Systems Thinking: Stocks and Flows

Systems thinking is a powerful approach to understanding complex problems by modeling stocks (accumulations) and flows (movements between stocks). This mental model helps identify leverage points and predict system behavior over time.

What is Systems Thinking?

• Systems thinking focuses on two key components:

  • Stocks - Things that accumulate (e.g., number of fish in a lake, number of people fishing)
  • Flows - The movement between stocks (e.g., fish being caught, fish reproducing)

• The relationship between stocks and flows creates dynamic behavior:

  • If there are many fishermen (high stock), the fish population (another stock) will decrease faster
  • If fish population is low, the reproduction rate (flow) will be slower
  • Small changes at one level can concentrate and amplify as they move through a system

How to Apply Systems Thinking

1. Start with a simple model

   • Map out the key stocks in your system
   • Identify the flows between those stocks
   • Consider how changes in one stock affect flow rates to others

2. Compare your model to reality

   • Use your model to make predictions
   • When reality conflicts with your model, update the model
   • "Reality is never wrong, your model is always wrong if it conflicts with reality"

3. Use the model to identify leverage points

   • Look for bottlenecks where stocks accumulate
   • Find places where small changes might create outsized effects

Example: Hiring Pipeline System

• Stocks in a hiring pipeline:

  • Potential candidates (infinite pool)
  • Active candidates in your pipeline
  • Candidates at each interview stage
  • Offers extended
  • Offers accepted

• Flows between these stocks:

  • Sourcing rate (affected by number of sourcers)
  • Conversion rate between pipeline stages
  • Offer extension rate
  • Offer acceptance rate

• Using the model to diagnose problems:

  • If candidates get stuck before offers, hiring managers may lack conviction
  • If offers aren't being accepted, you have a closing problem
  • If not enough candidates enter the pipeline, you have a sourcing problem

Caution: Avoid Systems Thinking Pitfalls

• Don't get so caught up in measurement that you forget to make improvements
• Avoid the "measure infinitely, cut never" trap
• Remember that the model is a learning tool, not an end in itself
• When your model conflicts with reality, update your model, not your perception of reality

Recommended Resources

• "Thinking in Systems" by Donella Meadows
• "Silent Spring" by Rachel Carson (for understanding how small changes can concentrate through a system)

The power of systems thinking comes from making complex, abstract problems concrete and actionable by visualizing how different components interact over time.