Streams & Spikes

The notion of a "stream" has been around for a while, but for some reason I haven't seen it generalized, even though it would be extremely natural to do so. For our current purposes a stream will be any ongoing or repeated process: a habit can be a stream, for example. This won't be the full definition. We'll want to be able to hang a few connotations on it as well, because most of what's interesting about streams is in what they imply. For instance, it's revealing to compare streams against what they aren't. The opposite of a stream is any isolated incident, or something that happens but isn't recurring. We can call these "spikes".

The bills that come in the mail are a stream. If you play guitar every day, that's a stream. Going out for ice cream is a spike, but grocery shopping is a stream. Your heartbeat is a stream. Fifteen minutes of fame is a spike.

This is a broad definition, no question. Now, here's what makes it interesting: if we can say anything reliable about something this general, that's sure to be a useful tool.

In professional disciplines, streams appear in a few places. In business or accounting, "cash flows" are streams. Website activity feeds are all streams. Regular customers at a restaurant are a stream. Investing dealflow is a stream. Economics describes the concepts of "capital" and "natural resources", and neither of these are streams on their own, but they are both good sources of streams.

Computer scientists use the word "stream" to mean the flow of data—like water through plumbing—but that's not the kind of stream we're talking about. There's another kind of stream from computing that we don't mean either, as in "streaming" internet radio. The sort of streaming Spotify does has more to do with not owning a file.

The kind of stream we're interested in is socioeconomic. A more accurate concept from computer science would be "proportional" versus "fixed" costs. This they don't call a stream there: they call it O(n) versus O(1). Focusing on cost can be a good way to look at streams. For our definition, dust settling in the house is a stream, but spilt milk is a spike.

Streams Matter, Spikes Don't

Here's the first thing we'll say about streams. Streams matter, spikes don't. Regular people get this backwards. One crucial aspect of streams, so crucial it drives the definition, is that regular people invert the importance of streams and spikes. The way it really works, is that the stream is what you have to worry about, and the spike isn't. But the spike draws the attention of the average person while the stream is ignored.

Gamblers talk about their jackpots but ignore in the long run that that their pastime has negative expected value. Addicts too. As a more familiar experience, if your website makes the front page of a news aggregator, you can drive 10,000 views in a day. Amortized over a year, this is only 30 daily views, which isn't a meaningful figure. You'd have to be in the news consistently to have any kind of meaningful traffic. One big spike makes for a wimpy stream.

The best we can hope for in a discussion this general is a rough approximation. You can do funny things to the definition if you stretch it. So nobody really means, for instance, that the delivery of a firstborn child, a spike, doesn't matter. But a good father who missed the birth of his child has a funny story, while a bad dad who happened to be there is a tragedy. And that kind of insight is what we're looking for.

Companies exploit our misperception of streams to get you to pay higher prices. Payment plans are there because customers balk at high fixed prices. But a low monthly payment? That's nothing. And over time the customer pays the higher price.

Lotteries exploit the other side of the misperception to pay less. The fine print says the lottery pays out the advertised winnings in small payments over time. If the winner doesn't like that, he can opt to get less than the advertised winnings, but as a single, one-time, lump-sum payment. Lotteries hope he will opt for the "larger" one-time payment, which is a discount for the lottery on what they would normally pay.

Suggestion Boxes are another good example. If you've ever felt like a Suggestion Box is a black hole where your opinions go to disappear, you are not alone. The companies don't care about individual ideas. They are polling people to see which streams of requests are the loudest, and the top few are, maybe, the ones they'll act on. If your suggestion is the least bit novel, it's sure to be ignored.

Our justice system is also wise to the way streams work. If you smash a few windows in your neighborhood, there's a good chance you'll get away with it. The police are not given the resources to fully investigate every infraction. But if you turn lawbreaking into a habit, you're going to get caught at some point or other. And then the penalties will make you regret it.

There's pressure to obey the law in two directions. If you break the law a handful of times, it's not likely you'll get much out of it. Those are spikes, and to get anything meaningful, you'd need a stream. But by the time you build a stream of infractions, you've already been caught. This two-sided phenomenon is what guarantees that I can trust the random vendor on eBay. He'll send the memory card I've bought. Why would he risk his reputation over a single card?

Streams Are Too Much to Handle

Some common streams are artificially rate-limited so that you can handle them. Leasing an apartment tends to cost about a 1/3 of your income. From a certain pessimistic point of view, this is just low enough so that you can go about your life and keep paying. Leases are special in this respect since the counterparty needs you to be willing to sign.

