish and 28% more C fish on every cast. Once the fish are sold, each cast earns $125 instead of $100, and each fish sold costs $9.45 instead of $10. Nobody at the dock can see that yet; it shows up in pool 5, weeks later.

No bait next to bait, on average
No baitWith baitFish per cast2527.5Contribution after acquisition$100$125Cost per fish$10.00$9.45
Every $10 of bait brings back $35
Bait, every cast$10More profit it brings in$35

Back to the investors. Bob said a dollar comes back as 1.36 (136%). With the bait, once the fish are sold, it comes back as 1.43 (143%). Marketing looks like heroes, and the investors say what investors say: spend more on the bait. Get more fish in the net.

What every $1 brings back, with and without bait, sold out of pool 5
No baitRevenue return 1.36 (136%)
$275 invested · $375 net revenue
Contribution after acquisition $100Contribution return 0.36 (36%)
With baitRevenue return 1.43 (143%)
$288 invested · $413 net revenue
Contribution after acquisition $125Contribution return 0.43 (43%)

Grey is what's invested. The bar runs on to net revenue, so the colored part past the grey is the contribution after acquisition.

The plan the investors hand Bob

Scale it. Four times the fish sold, call it 100 a cast out of pool 5, with the cost per fish sold coming down and every fish still earning its $4.55 once it's grown. Drag the catch up to see their math.

Fish sold a cast
27.5 today100, the plan (25 × 4; Bob gets a break on 27.5 × 4)

That number is the investor baseline. The fish the team lands, each still earning its $4.55. Every test from here is judged against it.

The math: the bait, and the baseline

cost per fish sold = ($250 cast + $10 bait) ÷ fish sold

contribution after acquisition per cast, once sold = $1.50 × pounds sold from pool 5 − $250 − $10 − $1 × fish sold

investor baseline per cast = fish landed × $4.55, where fish landed = $260 ÷ cost of acquiring a fish

The bait adds about 10 fish of the average size to each cast, 2.5 of them sold out of pool 5, and once they're grown that's $25 more contribution a cast after the bait's own $10: every $10 of bait brings back $35. The fish it pulls in more often are the 36 fish from 2 to 50 lbs, groups B and C, which average exactly 10 lbs. The bait takes the average cast from $275 invested and $375 back to $288 and $413: 1.36 (136%) to 1.43 (143%) per $1, the same as at the dock. $125 spread over 27.5 fish sold is $4.55 a fish, and that is what the investors expect every fish to keep earning as the team lands more of them.

So what does the team count?

Bring the bait back at $10 a cast, and hand the team the plan: more fish, the cost per fish coming down, every fish still earning its $4.55. Each test tries a small change against the bait in use, cast after cast, and the team keeps the winner. But nobody knows what a catch is worth until its fish grow, weeks later. So the team counts what it can see: the fish that reach a pool. Pick the pool.

Bait chosen on the fish caught, as the fisherman sees them

Test 0 of 20 · week 0
Optimize on the fish reaching
What the dashboard shows
What the catch grows into (known about 6 weeks later)
Drag to any test
Contribution after acquisition per cast once the fish have grown, week by week, for each pool the tests can aim at
Cost per fish reaching each pool, week by week, what the cast and the bait cost for each one

The pool you picked · what the catch earns once it grows; the faint lines are the other pools Investor baseline · the fish the tests deliver, each still earning the $4.55 it earned when bait came in
The same two, test by test: every pool on one clock
Cost per fish reaching each pool, test by test

Every fish makes each slide at the same 71 in 100, so whichever pool the team counts, the tests keep the bait that lands more fish. The dashboard prices every fish at the average, so more fish always looks like more money. After 20 tests the dashboard says $1,707 a cast. Once the fish grow, it's $542: $97 short of the $639 baseline, with the cheapest fish in the story, $0.46 a fish caught and $1.85 a fish sold. The catch is 562 fish a cast and 140.5 of them sell, at less than half the weight the plan priced them at. Counting at pool 5 instead of pool 1 doesn't fix it. Each test takes longer, so the bait drifts the same way, more slowly.

