When Markets Eat Themselves
For people: There are two ways to lose the ability to pursue meaningful goals. One is to check signals so constantly that the signals become the goals. The other is to care only about survival, at which point goals collapse to "still here." Both destroy the space where purposeful choice operates.
For organizations: Strategic choice exists in a zone bounded by two failure modes: market degeneration, where coordination mechanisms outrun the reality they claim to represent, and survival degeneration, where existence becomes the only objective. Institutional infrastructure creates and protects the zone between them.
Strategic choice is not natural. It exists in a narrow zone bounded by two failure modes. Understand the failure modes, and you understand what strategic choice requires.
The First Failure: Markets Eating Themselves
Something strange happens when coordination mechanisms operate faster than the reality they claim to track. When a signal becomes an input to decisions, it creates demand for more of that signal. Daily prices instead of monthly means twenty times more data points, twenty times more decisions keyed to that signal. The more we care about a metric, the more we try to measure it; the more frequently we measure it, the more decisions we make based on it; the more decisions we make, the more we care about it.
Attention concentrates on what is increasingly false precision—the signal becomes more granular but not more meaningful. At the extreme, the signal detaches entirely from what it was supposed to track, while actors continue treating it as if it still matters.
Stock prices are supposed to track firm value but become prices about prices. University rankings are supposed to track educational quality but become prestige signals divorced from learning outcomes. KPIs are supposed to track performance but become targets divorced from purpose. In each case, reflexive dynamics cause the signal to detach from underlying reality while actors continue optimizing toward it—allocating ever more attention to what has become increasingly empty.
This is market degeneration. The temporal horizon collapses toward zero. Prices become self-referential. "Value" becomes whatever the coordination mechanism says it is at any given instant. The evaluative content that should guide coordination proliferates into noise because there is no time for validation—every signal is just another input to the next price.
The Second Failure: Survival as the Only Goal
The opposite failure mode is equally destructive. When survival pressure dominates, the only question that matters is "are we still here?" Evaluative content collapses to binary existence. There is nothing to verify because persistence is its own proof.
This is survival degeneration. The temporal horizon extends toward infinity—the organization exists to continue existing. What was once a rich set of objectives about value creation, stakeholder service, or meaningful contribution shrinks to a single point: not dying.
Organizations in survival mode make decisions that destroy their reason for existing in order to preserve their existence. They cut the capabilities that differentiate them, abandon the commitments that defined them, sacrifice the stakeholders who built them—all in service of continuing to be. The shell persists while the substance disappears.
The Strategic Zone
Between these failure modes lies the strategic zone. Here, the temporal horizon is long enough to pursue rich objectives—not collapsed into market-speed repricing—and finite enough that validation can eventually occur—not extended into infinite survival. The evaluative content is rich enough to distinguish better from worse, and tractable enough to guide action.
In the strategic zone, firms can ask: What should we be doing? For whom? By what standards? These questions have no instant answer, but they are not unanswerable. Evidence accumulates. Outcomes reveal themselves. Learning happens—just on timescales that exceed transaction-level coordination.
The zone is not natural. It is institutionally constructed.
What Protects the Zone
Legitimacy operates as a temporal buffer. Organizations survive by conforming to institutionalized expectations even when technical efficiency is ambiguous. This "gilded shelter" protects organizations from immediate selection pressure—but that protection serves a purpose. It allows strategic commitments to mature on their natural timescale rather than being compressed into market cycles or extended into pure survival.
Without institutional buffering, survival pressure dominates. Evaluative richness collapses. Organizations optimize for existence. With too much buffering, no feedback ever disciplines objectives. Organizations drift without selection. The shelter enables finite temporal commitments with rich evaluative content—the conditions under which strategic choice operates.
This explains why institutional conditions matter so much. Weak institutions—thin capital markets, uncertain enforcement—push toward survival degeneration. Strong institutions—robust capital markets, bankruptcy protection, contract enforcement—buffer survival pressure and allow temporal commitment. Hyperliquid markets—instantaneous trading, real-time metrics—create risk of market degeneration and require deliberate temporal architecture to protect slow-validating commitments.
The Design Implication
If the strategic zone is institutionally constructed, then maintaining it is a design problem. Organizations need architecture that resists both degenerations simultaneously.
Against market degeneration: mechanisms that protect slow-validating commitments from fast-cycle pressure. Long-term ownership structures. Governance that weights patient stakeholders. Metrics designed to track what actually matters rather than what can be measured fastest. The discipline to not check signals more frequently than they can meaningfully change.
Against survival degeneration: mechanisms that preserve evaluative richness even when resources are scarce. Clear articulation of purpose that transcends mere existence. Governance that asks not just "will we survive?" but "is survival worthwhile?" The willingness to accept that some versions of survival are worse than some versions of graceful exit.
Most organizations do not think about this explicitly. They either drift toward market degeneration—chasing metrics until the metrics become the mission—or toward survival degeneration—defending their existence until existence is all that remains to defend. The ones that avoid both failure modes do so through institutions that protect the temporal middle: the zone where strategic choice operates, where questions are slow enough to be meaningful and fast enough to be answerable.
Strategic choice is not given. It is constructed—and it must be defended against the pressures that would collapse it from both sides.