The Economics of a Dev Team
Looking at Your Dev Team from an Economic Lens
The Economic Lens
Most executives look at their development teams in one of two ways:
either as a cost center that burns money and needs to be kept lean,
or as an innovation engine that cranks out the next big thing.
Both frames contain some truth…but they’re incomplete.
A 3rd powerful lens is to view a dev team as a micro-economy.
Like any economy, it has scarce resources (time, talent, focus), supply and demand mismatches, cycles of boom and bust, and a constant tension between short-term needs and long-term investments.
It also accumulates debt, experiences inflation, and sometimes even spins up black markets when official systems can’t keep up.
Viewing your team in this way matters because it shifts leadership from a narrow obsession with cost reduction or shiny innovation toward a more balanced approach.
A CTO becomes less like a manager and more like a policymaker: balancing growth with stability, ensuring investments compound, and keeping the “national debt” aka tech debt manageable.
I’ll walk through 7 familiar economic concepts, from inflation to recessions to trade deficits…and show how they play out inside a dev team.
Think of this as your guide to running the “economy” of an engineering team.
Inflation
Economic Meaning
In economics, inflation occurs when too much money chases too few goods. Prices rise, purchasing power falls, and the economy feels unstable.
Engineering Meaning
In a dev team, inflation shows up when headcount grows faster than output. Each engineer contributes less per capita and the “cost per feature” rises.
Warning Signs
Velocity per engineer declines despite hiring more staff. Communication overhead spikes, stand-ups balloon, and timelines slip even though more people are involved.
Short-Term Benefit
Deliberate “inflation” can be useful when you need surge capacity — like breaking into a new market or supporting a major product launch.
Long-Term Strategy
CTOs must ensure headcount growth creates leverage, not dilution. Add people only when systems are ready, trim unnecessary steps, and monitor “per-capita” productivity as closely as total output.
Recessions
Economic Meaning
A recession is a broad economic downturn triggered by shocks, loss of confidence, or structural weakness. Activity contracts, unemployment rises, and recovery often takes years.
Engineering Meaning
In engineering, recessions take the form of burnout, RIFs/layoffs, or reorg fatigue that sharply reduce morale and output. Features shipped (i.e. “GDP”) plummet as the team loses momentum.
Warning Signs
Sluggish delivery, rising attrition, falling morale scores, and projects abandoned mid-stream. Energy feels drained no matter how many hours are logged.
Short-Term Benefit
A slowdown can sometimes provide breathing room. Teams can regroup, reassess priorities, etc. But engineering “recessions” are usually terrible.
Long-Term Strategy
The CTO’s role is to prevent prolonged recessions by pacing sustainably and avoiding whiplash reorgs. When downturns happen, rebuild trust and confidence first (productivity follows morale).
National Debt Crisis
Economic Meaning
National debt is when a government borrows to spend more today, with interest owed in the future. Too much borrowing crowds out growth as interest payments dominate the budget.
Engineering Meaning
In a dev team, this is technical debt — cutting corners to ship faster now, while burdening the future with bugs, maintenance, and slower velocity.
Warning Signs
Bug backlogs grow, new features take longer than expected, and teams dread touching certain parts of the codebase. The “interest payments” are eating into velocity.
Short-Term Benefit
Strategic borrowing makes sense. Tech debt can buy speed when you need to win deals, test markets, or seize fleeting opportunities.
Long-Term Strategy
CTOs must manage debt like a finance minister — borrow deliberately, repay consistently through refactoring, and avoid compounding interest that eventually strangles the team.
Supply & Demand Issues
Economic Meaning
Supply and demand is the foundation of markets: demand is more or less infinite, supply is finite, and prices balance the two. Misalignment creates scarcity or surplus.
Engineering Meaning
Demand for features, fixes, and integrations is endless. Supply of engineering time is capped and doesn’t scale linearly. Prioritization is key.
Warning Signs
Stakeholders constantly feel disappointed, backlogs swell, and engineers complain of being stretched thin with little clarity on priorities.
Short-Term Benefit
Pressure from demand can sharpen focus. When handled well, it forces clarity on what really matters and delivers value fast. But it’s generally not great.
Long-Term Strategy
Use a demand capacity model! A CTO must enforce prioritization discipline. Every yes is several no’s. Transparency in tradeoffs makes things clear and keeps supply aligned with demand.
Trade Deficit Problems
Economic Meaning
A trade deficit occurs when a country imports more than it exports. Dependence on external producers creates fragility and reduces self-sufficiency.
Engineering Meaning
In dev teams, this shows up when they rely heavily on vendors, libraries, or external partners, while delivering little original value.
Warning Signs
Vendor costs balloon, external dependencies dominate roadmaps, and the team struggles when an outside partner changes pricing or direction.
Short-Term Benefit
“Imports” aren’t bad — vendor tools and libraries accelerate delivery, especially early on. They let teams move quickly without reinventing the wheel.
Long-Term Strategy
CTOs should balance imports (vendors) with exports (in-house). Use external leverage wisely, but ensure the team builds core capabilities that deliver usre value and avoid over-dependence.
Capital Investment
Economic Meaning
Capital investment is money spent on infrastructure and equipment that fuels future growth. It’s an investment in long-term productivity, not immediate consumption.
Engineering Meaning
For dev teams, capital investment means infrastructure, automation, better tooling, and training. These don’t pay off instantly but compound over time.
Warning Signs
When capital projects are ignored, velocity flatlines, tech debt piles up, and engineers complain that “everything feels harder than it should.”
Short-Term Benefit
Skipping capital investment can help teams ship features faster in the moment, appeasing stakeholders in the short run.
Long-Term Strategy
CTOs must protect investment budgets. Regularly fund automation, training, and refactoring so the team can keep compounding productivity and avoid stagnation.
Black Markets
Economic Meaning
Black markets are underground economies that emerge when the official system can’t meet demand. They can fill gaps but often destabilize formal structures.
Engineering Meaning
In dev teams, black markets take the form of skunkworks projects, shadow IT, or quick hacks that bypass official processes.
Warning Signs
Unapproved tools appear, rogue scripts run in production, or teams hide side projects from leadership. The underground economy is thriving.
Short-Term Benefit
Black markets can spark innovation. Skunkworks projects often produce breakthroughs that wouldn’t survive formal roadmaps.
Long-Term Strategy
Especially in larger comapnies CTO should channel this energy into structured innovation programs while limiting destabilizing shortcuts. Encourage experimentation, but keep it visible and integrated.
Closing Thoughts
A CTO’s job isn’t just to manage output, it’s to run the economy of the dev team. Resources are scarce, tradeoffs are constant, and cycles of growth and decline are inevitable.
You’ll face inflation when headcount outpaces productivity. You’ll see recessions when morale collapses. And you’ll carry debt every time you borrow against the future with tech shortcuts.
These ideas are the forces shaping your team every day. The difference is whether you spot them early and steer accordingly.
The best CTOs act more like policymakers, than just pure managers. They balance today’s pressure to ship with tomorrow’s need for resilience, investment, and sustainability.
When you lead with that mindset, your team’s economy doesn’t just survive it compounds value, year after year, for the entire business.
By the way, reach out for help if you need it: bobby@technocratic.io.
And in the meantime, keep the shark swimming! 🦈