Understanding Regimes

Whether classifies market conditions into four distinct regimes by evaluating two core dimensions: tightness (cost of capital) and risk appetite (investor confidence). Each regime maps directly to operational constraints that guide your team’s decisions.

The Four Regimes

SCARCITY

Condition: Capital is expensive (tightness > 70) and risk appetite is low (≤ 50). Description: Capital is expensive and risk appetite is low. Prioritize survival over growth. Operational constraints:

Shorten payback windows and preserve cash
Delay speculative hiring or large platform rewrites
Route roadmap bets through revenue certainty

SCARCITY conditions require defensive posture. Avoid capital-intensive bets until regime transitions.

DEFENSIVE

Condition: Capital is expensive (tightness > 70) but risk appetite is moderate (> 50). Description: Capital is expensive but risk appetite is moderate. Operate for efficiency. Operational constraints:

Focus on margin expansion and retention
Cut low-leverage experiments
Convert demand with tighter sales cycles

VOLATILE

Condition: Capital is cheaper (tightness ≤ 70) but risk appetite is weak (≤ 50). Description: Capital is cheaper but risk appetite is weak. Build trust and resilience. Operational constraints:

Ship reliability and security before novelty
Avoid disruptive pivots that spook buyers
Lean into proof, references, and guarantees

EXPANSION

Condition: Capital is cheap (tightness ≤ 70) and risk appetite is healthy (> 50). Description: Capital is cheap and risk appetite is healthy. Move quickly to capture share. Operational constraints:

Prioritize speed and distribution over polish
Accept controlled waste to win market share
Invest ahead of demand where signals are strong

EXPANSION is the ideal growth window. Time product launches and hiring accelerations to these conditions.

Regime Scoring Mechanics

Tightness Score (0–100)

Tightness measures the cost of capital by blending two components:

Base rate points (0–90): Ramps from 0 when the policy base rate is at or below 5%, reaching 90 as rates climb above the threshold. Calculated as:
```
baseRatePoints = clamp((baseRate - 5%) × 180, 0, 90)
```
Inversion points (0–25): Adds penalty when the yield curve inverts (10Y - 2Y slope < 0%). Calculated as:
```
inversionPoints = clamp(|curveSlope| × 50, 0, 25)
```

Total tightness is capped at 100:

tightness = clamp(baseRatePoints + inversionPoints, 0, 100)

Threshold: Tightness above 70 signals expensive capital conditions (SCARCITY or DEFENSIVE regimes).

Risk Appetite Score (0–100)

Risk appetite measures investor confidence by normalizing the yield curve slope:

riskAppetite = clamp((curveSlope - (-1.0%)) / (1.5% - (-1.0%)) × 100, 0, 100)

Curve slope range: -1.0% (very cautious) to +1.5% (confident)
Interpretation:
- Low (≤ 50): Investors favor safety; cautious market sentiment
- High (> 50): Investors accept risk; growth-friendly sentiment

Threshold: Risk appetite above 50 signals healthy investor confidence (DEFENSIVE or EXPANSION regimes).

Macro Adjustments

The base scores are adjusted by supplemental signals when available:

Signal	Threshold	Impact	Category
HY Credit Spread	≥ 4.5%	+6 pts/% tightness (cap: +15)	Stress indicator
Chicago FCI	≥ 0	+10 pts/unit tightness (cap: +10)	Financial conditions
VIX Index	≥ 20	-1.5 pts/pt risk appetite (cap: -20)	Volatility shock
VC Funding Velocity	≤ -5%	-1.5 pts/% risk appetite (cap: -10)	Funding slowdown
Tech Layoff Trend	≥ 65	-0.6 pts/pt risk appetite (cap: -12)	Labor pressure

Macro adjustments are applied after base scoring. They flag stress conditions that amplify regime signals.

