Stock and Flow Pt.1 – Introduction and Intuition

So far I have done my best to provide some intuition about systems thinking and why it might be important to you (while sharpening my own thinking as well). Through the few examples, we now understand that a system is the product of the interactions of its parts and that the structure of the system causes its behavior. We also know to look for circles of causality instead of fixating on one time events. I will now introduce another very important concept that will further enhance our basic understanding of the systems we deal with in our every day lives. It will also allow us to develop some real systems thinking skills and habits.

Stock and flow

If you let water run freely into a bathtub with the drain plugged up, the water level will start to rise steadily until it fills the bathtub. You have built a stock, in this case a small body of water, into the bathtub. By unplugging the drain in the bathtub, you can increase the outflow of water from the tub, thus decreasing the stock of water. If you had both the faucet on and the drain unplugged, you would have two flows of water, with one flowing into and the other out of the bathtub. Similarly, if you refill your refrigerator without using any of the food, you will have accumulated a stock of food. When you begin consuming the food, you increase the outflow from the stock, thus changing the size of the stock. In systems thinking terms, you have created a system of stock and flow.

Stock and flow systems are a fundamental systems thinking concept that are used when doing a system analysis. It is important to understand stock and flow systems because it helps us understand the various systems that affect our lives. A stock and flow system is usually illustrated with a following kind of image:

stock and flow

Usually flows are represented with an arrow similar to the one in the picture, with stocks depicted as squares. The small thingy on the arrow represents a mechanism which can influence the flow into the stock. In the bathtub example the mechanism would be the faucet, but it can also be something immaterial, e.g. laws or other restrictions. The small cloud at the other end of the arrow represents a source, which is ignored for the purposes of narrowing down the analysis.

The world is full of stock and flow systems that affect our lives. Airports, train stations, and busy intersections are good examples of physical stock and flow systems. Fisheries are important stock and flow systems found in nature, and are often mentioned when talking about sustainability issues. Many industrial companies can be modeled as relatively simple stock and flow systems, with a flow of supplies coming in for the manufacturing process and a flow of finished goods coming out. Similarly schools, hospitals, banks, grocery stores, and even complex political and social systems can be modeled as stock and flow systems.

But why are stocks and flows so important? What does it matter if we know about them or not?

Well, think about the way we usually approach stock and flow systems in our daily lives.We tend to be somewhat ignorant about our behavior towards stocks and flows: how many times have you ended up depleting your stock of food before going to the grocery shop? And how many times have you been stuck in traffic because you did not leave early enough to avoid it? There must have also been times when you have run out of money before the end of the month, having to either use up savings or eat noodles to get by before next pay check. We all tend to have difficulties balancing the stocks and flows of our every day lives.

But since we have difficulties dealing with these very simple systems, what about more complex and more important systems? We often treat natural systems the same way we are treating our refrigerator. We deplete fisheries and acidify the oceans. The rainforests are being hacked away at an alarming rate and we have also been extremely efficient at killing off numerous species of animals. Furthermore, we don’t seem to fully understand the workings of our own man-made systems either! This was demonstrated in the 2008 financial crisis, whose aftermath we are still living today.

If we want to live in a sustainable way and make sure we have a place in this world, we need to develop our understanding of the systems we deal with every day. Understanding stock and flow is only one part of the equation, but it is a very important part. In order to better understand stock and flow, I will next time talk about balancing and reinforcing feedback!

Practice suggestion: Try to look for stock and flow systems in your surroundings. Try to identify the different flows and the stocks they are flowing into and out of. Notice: the flows and the stocks can be either tangible (e.g. water, people, food) or intangible (electronic currency, ideas, political opinions).

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