Feast and Famine Markets
Feast and Famine Markets
In some markets growth wins, in others survival wins.
If you liked reading this, please click the ❤️ button on this post so more people can discover it on Substack. Thanks!
Personal Update! I recently announced Near Horizon, a new kind of early stage venture firm I co-founded last year. We invest in your company AND join your team, working alongside you to build your AI-driven business. As proven entrepreneurs, we do everything from coding and selling to experimenting and scaling. If you are a solo-founder working on an industry defining problem (or know someone who is) we would love to talk to you.
Markets can be extremely frustrating. One day the markets want growth at all costs and the next day the markets want high margins and profitability. What the markets want changes so fast it makes setting long term strategy difficult.
You could try to ignore the markets, but we all need them. We need them for capital, for hiring and for partnerships. Despite their fickle nature, we are stuck having to try and adapt as the demands of the market change.
At the same time, the markets cannot set your strategy. To let the market set your strategy is to have no strategy and continuously react to what is happening. You want to plot a course that will succeed despite the market, and make course corrections along the way if necessary.
To do so, I find it useful to think about there being two kinds of markets that are constantly in tension: feast and famine markets.
Feast Markets
In the good times, there are plentiful resources. Those resources might be capital (high levels of investment), people (potential hires) or customers (greenfield market). In these markets, resources are not a limiting factor on growth and so growth is what is valued most highly.
You win in these markets by growing as fast as possible. Often, the fundamentals of your business are less important because there is the potential to grow fast enough to get to a scale where the fundamentals take care of themselves. While you don’t want to disregard your fundamentals, you do need to make growth your priority or else others will pass you by.
Famine Markets
When resources become scarce, the priority is survival. Often, there is no specific trigger that makes resources scarce! It can simply be the perception that resources are scarce.
In these markets, you need to ensure you have solid business fundamentals. Strong margins, great customer satisfaction and profitable customer acquisition are all critical fundamentals. Many companies abandon these during feast markets and then realize their business is built on a bad foundation.
The goal in a famine market is to outlast the competition. If you can survive while they fail, you will win the market over time.
Feast vs Famine
These two markets always exist in tension. Sometimes the feast market dominates and we have a bull market. Sometimes the famine market dominates and we have a bear market. But most of the time there is some level of balance between them, existing in an unstable equilibrium.
The key to anticipating the market is to understand where that balance exists and how it is likely to shift in the future. For example, if you are a new kind of product it is likely a Feast Market because the world is full of new customers who haven’t had any solutions in the past. The goal is to grab as much of this new market as you can, while the getting is good. Eventually, that market matures and those customers have more options to choose from, or have a preferred product they have already purchased. As that happens, the famine market begins to take control, and it’s a question of how strong your business fundamentals are to survive as the market gets more and more competitive.
Likewise, sometimes famine markets see the introduction of entirely new technologies which shifts the balance to feast. This has happened recently with the AI revolution, as previously static markets have been completely upended with new AI products that have changed the game.
Even if you can’t anticipate these shifts, you can react quickly when they happen. You should be able to see it happening, and instead of fighting against the change you need to change with it. Many companies fail when they see a shift between feast & famine and but stubbornly refuse to change their business. They try to force their business to work, instead of adapting.
This framework is not perfect, as there are many forces that can affect your market in more nuanced ways. However, I have found it a helpful framework for understanding if the rules have changed. If the rules are the same we keep using the same strategy, but if they change all bets are off and we need to revisit all of our assumptions.
This is why we need leaders, afterall. The world is always changing and we need to plot a course through that shifting landscape.
For more on Strategy, see: