10) Competition

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Introductory Remarks

Dear Vambracers —

In last week’s post, Micro-Eureka Moments, I discussed the little breakthroughs that make all the pain worth it. I also explored the attitudinal orientation that I think lends itself to these micro-eurekas and mentioned two specific micro-eurekas. Micro-eureka velocity is now pretty much my entire focus organizationally, and I think micro-eurekas stem from interactions with the world. So really interacting with the world is pretty much my entire focus organizationally I guess. Okay, moving on!

Competition

Today I’d like to discuss competition. I don’t intend to actually talk about competitive dynamics in our space—which I’m all too aware of—and I’d rather spend my time exploring some foundational principles around competition more generally. So, let’s get into it.

1) Pedantic deconstruction

What is competition? According to google: “The activity or condition of competing.” So, what then does it mean to compete?

Interestingly, “compete” apparently stems from the concept of “seeking together” which honestly sounds much more cooperative and kumbaya than the modern-day connotation (particularly within business circles!).

Let’s continue to deconstruct “compete.”

• “strive to gain or win something”: In a general sense, this is market share, which is revenue, which means customers. So you have to convince people that spend money within the general category of your product or service that your product or service is the best one to use.

• “by defeating or establishing superiority over”: This is a bit interesting because this is where conflict and competitive interaction enter the scene. But I do think there’s a massive difference between “defeating” and “establishing superiority over.” Establishing superiority over can be less direct whereas defeating feels very direct. Just something to think about. My personal preference is for the “establishing superiority over” because I think it’s a more lasting and durable method of destroying competitors.

• “others who are trying to do the same”: This part focuses on some goal or specific activity or function. I think how narrowly or broadly you define this matters in who you define as your competitive-set. As an aside, it’s also interesting within the context of ongoing antitrust stuff how broadly companies like Google and Amazon try to definite their competitive-set to dampen their competitive powers.

So what have we learned so far? Honestly, I’m not really sure. But I think it’s fascinating to deconstruct concepts that we take for granted within the lexicon of business.

2) What competitions means to me

Merriam aside, I think competition within business just means you’re trying to do something that other people are also trying to do or you’re bringing something to market that other people have also brought to market or are trying to bring to market. And I think that’s just life, really.

More generally, competition is implicit within the construction of our civilized society. We “compete” on exams; we “compete” on college admissions; we “compete” on job opportunities, etc. We might not be consciously aware of it but competition is all around us—and I think we can choose to let it frighten us or adopt a more abundance-oriented mindset and continue to move forward in life. This is my attitude from a more human, day-to-day competitive perspective.

On a business level, I’ll go deeper into some of my core beliefs in the next section. But broadly I think there is ultimately at any given point in time a fixed amount of customers to serve and spend to capture for any given category. That spend can go up or down over time and you can capture an increasing percentage of additional spend (or, I guess, lose proportionally less of marginal declines in spend).

But at any fixed point, x, there is y market spend. You have a revenue, and therefore have b_sub_x = a / y share of spend at x point in time. Share b is impacted by a and y, so like those are two important considerations in the long-term competitive dynamics and attractiveness of a market. And then I guess like for all competitive solutions with share {c, d, …, z…}, SUM{b, c, d, …, z…} = 1.

What does all of this mean? Probably nothing. But I think one thing is for sure: I really miss school.

3) My core competitive beliefs

Now I want to explore the practical application of my beliefs around competition and how I’m navigating the psychological minefield that is the concept of competition for a pre-revenue company that ultimately aims to raise some #daskapital (s/o Marx).

Competition is a copout

I think on some levels, I just want to level-set around competition being a little bit of a copout for not doing something—in life and in business. Ultimately, you pursue something because either you love it or you think you can be excellent at it—and ideally you operate at the intersection of those beliefs—and so then it really shouldn’t matter too too much what others are doing. If I think I have a song to sing and I think that I can be excellent at something and I think that I can empathetically and effectively serve people with some problem, then why would I let anything stop me from freely and enthusiastically pursuing that? And so in this way I think it’s easy for market observers and #NONPARTICIPANTS to just cite competition as reasons for being skeptical of someone trying to build something new or do something. I don’t think there’s anything wrong with that attitude, necessarily, but it sure couldn’t be me.

