Some Thoughts on Competition
The Alternative to Competition isn't Efficiency, but Stagnation
This essay was sparked by a recent conversation I had with a friend, in which he argued that competition was unnecessary and perhaps counterproductive for human achievement. It’s been in my head since then, so I suppose I have no choice but to get my thoughts out of my head and down on paper.
I am not naturally a competitive person. I’m too self-contained and find it hard to be motivated by what other people are doing. That said, I think competition is quite important and valuable for human society. By no means is it the only feature which is important and valuable, and a good society must contain a balance of other features. Competition is not good at all times and in all places, however in the proper place and time, it is vital, even necessary.
First, we should avoid arguing strawmen. Almost every human endeavor has an ideal version and a corrupted one. Competition rightly understood does not include backstabbing, cheating, sniping, envy, or greed. It does not include throwing out all virtue and propriety in the name of getting an edge. For that matter, there is cooperation rightly understood, and the corrupted form of cooperation (i.e., one student does the whole project and the other five students free ride). There is expertise rightly understood and there is “expertise.” It would take far too long to explore each one of these, but for the sake of time we can assume most of us have an idea of what “rightly understood” means and from here on out unless otherwise noted you can assume that when I say “competition,” I mean “competition rightly understood” and that when I say “expertise,” I mean expertise, not “made-up credentials.” And when I say cooperation, I don’t mean coercion.
The crux of my argument is that competition is necessary. Necessary for what? A variety of things, including innovation, progress in human achievement (scientific, athletic, etc.), and keeping people honest. To the last point, my friend contends that even in a market totally dominated by a single, monopolistic firm, consumer behavior would be enough to discipline the owners (i.e., keep them from abusing their position). This may be true where it is possible for consumers to substitute or do without, but where they cannot, they will not be able to meaningfully change their behavior to discipline a monopolistic firm. We see this in the market for patented drugs. Indeed, one might say that the only way to sustainably bring prices down over time is to have an open and competitive market.1
But more importantly, competition ensures that there is skin in the game. In his book by that title, Nassim Taleb makes a very subtle argument. The way I would put it is: human beings are not particularly good at doing what is rational, smart, or honest, but we are very good at doing what we need to do to survive. When we need to be rational, smart, and honest to survive, we are rational, smart, and honest.
People say sometimes that “95%” of businesses fail within the first year. Even if many of those didn’t get beyond the idea stage, we can still say that failure is shockingly common in business. This should tell us something: human beings aren’t always good at doing things. But when only the businesses that are good at what they do survive, we experience businesses as being good at what they do.
Without competition, businesses that aren’t good at what they do can stay in business. People have no incentive to act rationally or to innovate. My friend argues that even in a monopoly, people do have an incentive to act rationally, innovate, and produce good products and services. It is true that both in the scenario with competition, and in the scenario with no competition, innovation and producing better products will result in higher profits (higher rewards). (Even this might be a stretch – it might be safer, or more profit-generating, not to innovate, but instead to extract rent.)
But positive incentives aren’t what keep businesses honest and service good. The possibility of reward isn’t what caused our ancestors to do whatever it took to survive. Negative incentives are what motivate human behavior. When we have skin in the game (i.e., failure means being removed from the game), we will have motivation that we can never have without it (or we won’t have that motivation and we will fail and someone else will take our place who doesn’t repeat our failures). It isn’t a profit system; it’s a profit and loss system and the losses are probably more important than the profits.
One of Taleb’s insights in Skin in the Game is that across many areas of elite American life, skin in the game has been removed to the point that there are no consequences for actions. For a while, human beings with strong moral compasses can move in such an environment without abusing their positions, but not all human beings will be so virtuous. Competition means that there are consequences for actions. If the CEO drives the company to ruin, he loses his job and thirty other people apply for it. If a university fails to prepare students for the world, it loses out to other universities, and eventually goes bankrupt or mends its ways. If a politician abuses her office, she is removed by the voters.
It is precisely because we lack real competition in each of the areas I have mentioned thus far (healthcare, education, government, big business) that there is no skin in the game (because the players in question have no chance of being removed from the game because there is nobody to take their place), and without skin in the game, human beings (not all human beings, but enough) will abuse their position.
Athletic Achievement:
Perhaps the most obvious area in which competition brings out the best in human beings is sports. Without other teams to beat, there would be no reason for players to practice for hours, for coaches to hire the best analysts, or for stars to hone their technique and look for innovations to give them an edge.
Would it be better if we collaborated? If we gathered all the top athletes and coaches together and told them to practice and innovate in order to advance human performance, without competing against one another? If we paid them enough to incentivize them to actually do that?
This would, of course, be less fun. It would be less interesting for most people to watch, and without viewers, the money wouldn’t be there (where did you think “we” were coming up with the money to pay the athletes?). It would probably be less interesting for the players and coaches themselves.
But worse than that, it would discourage individuality and encourage groupthink. One of the benefits of open competition is that each individual team and athlete has an incentive to emphasize his or her comparative advantage. One person undoubtedly is the fastest runner and another can jump the highest. But in an open competition, athletes who aren’t necessarily the most dominant can nonetheless beat more talented athletes by playing in such a way as to emphasize their strengths (and de-emphasize their competitors’).
