Identifying Tech Debt and turning it into an investment

https://nojvek.substack.com/p/tech-debt

by nojvek • 6 years ago

3 2 6 years ago

nojvek.substack.com

I always think debt is a loaded term because a lot of people reflexively hate debt. I think viewing it in terms of Accounting's "Liabilities" makes it a lot more clear.

So the basic accounting equation is Assets = Liabilities + Equity. Any increase in liabilities must be balanced with an increase in Assets (you use a credit card to buy a lamp) or a decrease in equity (taking out a predatory payday loan to cover utilities).

The flipside of this is if you increase your liability to gain an asset worth even more, your equity goes up (take out a loan to buy a house that appreciates in value beyond the interest rate). This is what the goal of technical debt should be, increasing the "equity" of the software.

nojvek• 6 years ago

Absolutely. Very well put. There’s good debt which you can leverage to grow. Same as VC money.

Then there’s bad debt, which is predatory just like bad VCs and payday loans.

Identifying Tech Debt and turning it into an investment

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