Know Your Competition

Almost all human accomplishments are, directly or indirectly, judged in competition with others. This is most directly true in domains such as sports or entertainment, where awards and trophies go to some, and not others.

What matters here isn’t absolute performance, but relative performance. Absolute performance can often go up and up, yet because it rises with competitors as well, the standards of what counts rise in lockstep. Before Roger Bannister, running a four-minute mile was thought nigh-impossible. Now it happens regularly. The standards get raised, so what determines success as a runner goes up with it.

Even in domains that aren’t directly competitive, there is still a broader, implicit kind of competition. Singular accomplishments are judged on their impressiveness, indirectly, through a complex comparison with other kinds of accomplishments. Learning to speak another language fluently is moderately impressive in North America, where monolingualism is common. But learning to speak several was common amongst the educated elite a few centuries ago in Europe. Thus the friend that speaks a couple languages fluently impresses more in modern America than it would have in seventeenth century France.

I’d argue that even the most private, resistant-to-comparison situations tend to have subtle, unconscious competitive layers. Consider romantic relationships. Only the most crass compete in competitions over who gets the most dates or has the best spouse. Yet, I believe a lot of relationship happiness comes from beliefs as to whether we have a good spouse (in terms of looks, personality, faithfulness).

Since competition, direct or indirect, has a large influence on what we qualify as a success, I think it’s worthwhile to examine. In particular, I think there’s different types of competition and they imply different things we should do about it. If you see all competitive domains the same, you’re bound to draw incorrect conclusions about what action to take.

Level One: Competing Against the Middle

The first type of competition is competing against the middle. This is when being better than average is enough to count as success.

In a career situation, being an employee or freelancer is, in many cases, a competition against the middle. This is because the scale at which people can compete is relatively small, and so the very best performers are often removed from competition because demand for their talents is too high compared with what they can provide.

A personal coach or therapist competes in this domain. You don’t need to be the best possible coach to succeed, because the very best coaches are completely saturated with demand. Because their success can’t scale easily, you can still compete even if you aren’t the best.

This is true in business and career settings, but this level of competition is also present in many other sorts of achievements. Live music, restaurants and original artwork also have limited scope for the greatest successes. Most interpersonal forms of impressiveness (charisma, fashion, humor, etc.) are also limited in this way because people experience them through face-to-face interactions, therefore you’re unlikely to ever be compared on funniness with Chris Rock, or compared on charisma with Bill Clinton, since most people will never have an extended interaction with those people.

With this level of competition, success can often be achieved simply by putting in the effort. Although some skills are possibly more learnable than others, the bar of competition is relatively low, and so it’s not unimaginable for someone with low or moderate talent to compete well here, provided the interest and commitment is there.

Level Two: Competing Against the Top

The second level of competition is competing against the top. This happens when you need to be one of the best in your category to succeed.

Blogging is this kind of competition. As is running any business that sells products. Now, the most successful people can compete with you directly. Readers of this blog can read anyone else’s blog on the planet, so it’s not enough that I be the best writer in my local environment, I need to be the best of your options to attract your time away from people like Tim Ferriss, Malcolm Gladwell or Paul Krugman.

This kind of competition occurs whenever your competitors can scale. Live music can succeed because big successes need to have big concerts, which lose some of the intimacy and connection with the band that a small show can provide. However, once you start selling or streaming your music, then there’s no difference between you and famous bands, so the competition goes up to this level.

Similarly, original art can compete locally, but prints and reproductions compete here as well. The extent that people don’t care about original art can also mean you’re stuck competing at this level whether you like it or not.

This isn’t the highest form of competition though, because niching and differentiation can allow for many more than a single player to stay in the game. I can compete as a blogger against Ferriss, Gladwell and Krugman because my writing isn’t quite like theirs, so it’s possible you might like to read my blog, even if objectively I’m less popular or lower quality.

With this level of competition, it only really makes sense to compete if you’re going to devote yourself completely. You should also consider competing only in areas where you have some natural advantages. In other words, don’t try to compete in an area here if your talents here are low compared to other talents you possess, simply because it is going to make hard success even harder.

Level Three: Competing Against The Singular Best

The final level of competition is when you are competing against the best possible person. This happens when there are weak barriers between categories, so someone who dominates in one niche will likely dominate in all other related niches, leaving little left for you.

Investing is this kind of competition. To earn a risk-adjusted higher rate of return than the market, means that you need to have actionable information about why that asset is mispriced. However, all other investors in the world can potentially do the same—including well-heeled Wall Street financiers with insider information, supercomputers and mathematical geniuses.

This doesn’t mean it’s impossible to beat the market, just very hard. You have to be able to answer not only why a particular asset is priced incorrectly, but also why nobody else has noticed it.

