Ever find yourself comparing yourself to other people? All the time? Well I'm afraid that's natural. We live in a society where competition is the norm, where competition “forces us to be our best”.
In this post we'll take a look at what competition means in economics, in business, and in our personal lives. I'll show you how thinking competitively will always leave you feeling like you lost. As PayPal Co-Founder Peter Thiel says:
“Winning is better than losing, but everybody loses when the war isn't one worth fighting”.
First off, economics.
We're taught in economics that competition is good, monopolies are bad. Competitive industries are those with thousands upon thousands of almost identical businesses, all vying for the same customer with very similar products.
In a perfectly competitive market, there are in theory an infinite number of incredibly similar businesses. Imagine a carrot farmer. The issue with carrots - from an economics standpoint only, I love carrots - is that a carrot's a carrot. There's no difference between a carrot made by Farmer X and Farmer Y. All that matters is price.
In perfect competition, economic profits are zero. If Farmer X tried to raise their prices, no one would buy their carrots because they could get the exact same product from Farmer Y for a cheaper price.
If for some reason carrot farmers were making a profit of any kind – if David Beckham tweeted saying he loved carrots, for example, giving carrot farmers the ability to increase prices - other farmers would be motivated to stop growing other products (say potatoes) and start growing carrots. An increase in carrot farmers would then increase the number of carrots available to customers, reducing the price of each carrot, and then reducing profits for everyone back to zero.
With no money for innovation, perfectly competitive industries are left offering the same products year-after-year, with only slight changes aimed at differentiation and consumer manipulation (e.g. fancy carrot packaging). There would be no risk-taking, no new technology, no new efficiencies, and the consumer is left with the same old product.
Let's compare that with monopolies.
A monopoly is essentially the complete opposite of perfect competition. Let's look at Microsoft as a close example of a real-world monopoly. There are very few competitors to Microsoft's products (try to think of what else you might use other than Microsoft Excel!).
It's very difficult for new organisations to create rival products, and Microsoft could hike up prices tomorrow and the industry would look very much the same.
Apple is another close example. While there are of course other phones on the market, the iPhone has dominated for the past decade, and millions of people wouldn't look beyond a Macbook when looking for a new premium laptop.
At school we're told that monopolies are by their nature bad because they can charge whatever they want and consumers have no choice. However, Microsoft spent $19bn last year on research and development, Apple spent $18bn. Those two companies alone spent more on innovation, trying to make better products for us, than the total revenue of Sainsbury's.
The more competition an organisation faces, the less it can concentrate and spend on actually creating better products for you and me.
But competition is different in economics compared to daily life right? Well in a way, but the results are the same. The more we concentrate on competing with others, the less we actually improve and the less value we bring to the world.
Let's take a look at the education system – we all go to school, get immediately thrown into a competitive environment where we're ranked based on our skills, put into different Maths and English classes based on our supposed ability.
Then we take school exams. Kids have no choice but to begin comparing themselves against everyone else in their class. Their mindset turns to how they can be better than Tom, Dick or Harry.
Then at university we're again constantly competing. The vast majority of us end up with a similar degree, from a similar university, in a similar subject, all going out into the job market competing over similar jobs.
Then we get to work, we turn our attention to becoming the best salesperson in the company, the best accountant, architect, engineer, best team member, whatever it is. And what happens? We hate it.
We end up focusing so much on being better than someone else, that we forget to focus on ourselves. We forget to ask ourselves the question of “How can I improve?”, “How can I bring more to this world?”.
Switch your mindset. Don't care about what other people are doing. Don't worry about Sally from school being better than you, progressing faster. Instead worry about your own path, and how you can be the best version of yourself.