The idea that competitive markets create market efficiency is orthodoxy in financial theory. It’s become a metonym for how people in society act. However, efficient markets are false in my experiences investing and studying decades of market events.
George Soros (an idol and a teacher) first revealed to me the dangerous, destructive competitive politics within financial academia and modern portfolio theory. This broadened my horizons as an investor, trader, and thinker. My continued observation in markets ultimately hatched my cynicism towards our society’s obsession with competition.
In technology and startups, Peter Thiel has the most compelling thesis on competition. He synthesizes his viewpoints from Rene Girad’s mimetic theory. Our fetishization of competition is mostly a byproduct of harmful mimesis.
Peter Thiel cites Shakespeare’s Hamlet to highlight society’s competitive theatre. People fight for the same thing. Hamlet views greatness as a willingness to fight for reasons as thin as an eggshell. This psychosis has historically reflected on humankind’s greatest conflicts and wars. America mythologizes capitalist competition across all facets of life against the socialist bread lines of the East.
However, “capitalism and competition are antonyms.” Profits get competed away in perfect competition. Undifferentiated businesses focus on short-term margins instead of long-term futures. The intensity of competition often becomes the proxy for value.
I grew up in New York City, perhaps one of the most structurally competitive environments in the world. I went to one of the most elite high schools in the country in NYC. My peers and I surrendered ourselves to the commandments of competition. We competed against each other with grueling incrementalism. We fought for good grades and well-roundedness. We struggled for the approval of homogenous standards that measure our competitiveness. We all chased the same Ivy League optionality like that of our parents.
Much of our belief systems can be traced back to the 1982 bull market: an indefinite optimist belief that the future will be better, but no one knows precisely. This perhaps explains our primary career choices as bankers, private equity investors, consultants, and lawyers. Instead of creating the new, we obsessed over optimizing the old.
The problems around mimetic competition for society has amplified in the Information Age. Today, investors and founders alike, spend most of their time on bits, instead of the more audacious bets in atoms. Founders and investors fight to disrupt instead of chasing the open blue oceans where no one is looking. In other words, businesses burn energy and resources competing against each other instead of focusing on building differentiated products and creative monopolies.
As Peter Thiel notes, indefinite optimism remains entrenched in the company building process where founders are taught to focus on indiscriminate “growth hacking,” indeterminate A/B testing, and incremental “lean” iterative methods.
The cutthroat attitude towards competition is the trappings of success. Rivalries are rooted in fame and glory, capitalizing on our ego barriers and most narcissistic tendencies — our society trends towards this indefinite optimist direction grounded in the direction of Epicurean and Lucretian physics. Competition is an ideology that views the world and success as a zero-sum, hedonistic game.
Those who escape the destructive logic of competition. Whether it be individuals or companies…are those that will drive the most positive-sum changes for the world.