Most other streams are oblivious to your opinions on the matter. You could never watch all the funny Vines people post, for instance.

These kinds of streams are…mighty. It's tough to convey the sense of it. In the same way "most machines" will chew your finger off if you're not careful, "most streams" will overrun you if you try to stay ahead of them. There is no governor on their flow, and they are too much for one person. In my experience, the majority of streams are like this. If something is a stream, your default response should be not to tangle with it.

Sometimes, you're saddled with an ongoing cost that you simply can't avoid. I'm going to guess most of us have a stream like this: work email. At the corporations I worked at the volume of work email was too much to internalize all of it. The only thing to do then was to ignore a lot of the stream.

Probably this was the first time in my career where I was forced into "dropping the ball", and I'll expand my guess to conclude that this is the first time for most people. The streams that you deal with in school are artificially limited. Work email isn't.

To deal with a stream like this, you need some kind of variation of the following algorithm:

  1. Read a few important things closely.
  2. Skim a few other things.
  3. Filter or archive all the rest.

It irks us to have to admit defeat like this. Still, trying to read all the email is a much worse idea. There's not enough time. And even if you make the time, you've given equal consideration to some emails which are clearly not important.

As far as I can tell, progressing in any profession will increase the number of streams you have to filter. So if you plan on moving up, you'll have to accept that you'll be filtering streams. What's worse, the higher you go the more likely these streams are to consist of people. Celebrities are the extreme case, and they can never meet the personal demands on their time.

With a stream of good possibilities it's easy to let the borderline ones pass. Generally speaking, people who have a stream behave differently from those who don't. They're in filter mode, and they can afford to be choosy about which opportunities they take.

When I don't have a stream of possibilities, my tendency is to compensate by getting overly invested in the options I do have. This isn't a particularly special failing on my behalf, it's simply the natural result of putting the same amount of attention on a smaller selection of items. Already this is a bad idea, but it's made worse by the fact that other people will sense you are doing it. And when you do it they respond unfavorably, because it's a bad performance in the kabuki.

The right way to handle this situation is not to double down on unpromising options, but to find a way to increase the throughput of options. Sometimes this will solve the problem. When it doesn't, that's a sign. If you give it your best and the throughput won't increase, that's a good heuristic that what you're looking at is not important, and that you should look at something else.

Important things tend to have streams leading all the way there. This may be why people who are interested in other people seem to do better in business than people who are interested in manufactures. They can find the paths better. Beneficial streams have other streams of benefit branching off from them, and they are lined with people.

Beneficial Streams Are Closely Held

When a stream provides some kind of benefit, then a portion of that benefit can be re-routed to further satisfy whatever demand is driving the stream. What typically happens is the stream is used to finance hiring help. The additional help frees the stream to grow.

You would expect this feedback loop to be efficient, but there are streams everywhere where the owner lets the excess run into the ditch. Corporate inefficiency, mismanagement, neglect; the people with beneficial streams are free to do whatever they want with them. Given the opportunity, most smart people could make a fortune by fixing some dilapidated stream for a percent of the savings. But this rarely happens.

I notice that up to this point few of the relatable stream examples I've cited are beneficial. I can think of a few beneficial streams that everyone has, family, for instance, but most beneficial streams are reserved for business owners and other privileged positions. This is an old situation. You can make the argument that Facebook is as valuable as it is because it lets you draw from (but not own) a personalized stream. People aren't used to that. Streams of benefit are closely held for the same reasons anything truly valuable is.

You'll find that education's about the only thing lying around loose in this world, and that it's about the only thing a fellow can have as much of as he is willing to haul away. Everything else is screwed down tight and the screw driver lost.
Fictional Chicago pork magnate John Graham in Letters from a Self-Made Merchant to His Son, 1902.

Land was once the main way to guarantee an income stream in America, and so "landowner" was once a synonym for "independently wealthy". This idea was a lot stronger coming from Great Britain and the European continent, where land ownership had long been sewn up, and the gentry had spent the past few hundred years sticking it to their tenants. The British royal family still derives a major portion of its income from real estate.

