Where it sits
Which is unsatisfying, unquotable, and probably why the metaphor gets used for the opposite purpose.
Tell it apart
| Aspect | Flywheel | Burn rate |
|---|---|---|
| Momentum from | Inside | Outside |
| Has a deadline | No | Yes |
| Early stage | Very slow | Very fast |
| Failure mode | Never starts | Runs out |
The flywheel compounds momentum generated from within. Burn rate consumes momentum purchased from outside. Opposite engines — and only one of them has a date attached.
What it doesn't mean
Collins's argument is the opposite: no single heave, however large, reflects more than a small fraction of the cumulative effect on the flywheel. Transformations that look revolutionary from outside were gradual from inside — and the outside can never see which push was the important one, because none of them was.
Steven D. Levitt noted that two of the selected 'great' companies later got into serious trouble, that only one dramatically outperformed the market, and that investing in all eleven companies in 2001 would have UNDERPERFORMED the S&P 500.
What it really means
Jim Collins described the object with unusual specificity: a wheel of about 5,000 pounds, 30 feet in diameter, 2 feet thick, mounted on an axle.
Push it. Almost nothing happens. Push again. It moves an inch. Keep pushing — for hours — and it completes a turn, then two, then ten, and then at some point it is turning so fast that stopping it is the hard problem.
The argument he built on it, in Good to Great (16 October 2001), is genuinely counter-intuitive and it is the part that gets dropped: no single heave — no matter how large — accounts for more than a small fraction of the cumulative effect. Transformations that look revolutionary from outside were gradual from inside. People inside those companies, asked afterwards which decision was the turning point, frequently could not identify one, because there wasn't one.
His name for the opposite pattern is the better half of the idea. The doom loop: push the flywheel one way, stop, reconsider, change direction, push again. Every individual push is energetic and defensible. Nothing accumulates, because the accumulation was never in any single push — it was in all of them pointing the same way.
Which makes the flywheel a metaphor about direction and repetition, not about effort. And it is routinely used to mean the opposite: our flywheel has become corporate shorthand for a diagram of virtuous circles, which is roughly the inverse of an argument about the invisibility of causes.
One piece of honesty the metaphor's popularity has outrun. The economist Steven D. Levitt noted that two of the eleven companies selected as 'great' later got into serious trouble, that only one dramatically outperformed the market, and that investing in all eleven in 2001 would have underperformed the S&P 500.
The mechanism may well be sound. The evidence base for it was a portfolio that lost to the index.
This page explains the terms and is not investment advice.
Where it comes from
a heavy rotating disk that stores rotational energy
Collins specifies the object precisely — a 5,000-pound wheel, 30 feet in diameter and 2 feet thick. The specificity is the argument: it is enormously hard to start and enormously hard to stop.
- 16 October 2001
Good to Great is published, setting out the flywheel and its opposite, the doom loop.
- 28 July 2008
The economist Steven D. Levitt publishes prominent criticism of the book's company selection.
In real life
- The literal sense: the heavy flywheel on a steam engine stores energy and keeps the machine turning smoothly between strokes of the piston.
- A bookshop's flywheel: good recommendations bring regulars, regulars pay for author events, events bring new customers, and the recommendations keep getting better.
- The doom loop instead: a company that launches a new strategy every year and abandons each one before it has had time to build up any momentum.
Questions
Q01Where does the flywheel come from?
Jim Collins's Good to Great, published 16 October 2001.
Q02What's the doom loop?
The comparison companies' pattern — pushing the flywheel one way, stopping, changing direction, and never accumulating momentum in any of them.
Q03Has the book been criticised?
Yes. Steven D. Levitt noted that two of the eleven selected companies got into serious trouble, that only one dramatically beat the market, and that the eleven-company portfolio would have underperformed the S&P 500. This page explains the terms and is not investment advice.