Even though we have all been trained to ignore it, our education system exposes and drives our obsession with competition. The students with the highest grade point average (GPA) receive the most awards and highest status in the classroom. Our education system is designed so that all students generally learn the same subject matter, disregarding their individual talents and interests. As a result of having a system that encourages competitiveness, it is easy to understand why we grow up with competition ingrained in our heads as a necessary part of life.
But when it is time to leave the wonderful school system and enter the capitalistic world of America, our attitude towards competition will have a greater need to be reevaluated. Although competition can have benefits in the short-run such as proof of concept, capitalism operates on the fact that capitalism and competition are polar opposites.
One short-term benefit of competition is that it can be helpful to new firms that have just hit the market to stay around for a few more years. Research conducted by the Harvard Business review found that exposure to competition in the early stages of a firm’s life increases its chances of survival in the future. By taking British tax data from nearly 2 million companies launched between the years of 1995 and 2005, the researchers were able to find that companies launched in crowded markets had higher odds than others of failing in the first year, but if a company survived this early period, it had a much greater chance of making it to the three-year mark. Therefore a firm’s early exposure to competition can act as an immunization shot, preventing the firm's downfall to competition in the future by being hit with a small dose at the start.
Perhaps because he believes that businesses should last longer than three years, Peter Thiel in his book Zero to One argues that capitalism and competition are polar opposites. He even dares to say that Americans mythologize competition and credit it with saving us from socialist bread lines. Capitalism he says is premised on the accumulation of capital, but under perfect competition all profits get competed away. His lesson is that if you want to create and capture lasting value, don’t build an undifferentiated commodity business. Therefore capitalism favors those who can eliminate all competition.
Competition is what cost Microsoft and Google to lose their dominance when Apple resurrected and overtook them both. In January 2013, Apple’s market capitalization was $500 billion, while Google and Microsoft combined were worth $467 billion. Just three years before, Microsoft and Google were each more valuable than Apple. Now Apple’s market capitalization today is 654.2 billion while Google’s is 439 billion and Microsoft is 345 billion. The competition that Google and Microsoft were having with each other allowed Apple to gain a large market capacity and maintain it into the future.
As Grandmaster Jose Raul Capablanca said “You must study the endgame before everything else.” When it comes to business it is much better to be the last mover, than to be the first mover and have a subpar product. For example, Google wasn’t the first to develop a search engine but they perfected it. While Google preaches that they have competition, we all know that they have monopolized search engines. The only real reason you would use their competition (Bing) is to search for Google. As a result the Google monopoly is reaping the profits of American capitalism.