Regime Thresholds and Boundaries

The regime classification matrix uses these thresholds:

DEFAULT_THRESHOLDS = {
  baseRateTightness: 5,        // Base rate % threshold
  tightnessRegime: 70,         // Tightness score threshold
  riskAppetiteRegime: 50,      // Risk appetite score threshold
}

Classification logic (from regimeEngine.ts:324):

if (tightness > 70 && riskAppetite <= 50) return "SCARCITY";
if (tightness > 70 && riskAppetite > 50) return "DEFENSIVE";
if (tightness <= 70 && riskAppetite <= 50) return "VOLATILE";
return "EXPANSION";

Transition Watch and Confidence Levels

Confidence Index

Whether computes regime stability using the nearest threshold delta (minimum distance to any regime boundary):

HIGH: Delta ≥ 20 points from nearest threshold
MEDIUM: Delta between 10–19 points
LOW: Delta < 10 points

Example:

Tightness: 75 (delta from 70 threshold: +5)
Risk Appetite: 48 (delta from 50 threshold: -2)

Nearest threshold delta: min(5, 2) = 2 → Confidence: LOW

Transition Watch

Transition watch activates when nearest threshold delta ≤ 5 points. This signals the regime may flip soon.

Transition watch active: Defer irreversible decisions until regime stabilizes for 30 consecutive days.

Intensity Bands

Intensity measures how strongly a regime signal presents:

STRONG: Delta ≥ 25 points from threshold
STANDARD: Delta between 10–24 points
MILD: Delta < 10 points

Operational impact:

STRONG signals: High conviction; act decisively within regime constraints
MILD signals: Prepare for transition; maintain reversibility

Reversal Triggers

Regimes require 30 consecutive days of threshold crossings to confirm a reversal. Use these triggers to schedule decision reviews:

Current Regime	Reversal Condition
SCARCITY	Tightness drops below 70 and risk appetite rises above 50
DEFENSIVE	Tightness drops below 70 or risk appetite falls to/below 50
VOLATILE	Tightness rises above 70 or risk appetite rises above 50
EXPANSION	Tightness rises above 70 or risk appetite falls to/below 50

Weak Reads Warning

When 2+ macro adjustment signals trigger simultaneously, Whether flags a “two weak reads warning” (regimeEngine.ts:142).

Two weak reads detected: Multiple stress indicators active. Regime confidence may be fragile.

This warning suggests:

Cross-check with historical transitions (see Historical Analysis)
Tighten decision guardrails (see Making Decisions)
Monitor daily until signals stabilize

Data Warnings

Whether reports data quality issues transparently:

Base rate missing: Falls back to 5% threshold for conservative scoring
Curve slope missing: Defaults to -1.0% (cautious floor)

Data warnings appear in the /data endpoint and regime assessment diagnostics. Missing signals reduce confidence.

Overview

Core Features

Use Cases

Guides

Data Sources

Understanding Regimes

The Four Regimes

SCARCITY

DEFENSIVE

VOLATILE

EXPANSION

Regime Scoring Mechanics

Tightness Score (0–100)

Risk Appetite Score (0–100)

Macro Adjustments

Regime Thresholds and Boundaries

Transition Watch and Confidence Levels

Confidence Index

Transition Watch

Intensity Bands

Reversal Triggers

Weak Reads Warning

Data Warnings

Next Steps

Making Decisions

Historical Analysis

Build docs developers (and LLMs) love

Overview

Core Features

Use Cases

Guides

Data Sources

​The Four Regimes

​SCARCITY

​DEFENSIVE

​VOLATILE

​EXPANSION

​Regime Scoring Mechanics

​Tightness Score (0–100)

​Risk Appetite Score (0–100)

​Macro Adjustments

​Regime Thresholds and Boundaries

​Transition Watch and Confidence Levels

​Confidence Index

​Transition Watch

​Intensity Bands

​Reversal Triggers

​Weak Reads Warning

​Data Warnings

​Next Steps

Making Decisions

Historical Analysis

Build docs developers (and LLMs) love

The Four Regimes

SCARCITY

DEFENSIVE

VOLATILE

EXPANSION

Regime Scoring Mechanics

Tightness Score (0–100)

Risk Appetite Score (0–100)

Macro Adjustments

Regime Thresholds and Boundaries

Transition Watch and Confidence Levels

Confidence Index

Transition Watch

Intensity Bands

Reversal Triggers

Weak Reads Warning

Data Warnings

Next Steps