Every system has stocks. A stock is anything that accumulates: water in a tank, money in an account, reputation in a market. Stocks change through flows, the rates at which stuff enters and leaves.
Below is a tank. Water flows in from the left, drains out from the right. Use the sliders to control the rates. Watch what happens to the stock when inflow and outflow are different.
What you just learned
The stock only changes when inflow and outflow are different. When they're equal, the tank stays put. This is the most fundamental rule of systems: stocks are the memory of the system. Flows are how that memory changes.
Think about your bank account. Income is inflow, spending is outflow. Your balance (the stock) only grows when you earn more than you spend. Simple. But most people only watch the stock and forget about the flows.
Jargon you just learned
- Stock
- An accumulation. Anything you can measure at a point in time: water in a tank, money in a bank, trust in a relationship.
- Flow
- The rate of change of a stock. How fast something is added or removed.
- Inflow
- A flow that adds to a stock.
- Outflow
- A flow that drains from a stock.
- Rate
- How much flows per unit of time.
- Accumulation
- The process of a stock increasing over time because inflow exceeds outflow.
- Net Flow
- Inflow minus outflow. Positive means the stock grows. Negative means it shrinks.