I am financially astute, and I've been working for small and large financial services firms.
When someone talks about taking on debt, it is critical to know the interest rate charged. Also very important are whether the debt is collateralized (example: car loan, house loan) or non-collateralized (credit card), along with how easily it would be to get out from under the debt if you cannot pay (can it be discharged in bankruptcy? how does it affect your credit rating?)
Very few (if any) financial people and senior managers could make the company liable to replay this debt unless these variables were known with relative certainty. To take on debt without this information could be deemed reckless and may expose the company to shareholder lawsuits, etc, and be job-ending moves for the people involved.
Back to technical debt? What kind of debt is it? Is it collateralized? What if you can't pay it? Can you write it off, or do you lose the company? Can you get out of it in bankruptcy? What's the interest rate?
I argue that "technical debt" is like an unknown debt. The interest rate is unknown, it is collateralized with the organization itself, and cannot be discharged in bankruptcy, short of bankrupting the entire company.
The prudent and reasonable thing to do would be to not take on the debt at all. Remember what Toyoda (the founder of Toyota used to say): Cash is your best friend, but debt is your worse enemy.
Who would borrow money to go to college and get an education at 40% interest rate a year? It would only be worth it in very rare cases. What about 20% a year? My wife put her college education on credit cards, paying foreign tuition rates, and we had fun paying it back, let me tell you. When I went to college, I went slower, paying as I went, but had no debt at the end.
If any company takes on debt, it is irresponsible for them to not do a thorough financial analysis of the impact of the debt.
What's the interest rate on technical debt? Who can say?
When someone talks about taking on debt, it is critical to know the interest rate charged. Also very important are whether the debt is collateralized (example: car loan, house loan) or non-collateralized (credit card), along with how easily it would be to get out from under the debt if you cannot pay (can it be discharged in bankruptcy? how does it affect your credit rating?)
Very few (if any) financial people and senior managers could make the company liable to replay this debt unless these variables were known with relative certainty. To take on debt without this information could be deemed reckless and may expose the company to shareholder lawsuits, etc, and be job-ending moves for the people involved.
Back to technical debt? What kind of debt is it? Is it collateralized? What if you can't pay it? Can you write it off, or do you lose the company? Can you get out of it in bankruptcy? What's the interest rate?
I argue that "technical debt" is like an unknown debt. The interest rate is unknown, it is collateralized with the organization itself, and cannot be discharged in bankruptcy, short of bankrupting the entire company.
The prudent and reasonable thing to do would be to not take on the debt at all. Remember what Toyoda (the founder of Toyota used to say): Cash is your best friend, but debt is your worse enemy.
Who would borrow money to go to college and get an education at 40% interest rate a year? It would only be worth it in very rare cases. What about 20% a year? My wife put her college education on credit cards, paying foreign tuition rates, and we had fun paying it back, let me tell you. When I went to college, I went slower, paying as I went, but had no debt at the end.
If any company takes on debt, it is irresponsible for them to not do a thorough financial analysis of the impact of the debt.
What's the interest rate on technical debt? Who can say?