Dick Fosbury was famously mocked by the high-jumping community. He was clearly less talented than his competitors. Until 1968, that is, when he changed the world of jumping forever, by going over the bar backwards. The “Fosbury Flop” made him a world-record holder, won him the gold medal, and quickly became adopted by everyone in the sport.
The Fosbury Flop never would have happened without competition. If all the experts and top athletes had been gathered together for the purpose of collaborating on improving the world record, Fosbury wouldn’t have been there, and if he had he would have been laughed out of the room. We would still be jumping the old-fashioned way, and the world records would be substantially lower.
In sports just as much as in the real world, competition keeps competitors honest. Without real competition, it is easy for highly talented runners to put on a sham race (i.e., run “fast,” but not so fast it’s a real race), because most spectators are fooled by anything that looks fast. Sure, a few spectators will understand that the times being run are a little slow, but you need more than this to keep a race honest. What you need are runners unwilling to commit to the unspoken agreement required to pull off a sham race, runners who want to win and will run to win regardless of what the others do (or even runners like Steve Prefontaine who believe it shameful to put on a sham race). As long as the runners in the race can’t be sure that one runner won’t try to win, they will all have to run as fast as they can. As long as at least one runner does run as fast as he can, the other runners have to try to win, too. Collectively, they have an incentive not to run as fast as they possibly can (because it’s hard), but individually they each have an incentive to run as fast as possible.
What If We Had All Oars Pulling in the Same Direction and the Smartest People Were in Charge?
My friend suggested a version of this idea. If I am mischaracterizing it, or anything else he has argued, he will no doubt correct me.
Competition seems inefficient, because people waste their energy trying to beat one another. If everyone pooled their energy and talent, couldn’t human beings achieve great things? Especially if we just got the best minds together to organize the effort?
This isn’t a new idea, and I suspect that it is as old as human beings. It is a very natural idea, and quite logical in a way. The problem is that it is false. The human mind is easily fooled by certain things: randomness, size, and unity. We are predisposed to think that working together in a unified tribe is optimal, and that opposing one another is wasteful.
A version of this criticism is leveled at free societies by autocracies in almost every decade, and it has consistently proven false. Mussolini’s “everything within the state and nothing outside of it” (all oars pulling in the same direction) did not beat out America’s “weak,” “divided,” indecisive society. On paper, authoritarian regimes lack all the obvious flaws of democratic (or republican) ones. In practice, they’ve had more flaws of their own.
Free societies like ours are competitive, contentious, often poor at “getting things done,” and fractious. And yet, time after time, free societies prove stronger and more robust than autocratic ones. In part, it is because our societies are competitive and dynamic that they are robust. Taleb, in Antifragile, demonstrated that bigness often correlates with fragility (i.e., a mouse can fall off one-story building and survive unharmed, but an elephant falling that far will break every bone in its body), and that redundancy and adaptability are key factors in survivability. A free society both has more redundancy, and (because the oars are pulling in different directions) more adaptability to changing circumstances. Especially since in a more chaotic society, such adaptation will not rely on any individual or group of individuals possessing the necessary knowledge to direct it.2
Fair Play:
Perhaps the most crucial precondition for competition, upon which hinges everything I have written so far, is fair play. Without it, competition devolves into a no-holds-barred zero-sum contest. Some may argue that this is in fact the natural state of competition, but if that is true then the natural state of cooperation is coercion or slavery, and we said we weren’t arguing strawmen. Besides, most competitions do involve (mostly) fair play, and breaking the rules incurs punishment or rule-breaking is not punished but operates according to unspoken rules which govern behavior (ex. speeding 2mph is generally okay; certain fouls in hockey are allowed in certain contexts; etc.). These unspoken rules of fair play evolve over time in most human endeavors and they often go by the name of norm, tradition, custom, and habit.
Without rules, competition quickly becomes ugly and zero-sum. But with rules (usually simple or straightforward, not too many, not too complex) competition can engender glory, honor, happiness, camaraderie, achievement, and many other noble aspects of human character.
Fair play is a necessary element of all competitive endeavors, and it goes hand-in-hand with competition itself. Competitive and open societies can only function against a backdrop of the rule of law and a “moral and religious” people. They can only function when adults believe it is their duty to educate young people not just for careers, but for exercising virtue.
C.S. Lewis wrote that he “had sooner play cards against a man who was quite skeptical about ethics, but bred to believe that ‘a gentleman does not cheat’, than against an irreproachable moral philosopher who had been brought up among sharpers.” In other words, Lewis recognized that a culture of norms and rules which evolves in such a way as to ensure fair play and is ingrained in people by their upbringing will guide behavior better than simply studying ethics. He was concerned particularly with the subtle messages sent by seemingly innocuous stories and motifs (such as a discussion of natural beauty in a children’s instruction book). He understood that educating the moral emotions might be more necessary than educating the mind, and that we are often doing the former even when we believe we are doing the latter.
