Technical Debt

Acquiring debt is a way to receive somthing now that usually requires an extra payment later with interest.

This can be useful to speed things up in the short term.

For example, a loan can be used to allow you to make a large purchase such as a better car or truck that then enables you to earn more. Some of the extra earnings can then be used to pay off the loan along with the extra interest payments.

If you had the money up front you could save on interest payments but sometimes you may not want to wait.

Technical debt serves a similar purpose whoever it may be less clear what the interest payments are going to be or when they may become due.

For example, you may implement an algorithm that will work fine for small customers that pay a little money, but wouldn’t work for large customers that would pay more. Should you do it? Or should you implement a better algorithm that would work for everyone? This is an engineering trade-off. If you already know how to build the better algorithm, maybe it makes sense to. However if it takes a long time, it might be better to get some revenue so you don’t go broke before you get there. Taking into account the business.

You may decide to start with the simple algorithm and start receiving money from small customers. You have now acquired some technical debt. Over time a small customer will slowly grow, making your simple algorithm run slower and slower. To compensate you may increase the size of your servers which costs more. This is your interest. You may be okay paying this interest so that you have enough time to finish the better algorithm. Then you can switch to the better algorithm and you have then paid off your debt (with interest).

One day though, your small customer may rocket in growth and all of a sudden all your debt is payable now and you have to immediately work on the better algorithm for them. This is the risk of technical debt. Hopefully at that point you have enough to pay off the debt otherwise you’ll need to default on it and negotiate with the customer on options.