Debt is not necessarily a bad thing. The ability to borrow from another’s surplus, or borrowing from your own future surplus, so long as it is founded on prudent optimism, creates the virtuous cycle upon which stands the capitalist faith. But debt based on unfounded speculations or deceit is what gets us into bubbles.
It’s not just currency that may constitute debt. Actions and behaviours, too, can be a form of debt. That is, actions may have immediate benefits or avert urgent pains, but trigger costly actions further down the line.
It’s a sound strategy in general to live by the motto: ‘don’t be lazy’. Lazy in a loose sense of the word: taking shortcuts, procrastinating, cutting corners to avoid temporary pain or to expedite a short-term gain, is incurring a debt of the bad kind.
In my working experience so far, “action debt” is always overlooked. Sure, sometimes we’ve thought about long term trade-offs and consequences, but never with the sort of scrutiny paid to a balance sheet. Andreessen Horowitz calls it the Management Debt – https://a16z.com/2012/01/19/management-debt/.
The particular form of management debt I am currently contending with is a systematic under-investment in HR. We have one HR specialist servicing a staff of 80 and swells to nearly 200 during peak season. HR management has been reduced to a matter of payroll logistics.
The logic is as follows:
On the lack of HR Investment: We’re a start-up. Resources are limited and must be prioritized for revenue generating activities.
On the lack of formalized HR Life Cycles: We’re a start-up, we need people to be flexible.
On the lack of systematized training: We’re a start-up, people need to take initiative to learn.
The argument boils down to startupedness, and other start-ups supposedly being ‘more chaotic’ than we are.
It is ‘cheap’ to remain haphazard in your people management needs, believing that you could fix it later on. But this is where the debt element comes in – debt carry interests and if you borrowed too much, the interests can be debilitating. Our interest payment manifests as a company largely devoid of accountability, with rampant title inflation in some departments, with people hired under mistaken expectations, with roles desperately filled with under-qualified and overpaid people, with no way of measuring competency and know way of elevating competency.
Worse still, we’re stuck paying interests – the company under performs, we make losses, encounter failures left and right.
Avoid debt, folks. It’s tar pit.
#00117F 