Without a culture of fair play – one seated deep in the hearts of the people, not simply in their minds – all of the potential benefits of competition break down. In societies without the rule of law, most individuals can’t or won’t save money or invest in the future, and competition alone isn’t enough to raise standards of living. In sports with a culture of doping, even honest individuals can be corrupted because their honesty will penalize them severely. In schools where cheating is rampant, even children with steady moral character will struggle not to give in to the culture of cheating.
My friend might fairly ask the question, “Well, what if we live in a society in which fair play seems increasingly absent?” And he would be right. In elite institution after elite institution, we have seen ample evidence over the past twenty years that the rules that the little people (me and you) have to follow don’t apply for the people at the top. I would, of course, argue that this is because those people at the top have been unfairly protected from true competitive pressure which would give them skin in the game and ensure that every captain goes down with his ship and even the rich and famous and powerful face the consequences of their actions.
But If we live in a society in which intact families are the exception, in which secularism has proceeded apace, in which we have lost a sense of honor (i.e., that it is beneath a man or woman to cheat at cards), in which we mock the Victorian era, in which we believe in no virtue other than tolerance (with the exception that we can’t tolerate the “intolerant”), in which meritocracy is the word we use for when the people at the top privilege their children and friends and erecting barriers to outsiders, and in which we talk incessantly about tearing down standards and getting rid of stigma, is competition still a good thing?
My answer is that we need both. We need to restore both competition (real competition, even for the people at the top – in other words a meritocratic meritocracy) and fair play. And that needs to be a cultural value – as Lewis would say, in the chest – not just something we tell children about in school. The rules, as Ralph would say, are all we’ve got.
How can a culture of fair play be restored? The only answer I have is this: culture doesn’t come from the top down, but from the bottom up, and if we wish to see a return of fair play each of us needs to do our part to model the culture in which we wish to live. In other words, more individuals who are informed by principles of fair play must endeavor to create art which reflects those principles. Also, and I could write a whole book about this, we must refuse to tolerate blatant violations of a culture of fair play, even if such a culture doesn’t really exist.3
It Depends on Where You Stand:
Of course, if you are an individual athlete and your goal is to win a competition, it’s easier to win if there isn’t much competition. If you are a business, it is in your self-interest to have as little competition as possible. If you are a job applicant, your chances are better if there’s less competition for the job.
I don’t think those are the correct terms in which to think about competition, in part because I don’t believe the world is reducible to self-interest. If you are motivated by honor, it is more honorable for an athlete to compete against strong competition and prevail than it is to win handily against weak competition. Nobody wants to watch Lebron James defeat a team of six-year-olds in basketball.
But I recognize that if your goal is to ensure your own stability or security, competition isn’t necessarily good for you (in the short run),4 even if it is usually good for everyone (including you) in the long run.
I will close there. To paraphrase Mark Twain, if I had had more time, I would have written a shorter essay. As it is, my thoughts are somewhat jumbled, but I think I have addressed each of the points I wished to address. I needed to get this out by the end of the month (because I have articles planned for next month), and in keeping with my rapid-development process, it need not be polished. In March, I plan to release a book review of sorts comparing two (quite famous) fantasy series, and using that comparison to make some points about genre and culture which I think will help elucidate what I am doing here at Hardihood Books.
My friend contends that lower prices aren’t necessarily a good thing, or that they are only good for consumers. But how do we know what makes a price good? How do we know what makes a price fair? Usually, the only thing we mean by “unfair” is “a price I don’t want to pay.” I tend to think human judgement (even aided by computers) is unable to determine what a fair or good price is, and that the only way to set the right price is not to try (i.e., to let the fluctuation of external factors determine what the price is at any given moment), especially when the price of something is a means of conveying information, and any “setting” of the price interferes with (or prevents altogether) the flow of that information. Competition will ensure this fluctuation redounds to the benefit of consumers, but that isn’t the only reason competition is important.
Which is impossible. Even with AI, no group of individuals could possess the information necessary to direct such societal adaptation. Instead, the fluctuating prices (see my last footnote) transmit only such information as is necessary to each individual for him or her to make such adaptations as is necessary for him or her, and the sum of all these individual adaptations will change the direction of society. Moreover, in a competitive society, if any individual or group fails to make the necessary adaptation, someone else will take that place. When there is a shortage, someone, somewhere will step up to fill the need.
West Point’s honor code states, “A cadet will not lie, cheat, steal, or tolerate those who do.” I emphasized that last phrase because it is key, and it is the part most of us have so much trouble with in 2024. When I was at UVA, the honor code there barely functioned because we did not have that last phrase and a culture had grown up among students that it was “dishonorable” to “rat” on your friends, even if in an older era honor would demand that one informed on anyone who lied, cheated, or stole. A culture of fair play usually requires ruthless bottom-up policing of norm-breaking (i.e., people shun someone who won’t abide by the rules).
Even this isn’t always true. Sometimes having more competition for your product or service is actually good for your business because it grows the market/educates people’s tastes. My favorite example of this is the craft brewery market, where it is usually in the interest of local breweries to see new local breweries pop up, because that can attract tourists who visit for the local beer scene, and it can create new interest in local variety among beer-drinkers who twenty years ago would have never branched out beyond Guinness and Coors.