On the Risk of Scaling by Fortune Alone — Luck Opens the Door, Skill Holds the Room

So far we’ve looked at three false foundations: vision, money, and contact points. The last risk to close out Part One is, of all of them, the hardest to notice. It’s growth that’s happening not because you’re doing well, but because you’re lucky.

Why a Thriving Company Collapses the Moment the Market Turns

It’s a familiar scene in hindsight. An entire industry catches an unusually strong tailwind at a particular moment. During the pandemic, when demand for remote services exploded, or during a period of cheap money when capital was everywhere, a whole cohort of startups drew the same steep growth curve at once. The founders inside those companies find it easy to believe their own execution and strategy produced that growth.

But when the wind changes, you watch several companies that rose together at the same moment collapse together too. What surfaces only then is that a large share of that growth was actually the market lifting everyone at once — and underneath it, the organization, the cost structure, the decision-making systems were never made sturdy enough to carry that growth on their own.

This moment repeats across every industry. When demand in a particular category spikes temporarily, a cohort of companies that caught that wave early grow at roughly the same pace. The founders inside them, watching each other’s growth, become convinced their own strategy has been validated — when in fact they’re just several boats riding the same swell. Only once the swell flattens out does the real difference between the boats — how sound each hull actually is — become visible.

Virtù and Fortuna

In The Prince, Machiavelli distinguishes two paths to power: one gained through a ruler’s own capability — virtù — and one gained through sheer luck — fortuna. He explains why power gained through fortune is hard to hold onto: the conditions that granted it — a friendly faction, a chance turn of events, good timing — were never something the ruler created himself, so when those conditions vanish, so does any means of defending the power they gave him. Power built through one’s own capability, by contrast, has its source inside the ruler, so it survives even as conditions change.

Machiavelli adds an interesting detail here: among those who gained power through fortune, the ones who used the time that fortune bought them to actually build their own capability were the ones who survived what came after. Fortune only opens the door. Holding the room once you’re inside is entirely a matter of capability.

What Didn’t Get Done During the Good Years

Translated to startups, the real danger isn’t riding a market tailwind. It’s failing to do the preparation that tailwind gave you time for. When revenue sets a new record every month, nobody feels the urge to examine the cost structure. When hiring is easy, gaps in organizational process rarely surface. When new users are pouring in, the topline numbers keep looking good enough that nobody has to look closely at retention.

All of it surfaces at once the moment the tailwind stops. A cost structure sized for that era’s revenue can’t be sustained once revenue turns down. An organization that grew at that era’s hiring pace turns out to have processes that were never built to carry it. Weak retention only becomes unmistakable once new-user growth dries up and there’s nothing left to mask it. In the real world, a wave of startups that grew fast on cheap capital during a low-rate period shrank or shut down at almost the same time once rates rose and investors turned cautious. They didn’t suddenly become incompetent. What was true all along — that they’d grown through luck rather than capability — simply became visible the moment the luck lifted.

A Question That Separates Skill From Luck

The trouble is that in the middle of a growth spurt, it’s genuinely hard to tell whether it’s coming from capability or from luck. Here’s one question that helps: did competitors who started around the same time under similar conditions grow too, or did we grow unusually fast on our own? If the whole industry is drawing the same curve, then a large share of that growth was made by the market, and what your own capability actually contributed is closer to the difference — how much faster, how much more healthily you grew than the competitors riding the same wave.

An organization that makes this distinction honestly knows exactly how much of its position it can actually defend once the market turns. An organization that has credited all of its growth to its own capability only discovers, the moment the market turns, just how little of it was ever really theirs to defend.

What to Do While You’re Lucky

The conclusion isn’t to refuse good fortune. There’s no reason to turn luck away. It’s that the moment you’re lucky is exactly the moment to build capability. Could you sustain your cost structure at a revenue level smaller than today’s? Do you have a cash buffer that survives a slowdown in growth? As hiring speeds up, are the processes people actually need to do the work keeping pace with it? Building answers to these questions while things are going well is the only real way to hold your seat once luck moves on.

This isn’t a check you run once. An organization that keeps asking the same questions every quarter — could we survive on a smaller cost structure, do we have cash to survive six months without growth — ends up in a completely different position than one that assumes growth will simply continue and keeps deferring those questions, the moment the market turns.

We’ll return to this in the series’ final post, but decline usually doesn’t arrive the instant luck disappears. It arrives later, as the bill for what wasn’t prepared during the good years finally comes due.

Part One is now complete, having looked at four false foundations: vision, money, contact points, and fortune. Starting with the next post, we move into Part Two — the problem of leadership, and how to lead an organization once it has found its footing.