Of course, this doesn’t mean one shouldn’t invest money—the market still has a positive rate of return, so passive investing still makes sense for many. Active investing might also make sense in cases where these assumptions are violated (say the potential pool of investors are limited, or highly-skilled investors are ignoring the opportunity because it is too small, etc..)

With this level of competition, it rarely makes sense to compete at all. If you are going to compete, then there needs to be an overwhelmingly strong rationale for why you are, in fact, the best person in the world, in order to succeed. If that rationale isn’t present, being #10 or #115, which would nearly guarantee success in other contexts, is still a failure.

Example: Physics Success

One way to understand these three levels is to look at success in a field like physics.

Learning physics is a level-one success goal. Implicitly there is some relative performance standards because if physics got easier to learn, people would probably expect somewhat more learning in order for you to qualify has having above-average physics knowledge.

To see the competition inherent here, remember that a thousand years ago nobody had the physics knowledge of the average high-school senior. Most of us have a general gist about ideas like inertia, that electricity and magnets are somehow related or that the earth orbiting the sun is because of the same force as apples falling to the ground. The fact that such general insights don’t count as “knowing” physics is a sign of a relative increase in standards.

Becoming a physicist is a level-two arena. Now, it’s not enough to know physics better than average. You need to know it better than the “top” physicists. You can specialize in narrow areas of research, and thus eke out a living being merely in the top hundred thousand or million physicists in the world.

Winning a Nobel-prize for physics is now a level-three goal. It’s not enough to be good. It’s not even enough to be the best in your subfield. You need to dominate a large and encompassing category to win the prize.

One can see how advice for entering physics might change as one considers what level of success is being sought. If the person has middling or low talent, then level-one success is still clearly achievable with effort. Level-two success might be possible with minor talent, but is more dubious with low talent. Level-three success is basically impossible without high talent, luck and effort.

Optimism or Pessimism? Talent or Effort?

The net outcome of these different types of competition is that your view on the possibility of success will likely flip, depending on which you’re examining.

Level-one competition, which is restricted to a small pool of individuals, and often has the best performers removed because of their limited scope, is an area where most of your competitors may not be trying very hard. You can be more optimistic about success here, relatively speaking, because the barriers to winning the competition are a lot lower.

Similarly, I believe effort, attitude, gumption or any of the other success literature staples is probably quite useful here. Since your competitors may not be setting clear goals, or working very hard, it is often possible to do quite well just by trying harder than most and using a decent, proven strategy.

Level-two competition, which has a much larger scope, but is still limited because there are many different categories and niches one can be the “best” in, is much harder to be successful at. Here, I think effort must be combined with talent or aptitude to be optimistic about success. Success overcoming low natural ability is possible, but it’s no longer the case that you can succeed just by working hard. Your competitors are working hard too, and if they’re naturally better than you, that will only compound their advantage.

In this area of competition, differentiation and specialization is key. You want to quickly find the area you can outperform everyone, and that often means trying lots of stuff until you can find something you can truly be world-class at. This involves both tons of hard practice and testing to find out which skills and assets come easier to you than others. Strengths + deliberate practice = possible, though not guaranteed, success.

Level-three competition is a completely different beast. Here, I’m much more pessimistic about success. Obviously success is possible here, because someone must be the winner. But no longer can you make general statements about everyone being a potential winner. Success here inevitably requires extreme effort and extreme talent.

Similarly, if there are structural advantages that accrue to some people based on certain factors (say where they went to school, access to key mentors or investors) it may be nearly impossible for anyone without those things to succeed here.

Success stories surmounting obstacles to succeed at this scale are less common than ones in which the person had everything going for them and it was still incredibly difficult. If you do read about a case where someone had a high barrier, and overcame it nonetheless, it is more often that their other qualities (talent or effort) were so high as to be outliers. If you are not just more talented than average, but a standard deviation more talented than anyone, then overcoming extreme barriers to success may be in the cards.

First, Know Your Competition

Looking at these competitive ranges, you could either describe me as a self-help optimist—believing in the power of effort, goals and sound methods to be the ultimate determiner of success—or you could see me as an unabashed cynic—believing that there’s no possibility of success without extreme talent and luck.

However, I think if you analyze the type of competition you’re facing, it’s easier to see how the situation can look very different for different people.

This reversal of fortunes and the level of competition changes, is also one of the reason I get frustrated with book titles like Talent is Overrated or ones that focus on genius or inherited advantage to determine success. My feeling is that much of the conversation around these ideas neglects the essential competitive dimensions, and therefore misses the most crucial aspect in deciding whether something depends highly on fixed talents or not.

I think being able to think about the kind of competition you’re facing is a much more powerful mental model than dividing success into “effort/experience” and “talent/privilege.”

Don’t Like the Competition? Change It

For one, you can often change the type of competition you face. For many businesses, starting out in consulting is a softer move than trying to go immediately into products, since the former is level-one competition and the latter is level-two. Alternatively, you may aim for uniqueness (level-two competition) rather than try to be the best in the world (level three).

