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Stocks Flows and Dynamic Equilibrium
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Model systems as things that accumulate, rates that change them, and balance points.
The Pieces
- Stocks — what accumulates. Cash, users, inventory, trust, tech debt.
- Flows — rates of change. Inflows add to stocks; outflows reduce them.
- Dynamic equilibrium — when inflow equals outflow, the stock stays level.
Why It Matters
- Many decisions confuse stocks with flows. "We hired ten people" (flow) doesn't tell you "how big is the team" (stock).
- Dynamic equilibrium explains why systems stay put even when individual parts churn.
- Changing a stock requires changing flows — over time, not overnight.
How to Apply
- Identify the stock you care about.
- Name its inflow and outflow.
- Ask: is it currently growing, shrinking, or in equilibrium?
- To change the stock, change one of the flows.
Examples
- Bathtub: water level is a stock, tap and drain are flows.
- Team size: headcount stock, hires in, attrition out.
- Customer base: total users, signups in, churn out.
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