After 20 tests: what the dashboard says, the baseline, and what the fish grow into
Dashboard saysevery fish at 10 lbs$1,707Baselinecheaper fish, each at $4.55$639Once the fish grow$542
After 20 tests: what every $1 brings back
Dashboard saysRevenue return 5.26 (526%)
$400 invested · $2,107 net revenue
Contribution after acquisition $1,707Contribution return 4.26 (426%)
Once the fish growRevenue return 2.35 (235%)
$400 invested · $942 net revenue
Contribution after acquisition $542Contribution return 1.35 (135%)
Before any testing1.43 (143%)

Grey is what's invested. The bar runs on to net revenue, so the colored part past the grey is the contribution after acquisition.

For an investor, the dashboard promises a revenue return of 5.26 (526%). Once the fish grow, it's 2.35 (235%), against the 2.59 (259%) the plan priced those fish at. More fish did bring more money, five times the fish sold for about four times the contribution, but every one of them was priced at a fish it isn't. Every number on the dashboard is green. The dashboard is 15% ahead of the business it describes, and growing.

The math: what never shows up

contribution after acquisition that never shows up = fish sold × $1.50 × (10 lbs − the real average weight), where fish sold = fish caught ÷ 4

When every fish is sold the day it's caught at its full size, as in Point of Sale, tests on contribution after acquisition raise each cast from $125 to $1,045. Here, aimed at the fish caught, they sink it first and lift it only to $542 after 20 tests, against a baseline of $639, while the dashboard reports $1,707 and the cost per fish sold falls from $9.45 to $1.85. A test runs a week of casts, and its fish take another week for every slide they cross, so a test aimed at pool 5 takes five weeks: after 20 tests, 100 weeks in, it's $464 against a baseline of $565. Until the fish grow, every pool is a count of fish. 100% of the baits adopted pull in fish that grow up lighter. The real weights only show once the fish have reached pool 5 and grown, about 6 weeks after the catch.

What the bait is really pulling in (nobody can see this at the dock)

Is there anything you can see when a fish is caught?

Look closer at the catch. Every fish is still the same size and still blue, but some have a green tail and some a pink one. The funnel treats every fish the same, and 71 in 100 of each make every slide. Pool 5 is where they split: as each fish grows, its tail's color spreads over the whole fish.

Run the business first. Before anyone tests a bait, run it as it is, with no bait, so every cast is a fair draw from the ocean. Nothing in pools 1 to 4 shows what the catch is worth. Pool 5 shows it, as the fish grow. Once the teams below pick a bait, this funnel follows it.

No bait: wait and see what grows

The first cast is on its way

Each quick cast is 100 more fish caught the same way. The odds settle as the fish add up.

Run it long enough and pool 5 has the data: the tail at the dock says what a fish grows into. A green-tailed fish grows into a giant 1 time in 5. A blue fish or a pink-tailed one does it 1 time in 50. Once the fish grow, every green-tailed fish sold earns about $59, and every other one about $5.

What each tail color grows into in pool 5
Green tail: 1 in 5 grows into a giantBlue or pink tail: 1 in 50
What each color is worth, once the fish grow

Green-tailed fish

Grows to about 40 lbs

Sells for about $60

$59

contribution for every one caught

Blue or pink-tailed fish

Grows to about 4 lbs

Sells for about $6

$5

contribution for every one caught

Now hand the bait to two teams. The Lower CAC team does what most teams do: it counts fish, at pool 1 or further down, and keeps whichever bait lands the most. The Value/signal team counts green-tailed fish at pool 1 and prices each one at what green-tailed fish grow into, so it knows what a cast is worth the moment it lands. Pick an option below.

Same size at the dock, valued by tail color

Round 0 of 20
Drag to any round
What lands in the net: the share of green-tailed fish
No bait25 fish a cast17% green-tailedLower CAC140.5 fish a cast1.2% green-tailedValue/signal33.76 fish a cast70% green-tailed

The Lower CAC team's catch is almost all blue and pink-tailed fish, the easiest to land in numbers. The Value/signal team's catch is about three quarters green-tailed.

The result: contribution after acquisition and cost per acquisition, round by round

Round 0 of 20
Contribution after acquisition per cast, once the fish have grown
Cost per acquisition: the cast and the bait for each fish caught
Value/signal · optimized on the green-tailed fish caught at pool 1 Lower CAC · optimized on the fish counted Investor baseline · the cost per fish falls the way the Lower CAC tests cut it (right), and every fish keeps the $4.55 it earned when bait came in (left) Shading · where 8 in 10 of the 200 runs land, round by round

Both teams spend the same $260 a cast on the net and the bait. By round 20 the Value/signal team makes 2.2 times the contribution after acquisition on 73% of the money: $294 a cast in, $1,188 out. The Lower CAC team puts $400 in, because it pays to handle the sale of a crowd of small fish, and makes $542: 1.9 times the baseline against 85% of it. Every $1 the Value/signal team puts in brings back 5.05 (505%); the Lower CAC team's $1 brings back 2.35 (235%).

