When I was getting my PhD in engineering, my previous experiences and studies suggested that it would be important for me to be able to explain any ideas I created from an engineering perspective to financial types, and to do so in their language. This led to my initial studies in accounting.
As I learned accounting techniques, many things did not make sense to me. Why do costs go down as I create more output? Why isn’t there just one cost that represents the creation of a product or the execution of a process or service? I began by looking at things—profit, costs, cash flow—from an engineering perspective. Borrowing ideas from thermodynamics, fluid mechanics, and system dynamics, I created a model that I ...
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