Know thyself
There are moments when the ground underneath an industry shifts so decisively that instincts forged in stable conditions become liabilities overnight. Deglobalization, manufacturing onshoring, geopolitical fragmentation. These are not ordinary cycles or transient risks. They are convergence events: shocks large enough to invalidate assumptions embedded deep within global architectures. The "Assumptions" built on that one Excel sheet analysts copy from project to project, once they are scrambled, they will be rebuilt in a way that no one recognizes.
What matters in these moments is not who is smarter or braver, but knowing what kind of organization you represent.
Large incumbents and startups are not separated by scale alone. They are different species of systems. Incumbents are highly optimized machines: efficient, well-lubricated, and deeply invested in a particular configuration of the world. Over time, these self-reinforcing optimizations are so intertwined missing any piece does not make sense. The organization becomes excellent at extracting value from a specific stable equilibrium, at the same time, filtering out tiny variances at this equilibrium.
Startups are the opposite. They are incomplete by design. Under-optimized, lightly committed, structurally chimeric. They carry little historical baggage and few irreversible decisions. Early investments can be written off as sunk cost without threatening the integrity of the whole. These features alone allow startups to exist and thrive in uncertain environments.
When convergence shocks occur, incumbents must react defensively. They do not have the luxury of improvisation. A wrong decision at scale compounds: across suppliers, regulators, customers, and financiers. Stability is not optional. Redundancy, diversification, and hedging are rational responses to sharp, catastrophic exposure, which could knock the giant down with a single arrow to the weakest point.
The danger begins when startups mistake this defensive posture for wisdom and try to imitate incumbents' moves.
I
Half a league, half a league,
Half a league onward,
All in the valley of Death
Rode the six hundred.
"Forward, the Light Brigade!
Charge for the guns!" he said.
Into the valley of Death
Rode the six hundred.
The three ways startups fail during seismic shifts
When the environment shifts, startups often respond by overanalyzing the shock as if they were incumbents. When I explained the mass onshoring of pharma manufacturing to my mom, it became clear there are 3 answers that could kill startups in this specific question: "What do we do now?"
- Overthink: They ask which geography will dominate: China, the US, or Europe. Trying to map an optimal long-term configuration for a world that has not yet settled. By the time the analysis feels complete, the opportunity created by the shock has already been claimed by faster competitors who acted with partial information.
- Diversify: If you can't figure out which is the best one, why not do all of them? Respond by diversifying defensively. Startups spread thin across regions and strategies in the name of prudence. This invites concentrated competitors to attack them on every front. Capital dilutes, execution degrades, and the startup loses the only advantage it had: focus. Diversification protects large organizations from collapse; for startups, it multiplies failure modes.
- Freeze: Waiting for clarity feels safe when uncertainty is high. In practice, it is an open invitation for others to take your lunch. Incumbents reallocate resources. Other startups commit. Markets do not pause while you preserve optionality. Inaction is not neutral but surrender.
All three failures stem from the same error: the startup begins to behave as if collapse is the primary risk to manage. It is not. As Reid Hoffman says, "for a startup, collapse is the baseline." Losing a single customer, missing payroll, or being out-executed can be fatal long before geopolitics finish unfolding. Optimizing for global shocks at this stage is a category mistake.
Self-organized criticality
There is a useful way to understand this difference that comes from systems theory, particularly the work of Per Bak on self-organized criticality. Bak showed that complex systems naturally evolve toward states where accumulated structure makes them sensitive to disturbance, via the sandpile model.
As grains are added, the pile grows steeper. Nothing dramatic happens for a long time. But eventually the system organizes itself into a critical state where any additional single grain of sand may trigger a small slide or a catastrophic avalanche. The key insight is that the system does not know which grain will cause collapse. At any given moment, the perceived stability is an illusion produced by accumulated tension. By the massive scale of these metaphorical systems, not a single actor or their actions know whether their nudge is absorbed or empire-toppling.
Large incumbents resemble mature sandpiles. Years of optimization, efficiency gains, and capital deployment accumulate structural stress. Supply chains become more and more JIT, orgs become leaner through rounds of "right-sizing". The organization performs brilliantly until a convergence shock adds just enough force to trigger cascading reconfiguration. Collapse in this category is non-linear and unforgiving.
This is why incumbents treat seismic shifts as existential threats. They are managing tail risks: the kind of risk that cannot be absorbed incrementally and cannot be written off cheaply. Wrong moves do not merely reduce performance; they threaten systemic integrity.
Startups exist on the opposite end of this spectrum. They are not self-organized critical systems looking for a systemic correction. There is no true accumulated mass, coupling, or internal stress. Almost all decisions can be reversed; investments can be abandoned; paths can be rewritten. What looks like existential danger to an incumbent often registers as directional information to a startup.
This difference is fundamental. It explains why the same shock produces defensive behavior in one class of organization and opportunity in another.
III
Cannon to right of them,
Cannon to left of them,
Cannon in front of them
Volleyed and thundered;
Stormed at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of hell
Rode the six hundred.
Shock absorption is not symmetric
It is tempting to say incumbents are "more robust" because they have diversified suppliers and capital buffers. In stable environments, this is true. But robustness is not about size; it is about the ability to reconfigure without collapse.
Incumbents absorb routine volatility well. They absorb regulatory noise, demand fluctuations, and operational disruptions every day. Convergence shocks are different. They target the assumptions the system was built. Absorbing them requires writing off enormous sunk costs, decisions that are organizationally and financially traumatic.
Startups absorb shocks differently because their sunk costs are shallow. Writing off a geography, a supplier, or even a product direction is painful but survivable. There is no equivalent cascade. What would be a systemic failure for an incumbent is a strategic pivot for a startup.
This asymmetry is why copying incumbent behavior is so dangerous. A startup that delays, hedges, or freezes in the face of a convergence shock is not becoming safer. It is forfeiting its ability to move while incumbents are busy stabilizing.
What this demands of startups
A startup cannot afford to be scared and freeze. It cannot afford to be scared and over-diversify. It cannot afford to wait for the world to settle. It is not an incumbent.
When the environment converges, startups should choose a path, commit, and move. Even knowing the choice may later prove imperfect. Imperfect in action can be corrected. After all, incumbents are built to extract value from a stable world. Startups are built to search for value in an unstable one.
Don't look for floaties if you are a fish in a flood.
VI
When can their glory fade?
O the wild charge they made!
All the world wondered.
Honour the charge they made!
Honour the Light Brigade,
Noble six hundred!