Round 20: 2.2 times the contribution after acquisition on 73% of the money
Value/signalRevenue return 5.05 (505%)
$294 invested · $1,482 net revenue
Contribution after acquisition $1,188Contribution return 4.05 (405%)
Lower CACRevenue return 2.35 (235%)
$400 invested · $942 net revenue
Contribution after acquisition $542Contribution return 1.35 (135%)
Before any testing1.43 (143%)

Grey is what's invested. The bar runs on to net revenue, so the colored part past the grey is the contribution after acquisition.

Round 20 against the baseline: the average cast, and where 8 in 10 runs finish
$0$1,000$2,000$3,000Value/signal$1,188 a cast1.9 times the baseline8 in 10 runs: $345 to $2,570Lower CAC$542 a cast85% of the baseline8 in 10 runs: $172 to $1,042Baseline $639

Against the baseline, the Lower CAC team delivers the cheapest fish in the story, under $2 a fish sold, and still finishes $97 a cast short of the $639 baseline, because its fish don't keep their $4.55. The Value/signal team pays more for each fish at first, up to $10.83, then less as the green-tailed fish come in, and finishes at 1.9 times the baseline. Runs vary: 8 in 10 Value/signal runs finish between $345 and $2,570 a cast, and 8 in 10 Lower CAC runs between $172 and $1,042. Pair one run of each at random, and Value/signal comes out ahead 76 times in 100.

Optimize for the signal, not the thing. Same boat, same bait budget, same funnel. The only difference is what each team optimized for.

Find a signal you can see at the catch that tells you what shows up later. Price every fish by what its signal grows into, not by the average fish. Judge every test against the baseline in real contribution after acquisition and return on every $1, not in cost per fish.

The math: pricing by tail at the dock

contribution after acquisition per cast at the dock = $59.80 × green-tailed fish sold + $6.04 × every other fish sold − $260 − $1 × fish sold, where the fish sold are 1 in 4 of the catch

150 of the 900 fish have green tails: 30 of the 45 A-tier fish, all 99 B-tier fish and the 21 heaviest C-tier fish. The other 750 are 400 blue fish and 350 with pink tails, each with the same mix: 1 in 50 of them A-tier and the rest C and D-tier fish. At pool 5's $1.50 a pound, a green fish sells for about $60 and a blue or pink one for about $6. Both teams start from the scene 5 bait, about 110 fish caught and 27.5 sold a cast in the same mix as the ocean, and run the same tests. Some fish swim into any net whatever the bait, so even the Lower CAC bait keeps landing a few green-tailed ones, a little over 1 in 100 by round 20, and each cast sinks from $125 to about $111 before the sheer number of fish lifts it back to $542. Bait is finite, so drawing more green-tailed fish means drawing fewer of the rest: at first the Value/signal bait lands fewer fish, and each one costs more, up to $10.83 by round 8. Then the green-tailed fish come in numbers, the cost falls to $7.70, and each cast climbs to $1,188. Every fish with the same tail is alike at the dock, so the price the dock puts on a cast is right on average: the value seen in pool 5 is the value priced at pool 1. The signal here is perfect and never degrades; a real one is found by back-testing it against realized value and confirmed with a holdout.

What each color is worth over a lifetime

Addendum: why the Lower CAC team falls at the point of sale but climbs here

Point of Sale runs the same Lower CAC tests on fish sold the day they're caught, at their full size, and each cast falls from $125 to $28. Here, it climbs. Both teams keep whichever bait lands more fish. What differs is what the bait can tell apart, and so what each extra fish is worth.

At the point of saleHere, scene 8
What the bait can tell apartSizeOnly tail color
What landing more fish brings inThe tiniest fish: 78 of 93.7 a cast by round 20More blue and pink-tailed fish, in the same mix as always
Contribution after acquisition from each extra fish27 cents: 0.85 lbs × $1.50 − $1 handling$5.04: the blue and pink average, after handling
Contribution after acquisition per cast$125 → $28$125 → $111 by round 3 → $542 by round 20

At the point of sale the bait can pull some sizes harder than others, so the tests that reward more fish trade bigger fish for tiny ones worth almost nothing, round after round. Here the bait can only pick blue or pink-tailed fish. Those fish come in a fixed mix, 1 in 50 of them growing into a giant, so every extra one still carries their average, $5.04. For the first 3 rounds the bait gives up green-tailed fish faster than volume makes up for them: 0.8 green-tailed fish a cast at about $59 each, about $49, against 7 more blue or pink-tailed fish worth about $35, so each cast falls from $125 to $111. After that, green tails are nearly gone, 3.8 a cast down to 1.7, about $118 more, while the catch grows to 140.5 fish: 109 more blue or pink-tailed fish add about $549, and each cast climbs to $542. That makes this scene generous to the Lower CAC team. A bait that could pick small fish directly, as at the point of sale, would trade bigger fish for ones worth 27 cents each once they're sold, and each cast would fall the way it does there.

The fish picks its signal before it's caught

A signal can be applied from the moment a fish is about to be caught. Here the fish identifies itself before the net ever touches it: it swims at the green square, the blue circle or the pink triangle, and the one it picks is its tag. A fish-identified signal, and it stays with the fish all the way to pool 5, where its lifetime value shows. Track the two together long enough to see how tag and value line up, and the signal becomes the thing to optimize: land more of the fish that pick the shape that grows into value, and the value follows.

The fish picks a shape

The first fish is on its way
Tagged so far: 0 green · 0 blue · 0 pinkGreen tails grow into giants 1 time in 5, the rest 1 time in 50, the odds pool 5 showed in the last scene.

Optimize for the signal, not the thing. Once every fish carries its tag, the dashboard in scene 6 isn't blind any more: it can count green-tailed fish at pool 1 and price each one at what green-tailed fish grow into, the way the Value/signal team did.

The math: what a tag is worth

contribution after acquisition per cast at the dock = $59.80 × green-tailed fish sold + $6.04 × every other fish sold − $260 − $1 × fish sold, where the fish sold are 1 in 4 of the catch

The tag is the signal read at the catch. Here it's perfect: every fish with the same tail is alike at the dock, so the price the dock puts on a cast is right on average, and the value seen in pool 5 is the value priced at pool 1. A real signal is found by back-testing it against realized value and confirmed with a holdout, and it can decay as the catch concentrates on it. The three walls are the three ways one book gets read on this site: revenue returned, investment made, and the funnel the account moved through.

About the numbers. Illustrative. 100 fish weighing 1,000 lbs, 180 lbs down to 0.5 lb, split into four groups by Power Law Nested Means. In scene 1 the net is a bell curve lowered at a random spot along the line; in scene 2 it is a round net cast at the middle of the cube, where every fish has the same 1 in 4 chance of being in it. Scenes 1 and 2 use the same 100 fish and scenes 3 to 8 nine copies of each, the ocean. A cast costs $250, bait $10 a cast, and the merchant pays $1.50 a pound, at the dock or at pool 5. From scene 3 the net is four times the dock's: each cast lands about 100 fish, every one caught the same small size, and the fish drift from pool to pool at their own pace; about 29 in 100 slip through the grate on each slide, so 1 in 4 reach pool 5, grow into their lifetime size and are sold there, with $1 to handle each fish sold. Nothing is spent on a fish that doesn't make it, so the average cast sells the same 25 fish and 250 lbs as at the dock and the money is the same: $275 in, $375 back. In scene 6 a test runs a week of casts, and its fish take another week for each slide they cross. Every bait test sets the bait in use against a new one, checks every 50 casts for up to 500, and keeps the new bait when it wins at p < 0.05. The rounds in scenes 6 and 7 are the average of 200 runs worked out in advance, and the shading in scene 7 shows where 8 in 10 of those runs land; the size of each change sets how fast the lines move, not which way. In scene 4 each investor funds 100 casts drawn from 20,000, and the band is where 8 in 10 of 4,000 investors land. In scene 8 the three walls are the shadow room from Above Baseline Pro, redrawn here, and each fish picks a wall in the ocean's own mix of tails. Casts run in your browser, and caught fish go back in the water.