Stocks and flows

Picture a bathtub. The water level is the stock; the tap and the drain are flows. The level rises when the inflow exceeds the outflow, falls when the outflow exceeds the inflow, and holds still when they match, however large each flow is. Meadows wrote that if you understand the dynamics of stocks and flows you understand a good deal about the behaviour of complex systems. Stocks are a system's memory: they change slowly, they lag their flows, and they buffer shocks, which is why a system keeps moving after you have changed the thing that was driving it.

The idea earns its place because people reason about stocks as if they were flows. Cutting emissions by 10% does not cut the carbon dioxide in the air; it slows the rise. A loan balance falls only while payments exceed interest plus new borrowing. A queue's depth is a stock and its arrival and service rates are flows: if arrivals exceed service, the depth grows without bound no matter how fast the service is in absolute terms. Most delays in a system are stocks that have to drain, and most overshoot comes from trying to make a stock jump.

The failure is not confined to novices. Sweeney and Sterman found it in graduate students at one of the world's best engineering schools, and most of their subjects had engineering or science degrees. The usual mistake is to draw a stock as a copy of its own inflow and call that a forecast, which they named spreadsheet thinking: treating change as something that happens in discrete jumps at reporting dates instead of continuously. Check which quantity is the accumulation, which are the rates, and whether the rate you are changing is large enough to flip the sign of the net flow. If it is not, the stock will keep moving the way it was, and the only thing you have changed is the speed.