By: William Jones

Eugene Theodore, author of Built to Collapse, makes an uncomfortable argument: the companies unraveling around us aren’t necessarily victims of bad leadership. They’re the likely result of systems designed to optimize for the wrong things. Here, he explores what investors might be overlooking, what boards tend to miss, and why the metric that matters most may still not be fully realized.

When Markets Applaud the Fuse Being Lit

Most people who followed the Kraft Heinz merger recall the applause. The synergies seemed clean on paper. The cost savings were real, at least in the short term, and markets rewarded the C-suite accordingly. What markets didn’t fully account for was the playbook behind the numbers, one built on extraction rather than investment in brands, innovation, or the people responsible for building them.

Theodore isn’t surprised, saying, “Markets often price visible outcomes, not the machinery that produces them.” The $1 billion in initial “savings” that drew enthusiasm from investors eventually led to a $15 billion brand write-down. Naturally, the narrative shifted: leadership was following the playbook, not deviating from it. This was precisely his point.

The system wasn’t broken. It was doing exactly what it was designed to do.

Five Fingers on a Structurally Fragile Hand

For investors looking beyond the income statement, Theodore offers a framework he describes as five early warning signs, “like the fingers on one’s hand,” that may help distinguish genuine financial health from structural fragility dressed up in good-looking numbers.

• Margins from cutting, not building. When margins improve overnight because of cuts to product quality, service, or R&D rather than from genuine scale or pricing power, the improvement could be borrowed time.

• Demand on crutches. Heavy discounting, aggressive revenue recognition, or dependence on a small cluster of oversized customers might indicate growth proxies, not actual growth.

• Quietly fraying relationships. Rising churn, worsening CAC-to-payback ratios, declining LTV, and growing reliance on incentives to retain key partners or talent could be relationship-layer signals that rarely appear in a quarterly report.

• The narrative–reality gap. Earnings calls may sound excellent while customers, employees, and counterparties describe something far more fragile. Both things can be true at once, until they’re not.

• Muted customer voice. When complaints are absorbed by bots and scripts before they reach decision-makers, leadership may lose its early warning system. The frustration doesn’t disappear. It accumulates and finds a different outlet.

The 20-Quarter Clock

Theodore’s read on executive compensation is blunt. “When a CEO knows their longevity won’t last beyond 20 quarters, the long-term health of the business, brands, and people under their care can become expendable fuel for that clock.”

The result can be rational, predictable, and damaging at scale. Quarterly pressure and incentive-heavy packages often convert companies into scorecard games where leadership optimizes for whatever moves reported numbers in the near term. Resilience, product quality, and talent development may get underinvested. Buybacks, conveniently timed layoffs, and pulled-forward revenue are likely to be overinvested. The firm becomes increasingly excellent at hitting targets and increasingly brittle as an enterprise.

“The only question that remains,” he says, “is which C-suite cohort will be left holding the hollowed-out potato.”

The Tomorrow Problem

In high-growth environments, certain categories of risk are often invisible, not because they’re hard to find, but because the incentive to look for them may not exist. Theodore identifies these blind spots precisely: internal culture, customer trust, technical debt, compliance shortcuts, supply-chain fragility, dangerous over-reliance on a handful of profiles or partners, and the institutional inertia of “that’s how it’s always been done.”

None of these are typically reflected on a BI dashboard.

High-growth companies often classify them as “tomorrow problems” if they register as problems at all. The reckoning arrives when external growth decelerates, and the underlying system is suddenly asked to stand on its own.

Markets Aren’t the Only Ones Subsidizing This

Asked whether public markets unintentionally reward behaviors that increase systemic instability, Theodore’s answer is pointed: “Yes, but it is not so ‘unintentional.'”

Markets disproportionately reward near-term metrics. But he locates the deeper problem in behavior at the social level. When investors focus on growth rates, margins, and buybacks without interrogating how they’re produced, they effectively subsidize the underinvestment they’ll eventually absorb the cost of. “Many of us want to get rich faster than real value can be built,” he says, “cheering rising stock prices and rising dividends while ignoring the sustainability of it or outright deterioration underneath.”

The WeWork–SoftBank dynamic illustrates a corollary: when a company appears to be winning, stakeholders may stop thinking critically and start protecting the narrative. That’s precisely when the risk of collapse can become most dangerous and least visible. Entitlement, expansion beyond competence, weakened internal challenge, and inflated belief in the model’s durability all compound in the same window.

Success funds both genuine growth and spectacular overreach, and no one challenges the story while the numbers are going up.

The Governance Shift That Actually Changes Things

At a recent CEO Roundtable Theodore was moderating, the dominant themes were predictable: agility, transformation, and AI. Tools for the next efficiency cycle. One voice broke from the group. A CEO acknowledged that her tenure would never be long enough to fully realize meaningful change in an industry where innovation cycles run ten to twenty years.

Her response to that constraint was, in Theodore’s framing, the governance shift boards could adopt: adopt a steward’s mentality. Build systems that outlast you. Protect assets you will not personally harvest. Make decisions you may never be credited for.

“Durability requires boards to reward continuity,” he argues, evaluating leadership on capital allocation discipline, talent succession, and reinvestment in core capabilities. The logic is direct: if governance is structured around tenure-driven extraction, leaders extract. If it’s structured around intergenerational strength, the system may change.

A New Metric: Successor-Adjusted Performance

When asked which business metric he would replace, Theodore reframes the question. He wouldn’t swap one metric for another; he’d redesign executive bonus structures so that a meaningful portion of annual incentives would be deferred and paid only after a successor has been in the role long enough to test the durability of inherited decisions.

The mechanism is simple in concept, but radical in implication. Current compensation structures reward near-term outcomes. Even deferred bonuses are typically tied to market performance within a relatively short window. That creates a rational incentive to optimize for today’s optics over tomorrow’s substance, aggressive cost-cutting that erodes brand equity may look attractive; revenue pulled forward at the expense of future stability is likely to be easy to justify.

If leaders knew that a significant portion of their compensation would only vest once the next executive inherits the consequences of their strategy, those trade-offs could become far less appealing.

He calls it successor-adjusted performance: did the business become structurally stronger or just temporarily more profitable? “Acceleration is needed,” he says, “but only if it reinforces durability.”

Built to Collapse is available now on Amazon. Eugene Theodore works with leadership teams, boards, and conferences on surfacing systemic risk and building toward long-term enterprise durability.