The Inadequate Equilibrium: How Systems Fail and Where Opportunity Hides

In 2018, the FDA finally approved fish oil-based nutrition for infants with short bowel syndrome—a treatment that had been saving lives in Europe for decades. The delay wasn’t the result of inept regulators; it was a textbook case of what Eliezer Yudkowsky calls an “inadequate equilibrium”: a stable but suboptimal state where obvious improvements remain unmade. While American infants faced a harrowing 30% mortality rate using soybean-based formulas, European infants, treated with fish oil-based alternatives, saw mortality rates drop to 9%. This stark disparity reveals how even advanced systems can become trapped by inertia.

An inadequate equilibrium arises when no single actor—be it a company, regulator, or individual—has both the incentive and the means to improve the system. Markets, when efficient, tend to eliminate such inefficiencies. But in some domains, systemic constraints entrench failure, creating opportunities for those willing to challenge the status quo.

The Hidden Cost of Systemic Inertia

Take the U.S. healthcare system, where medical errors remain the third leading cause of death, contributing to over 250,000 fatalities annually. Unlike aviation, which reduced accidents by 65% through rigorous error tracking, hospitals rarely track error rates or publish performance metrics. This failure isn’t due to incompetence among healthcare professionals; it’s the product of structural barriers. Hospitals fear litigation, regulatory penalties, and reputational damage, creating a culture of concealment rather than transparency. Inadequate equilibrium: preserved.

Similarly, in cybersecurity, despite rising threats, many organizations continue to rely on outdated practices. Procurement processes, compliance mandates, and sheer organizational inertia create a system where even superior solutions struggle to gain traction. These systemic blind spots—embedded in policy, habit, and culture—lock organizations into suboptimal outcomes.

Lessons from Tech: Breaking Equilibrium

The tech industry, often lauded for its dynamism, isn’t immune to these traps. For decades, programmers endured clunky version control systems. Tools like CVS and Subversion were incremental improvements at best, leaving fundamental inefficiencies unchallenged. Enter Linus Torvalds, an outsider to the version control tooling space, who created Git—not an incremental improvement but a paradigm shift. Git’s distributed model and performance advantages shattered the inadequate equilibrium, demonstrating how bold, outsider-driven innovation can unstick stagnant systems.

A Framework for Spotting Opportunities

Yudkowsky’s concept of inadequate equilibrium offers a lens to identify when systems are ripe for disruption. It hinges on three questions:

1. Market Efficiency: Does the domain quickly eliminate inefficiencies?
   • Efficient markets, like high-frequency trading, leave little room for obvious opportunities.
   • Inefficient ones, like healthcare, are plagued by opaque pricing and misaligned incentives.
2. Systemic Constraints: Are there structural barriers preventing improvement?
   • FDA regulations demand costly large-scale studies, deterring solutions like fish oil-based nutrition, even when benefits are already clear.
   • Academic research prioritizes novelty over replication, leaving critical findings unvalidated.
3. Information Asymmetry: Do you possess insights others lack?
   • Patients often out-research general practitioners on niche conditions.
   • Startups, unburdened by bureaucracy, can outpace incumbents.

Opportunity Beckons

For entrepreneurs and tech leaders, this framework points to actionable strategies:

• Target domains where systemic constraints limit incumbents.
• Focus on “good enough” markets that are far from optimal.
• Seek high-friction problems with low technical barriers.

For example, consider climate tech. Carbon capture is riddled with inadequate equilibria: funding gaps, policy inertia, and entrenched energy interests slow adoption. Yet, those who can bypass these systemic barriers—via modular solutions or unconventional funding models—can transform the landscape.

Breaking the Myth of Impossibility

“Inadequate equilibria” remind us that the reason no one has solved a problem isn’t always technical impossibility—it’s often systemic misalignment. Asking “Why hasn’t someone done this already?” is the wrong question. The right questions are:

• What incentives sustain the current state?
• Which barriers can I bypass that others cannot?
• How can I deliver value without waiting for the system to change?

Consider OpenAI. While academic AI research languished under the weight of grant cycles and publish-or-perish incentives, OpenAI built a moonshot-focused organization that prioritized deployment over papers. By sidestepping traditional academic constraints, they accelerated progress and captured the frontier.

For the Optimist in You

For optimists, inadequate equilibria are more than problems—they’re maps to hidden opportunities. History shows that systems don’t fix themselves; they are fixed by those who see what others overlook and act when others won’t. Whether it’s transforming infant care, rewriting the rules of cybersecurity, or pioneering new tech, the greatest breakthroughs come from understanding not just what’s broken, but why—and daring to fix it.

So the next time you encounter a broken system, don’t dismiss it as an unsolvable mess. Look closer. Somewhere in its constraints lies an opportunity waiting to be seized.