Comment by jillesvangurp

If you want to understand economics, I recommend watching some of Don Reinertsen's videos on Lean 2.0. He goes into a few concepts quite deeply that are quite intuitive.

Cost of delay: calculating the cost of delaying by a few weeks in terms of lost revenue (you aren't shipping whatever it is you are building), total life value of the product (your feature won't be delivering value forever), extra cost in staffing. You can slap a number on it. It doesn't have to be a very accurate number. But it will give you a handle on being mindful that you are delaying the moment where revenue is made and taking on team cost at the cost of other stuff on your backlog.

Option value: calculating the payoff for some feature you add to your software as having a non linear payoff. It costs you n when it doesn't work out and might deliver 10*n in value if it does. Lean 1.0 would have you stay focused and toss out the option for that potential 10x payoff. But if you do a bit of math, there probably is a lot of low hanging fruit that you might want to think about picking because it has a low cost and a potential high payoff. In the same way variability is a good thing because it gives you the option to do something with it later. A little bit of overengineering can buy you a lot of option value. Whereas having tunnel vision and only doing what was asked might opt you out of all that extra value.

A bad estimation is better than no estimation: even if you are off by 3x, at least you'll have a number and you can learn and adapt over time. Getting wildly varying estimates from different people means you have very different ideas about what is being estimated. Do your estimates in time. Because that allows you to slap a dollar value on that time and do some cost calculations. How many product owners do you know that actually do that or even know how to do that?

Don't run teams at 100% capacity. Work piles up in queues and causes delays when teams are pushed hard. The more work you pile on the worse it gets. Worse, teams start cutting corners and take on technical debt in order to clear the queue faster. Any manufacturing plant manager knows not to plan for more than 90% capacity. It doesn't work. You just end up with a lot of unfinished work blocking other work. Most software managers will happily go to 110%. This causes more issues than it solves. Whenever you hear some manager talking about crunch time, they've messed up their planning.

Stretching a team like that will just cause cycle times to increase when you do that. Also, see cost of delay. Queues aren't actually free. If you have a lot of work in progress with inter dependencies, any issues will cause your plans to derail and cause costly delays. It's actually very risky to do that if you think about it like that. If you've ever been on a team that seemingly doesn't get anything done anymore, this might be what is going on.

I like this back of the envelope math; it's hard to argue with.

I used to be a salaried software engineer in a big multinational. None of us had any notion of cost. We were doing stuff that we were paid to do. It probably cost millions. Most decision making did not have $ values on them. I've since been in a few startups. One where we got funded and subsequently ran out of money without ever bringing in meaningful revenue. And another one that I helped bootstrap where I'm getting paid (a little) out of revenue we make. There's a very direct connection between stuff I do and money coming in.