In his place he kept Servants long: being asked the Reason, I keep them awhile, because I have need of them; and I will keep them awhile, because they have need of me. Bnt indeed he knew that there was nothing better than an old Servant, as who had made his Masters Interest his own, with whom he would live and dye; and as one who understood his Masters business by long acquaintance and experience. He had once fallen out with a Gentleman, who shewed him some B•gs he would spend against him; he asked, Whether they had any bottom? Yes, said the Gentleman: Nay, then I care not; for here I have a constant Spring, and I cannot spend in other Courts more than I gain in this Court.
THE Way to be Rich, According to the Practice OF THE GREAT AUDLEY, Who begun with two hundred Pound, in the Year 1605, and dyed worth four hundred thousand Pound this instant November, 1662. London.

British culture is fixated on income streams, the same way it's obsessed with nobility. Great Expectations revolved around a secret £500 a year payment that allowed Pip to become a gentleman. Other Victorian novels are filled with references to pensions and annuities, many of which came, in some way, from her majesty.

In Pip's case, the money was coming from America, where we are more fixated on fortunes than on pensions. The story of America has been that it provides a stream of opportunities, and if you agree with that, then opportunity is a beneficial stream that Americans have. That America is still the best place in the world to start a business is widely conceded.

Streams Have Momentum

Today starting a small business is one of the best ways to get a recurring payment, and even to eventually cash out. Financiers are always willing to buy a profitable business. Why? Because they will either buy at a discount (and pocket the difference), or else they will use some magic to increase the size of the stream. These ideas are both dependent on having the stream not suddenly stop.

That's another property of streams, which is that they have momentum. The forces that align to create a stream are strong, and once they're in place they don't usually stop without warning. This is especially true for streams composed of streams. I don't know why this is. Could be survivorship bias, could be something else. But it seems to be a natural law. Once a complex stream gets going, it tends to keep going.

Whatever phone is the iPhone killer hasn't appeared yet. But I guarantee you one thing, when it does appear Apple won't close up shop, because any displacement will be gradual. BlackBerry is still going.

That gradual dissipation is a really important thing. That means if I push the ball up the hill it's not going to roll back down on me immediately. I sold apps in the Apple App Store for a while and that was a really hard business. You get paid once for your software, and then every time you want to get paid again you have to find a customer you've never seen before.

There's a model that works a lot better and that's the subscription model. Instead of paying once, a customer pays each month. A lot fewer people are willing to sign up for a subscription, but that recurring payment makes all the difference. Now, each customer is its own stream, and the combination of streams makes something really stable. This kind of business is so good that people are always turning products you don't subscribe to into products you do.

Streams Can Be Channeled

If you don't have a stream, it can be a good idea to make one.

The simplest kind of stream you can make comes directly out of your toil. One stream we all have that can be redirected is our work, or more precisely our toil. You can rechannel your work into some new direction. But you only get to choose one direction at a time, and the stream won't be very strong.

The output can be anything. If you're a writer, it looks like paragraphs. If you're in the dating market, it looks like potential spouses. If you're a mechanic, it looks like repaired cars. For me that stream right now is potential customers because I am working on sales. I'm talking to a lot of people to find the ones interested in buying Kerf licenses. In the past my output looked different.

Where I used to run into trouble was getting attached to my output. Each piece along the way seemed somehow crucial to the final product, plus, each was hard to do. What's more, I let them be difficult by spending too much effort at this stage, when I should've allocated more to editing. So editing turned into a struggle, and the product that came out at the end was corrupted as a result. In reality, you have to take a detached view to your work. Instead of viewing your streaming output as the final product, it's better to consider it as a stream of options, not all of which are serviceable.

For many kinds of work, stream generation is only the first step of a two step process. The second step is editing, or intelligently evaluating the opportunities that have come through. Not all streams of opportunities are like savings bond payments, where pure money is rolling in. Some of them are like ore from a mine, where only a few of the rocks that come out will contain gems. So if you spend all of your energy bringing the rocks out of the mine, you'll do a bad job when it comes time to find which ones are valuable. One of the great things about working on a team actually is you can hand off the hard work to someone else to evaluate it fresh.

Streams that depend on your labor are artificial in a way. If you remove the cause, your toil, they'll die out. Salary is like that. When you stop it stops. The other kind of stream is self-sustaining.

Self-sustaining streams come from somewhere. Either enough spikes reach critical mass, or the existing network of streams changes to spawn a new one. In the case of a large stream, no one person is ever responsible, but if you are there at the right time, you can contribute enough to the formation that other people will allow you to lay claim to it.

The little stream of your toil isn't much. But it's the starting tool everyone has. And some of those people used it at the right time in the formation of larger streams.