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## Sunday, July 18, 2010

#### Behind the Power Curve

One of life's under-regarded principles is called being Behind the Power Curve (or "on the back side of the power curve"). The analogy comes from aviation, and is illustrated in this graph, which all would do well to understand:

Spelled out, there comes a point when your plane is slowing down that in order to maintain altitude you need to start adding power again. Pretty soon you've got the throttle on full, engine working as hard as it can, fuel burning up at maximum rate, and yet you are flying at your slowest possible speed! And in fact at that point you are barely hanging in the air and if you cut the power back just a little bit you come tumbling out of the sky.

Sound familiar?

The apparent paradox comes down to efficiency--in order to maintain altitude at the lower speeds, the plane needs to pitch up more and more, and pretty soon the drag (air friction) is eating up most of the power. So at that point instead of pushing you forward, your fuel is being used to just stir up a bunch of air.

Once you reach that point where you are at max power and min speed, there is no way out without losing altitude. None. (Well, ok, you can throw your passenger out if you do it quickly so the friction of the door doesn't cause a stall, but I digress.)

But the caveat is the solution, and that's why the analogy is useful in life: If you are willing to lose some altitude, you can get your air speed back up, and pretty soon you can be on the front side of the power curve, back to climbing, and eventually havin' a good ol' time doing looptyloops or whatever it is you do when you've got more altitude than you know what to do with.

The most obvious application is to finance and particularly credit. Your altitude is your standard of living, which presumably is what you would like to maximize. But going after it directly is apt to leave you hanging by your nails from thin air. Your air speed, the thing you really need to watch, is your net worth. And your fuel is your effort and labor.

The tipping point between being in front of or behind the power curve is when your net worth, excluding your body and mind, goes negative, i.e., when you are net in debt. This is the point at which friction starts taking over, and some of that money you earn every month starts lining other people's pockets instead of your own. Your stall point, where you come tumbling out of the sky, is when your net worth, including your body and mind, goes negative, i.e., when you can't possibly earn enough to pay the interest on your debt any more. That's called personal bankruptcy.

Where you end up on that curve all comes down to whether you lead by your net worth or by your standard of living. That is, are you trying to keep your speed up first, and then to climb, or are you trying to climb first and paying no mind to your speed? Most people do the latter. They spend what they get (trying to maintain maximum altitude first and foremost) and save and invest (increase airspeed) little if at all. And if income drops, or unexpected expenses come up (turbulence...), most are so reticent to give up any standard of living (altitude) that they will take on debt instead (lose airspeed...). And the trouble is, once started down that path, friction has taken over, and for the same effort as before, they are now actually falling further and further behind. Pretty soon they have to start working harder just to stay even, and eventually they are even forced to lower their standard of living just to stay out of bankruptcy. That entire dynamic and course of events is illustrated in that little graph above about airplanes.

The way out is to keep up your speed. Hold back your standard of living enough, and work hard enough, to make sure your net worth is growing. Don't want to work so hard? That's ok as long as you lower your standard of living (and hence expenses) accordingly--you will still be climbing on the right side of that curve, which means even though you've chosen the less-work path, your standard of living will eventually exceed where it was when you were working harder (and spending everything you got)! [See The Economics of Productivity and Capital if it's not clear why.]

The analogy also applies to software development, or really to any big project. Rushing things to get faster results puts you on the wrong side of the curve, and pretty soon you are spending all of your time cleaning up messes left over from before, and then, short on time, you are forced to rush things again just to be on schedule, and pretty soon you're rushing to be late, and then eventually and potentially the project fails entirely. All this when it could have been done well and ahead of schedule by investing more up front and withdrawing less (forget that early demo, etc).

The point here is so much more than that the end result is the sum of the input (if you put in more up front you have more at the end). The point is that if you don't stay ahead of the power curve the whole way along, you can get less than zero at the end despite enormous input! And if you do stay ahead of the power curve, you can get exponentially more out than if you rode the margin as most people/projects do.

The analogy even applies to being happy in life, finding a mate, all sorts of things you wouldn't expect. The old adage that "you will find someone when you stop looking" in part is true because the act of looking itself is a cost, something that takes away time and creativity and focus from other things, and those other things are often the real fuel behind the fire of your life that will put you in those places, and doing those things, and creating all of what will bring you to that person or bring that person to you. Sometimes you just have to throw in the towel, and realize that from where you are you cannot reach what you want, whatever it is. Take a step back from it, take it off your list, lose some altitude for a time while you regain speed. Stop reaching, and start climbing, put your hands on the rung you can comfortably reach, and pull. Right now, with good effort, and keep going.

And pretty soon you'll be looking back behind you at the point you could never seem to reach.

And it's all in that little graph about airplanes.

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Simon Funk / simonfunk@gmail.com