It goes without saying that competition is just one variable that explains different degrees of success, but it isn’t the only one. Some level-one arenas are still notoriously hard (such as running a local restaurant) and some level-two domains have enough niches to sustain quite a few people in the “top” (such as blogging). As such, it’s always possible that a level-one domain is actually harder than a level-two, or that a level-two is harder than a level-three domain.

However, the level of competition should still provide a useful lens for estimating requirements for success. It is also more accurate within-domains than between-domains. Opening a successful restaurant chain (level-two) is harder than running a successful restaurant (level-one) even if running a successful restaurant is harder than a level-two goal in a completely different field.

Since success is often defined relatively, either directly or implicitly, understanding the type of competition you’re facing is a stronger predictor of the requirements of success than almost anything else.

  • carlmilsted

    You compare yourself to Paul Krugman??? Talk about setting a low bar!!

    That’s like me saying I am a better physicist than Rush Limbaugh.

    I’m not a big believer in the power of positive thinking, but this is ridiculous humility overkill.

  • Michael Thiessen

    I really liked this analysis, especially the implications it has for different competitive contexts, and that advice in this area tends to be too general.

    I had always approached this with the mindset that it was simply about market-size. Eg. playing basketball against some friends vs. nationally vs. the Olympics would be loosely matched to your levels. The larger the market you are competing against, the better you must be.

    Clearly though, there is more nuance and other factors to consider here.

    Also, you mentioned that the supply of the “best” (however you define that) is often restricted, which creates some inefficiencies in the market which can be exploited. I think this is also an often neglected insight that allows many to succeed in areas where they “shouldn’t” otherwise.

  • makko123

    This really opened my eyes to types of competition and how I might alter a few of my efforts in my hobbies. Do you have any book/article/things-to-type-in-google suggestions that go deeper into this topic about competition?

  • Amer

    This is arguably the most insightful post that I have read so far on your blog, Scot. Because it opens our minds to a new and highly useful perspective – competition. Thanks.

  • Temitope Tayo

    I find this article timely and useful. I’m at a phase in my career when I need to focus on a niche within my chosen specialty. It is important for me to know my competition. Thanks Scott for this piece of writing.

  • keren_m

    very eye opening post, Scott. Thank you for bringing this to our attention. I will soon start something of my own, and this concept will be in the back of my mind as I go along.

  • Fueled

    Very insightful post. I think for the third level of competition there also has to be an element of zero-sumness. Professional golf and tennis come to mind, where, in each competition, there can be only one winner.
    Your example of investing actually sounds more like level two — where there are many winners in many asset classes.

    Take private equity as an example. Imagine there was one PE investor who towered over the others. If this was a level three competition, this investor would attract the vast majority of investment money in the asset class. But it doesn’t scale up like that. PE investors cap the size of their funds, as well as the total assets under management. (One reason for the limits is that PE investing is time-intensive; the best can only do X number of deals per year.) The end result is that there are many successful PE funds. And there are many winners in real estate; in hedge funds, etc.

    The dynamic in these asset classes isn’t zero-sum / winner-take-all.

  • Deepti Km

    That’s a really useful framework! I’m going to start using it.

    When I first read it though, I had a nagging feeling that something was missing. A little later, I realized it’s because a lot of tasks I’ve been considering learning fall into a sort of ‘Level 0’ competition, where it’s a job that needs to be done but no one wants to do it. In that case, you are still competing with some kind of minimal benchmark of getting the job done, but apart from that all you have to be is willing, and people will be begging you to do it. Whereas the tasks you listed seem to have more supply than demand.

    I want to get better at keeping my papers organized and my work-space clean. I don’t care at all if I’m better than average at it, but I’m terrible at it now, so I have to learn it anyway.

    A lot of the examples of Level 0 are not paying work, but some might be responsibilities within a paying job, such as unglamorous clerical or organizing work.

  • Swati

    This blog is a rescue ranger. After reading it, I really got reasons to avoid baggages – of guilt, of failure, and the challenges that i’m faced with seem a lot less troubling.. Really, it is true. This is the most widely covered perspective. If seen through this angle, there is a lot more scope for survival. Thank you so much!

  • camila

    very useful article, thank you for sharing your insights.
    I can’t help but be reminded of this Nike commercial https://youtu.be/sMMfXioeOXY
    “if you can beat level one, you can beat level 3!”

  • Anatoli

    Thank you for such an insightful post, Scott.
    To remember the concept better (and to be able to explain it to my kid!) I simplified it:

    Level 1: I am looking for a job
    Level 2: Job is looking for me
    Level 3: I am looking to hire someone

    I know this may sound too simplified and not reflecting the whole picture, but it does give that insight into different levels of competitions you described and consequently level of success one should seek.

AS SEEN IN