Competition isn’t necessarily a bad thing

In a lot of ways, competitive markets can actually be positive insofar as that means there’s real demand for some product or service. That’s I guess kind of a fundamental dynamic of the free market, wherein the more economically compelling the market opportunity the more people that will try to capture that market opportunity. So I think I’d actually be somewhat skeptical of pursuing a market with literally no competition, because then that might mean there really isn’t anything exciting going on.

The caveat here I think is that there are some technologically prohibitive markets where there might not be competition because the technology required to pursue that market either doesn’t exist, is patented, or is only known by a small number of people. And I think maybe those have been the best markets in the past, with like Edison and Tesla, and like maybe that’s the platonic ideal of a venture-backable business. But within the B2B SAAS world really there isn’t much truly novel and defensible innovation (IMO).

And then also there have been many many examples of really leading edge technologies just being way too early for the actual appetite of the market. And so sometimes I think we let technical sophistication/novelty distract us from the utter lack of commercial potential of some technologies.

Thinking about competitors means you’re already losing

If the goal is to empathetically, enthusiastically, and effectively serve customers, then really what use is thinking too much about what other people are doing? I think it’s appropriate if and only if it impacts the e-e-e method of serving customers. And there I think really all that could be impacted by competitors is maybe the “effectively” part? Well actually that’s not true—competitors could be more enthusiastic and empathetic I suppose. But see that’s also interesting, because going back to the lack of true technical differentiation, anyone can be enthusiastic and empathetic without modifying any code (computer code, at least)—and so then really I think differentiation in how you serve customers is really as much of a mindset and attitude thing as it is a technical thing. And if your competitors are more empathetic and enthusiastic and effective, then they probably deserve to destroy you.

But really the main thing I want to highlight here is that there is a fixed amount of time in any business’ life, and you can choose how to spend that time. If you choose to spend that time obsessed over what your competitors are doing then you’re by definition spending less time thinking about how to better understand and serve your own customers. I’m reading about Nvidia right now and it seems like 3dfx became kind of obsessed with Nvidia and that that was a not insignificant part of their downfall.

So really all I’m saying here is focus on what you can control and focus on serving customers to the best of your ability. The rest will take care of itself. While also acknowledging that peer comparison is a very natural and human impulse, and so there’s nothing wrong with you for thinking about it. But don’t let it distract you. [This is me talking to myself.]

It’s pointless to worry too much about competition in the early days

I mentioned this is my Mindset post, but there’s a million reasons not to do something; and you can find countless, really good and logical reasons to talk yourself out of not pursuing something. But what’s the point in that? The reason entrepreneurship is so hard, I think, is that there’re so many really compelling reasons not to build something. It really is kind of stupid in a lot of ways. But continuing to persevere and trudge onward despite the many good reasons not to is what makes it worth doing.

And so within the context of competition specifically, I’m really trying not to spend too too much time thinking or worrying about it right now. Yes, I want to be aware of what other people are doing, I’ve done research on current solutions in the market, and there’s always lingering doubt around “what if somebody else does what I’m doing?”. But, this is where things get a little weird: I don’t even know what I’m doing yet. So literally how can I worry about somebody else doing what I’m doing if I don’t even know what I’m doing? It’s one of those paradoxical truths that is actually quite comforting.

And so that’s why I think worrying about competition is pointless at this point in my journey. I’m still in the very very early stages of talking, and iterating, and learning, and discovering, and so I don’t have anything for others to compete with really.

And then another thing here, maybe, is that we always talk about “competition” in some like semi-abstract sense—and it’s this cloud that looms over any business initiative, but I feel like the lived reality of competition is much different from its textbook representation. Like business is very human, at least how I aim to do business is very human. And so I’m literally like talking to people, listening to what they struggle with, and trying to get a sense of how I can help them—and so it’s not like: “tell me about competition” it’s just like, “what’s going on, what are you using now, what else do you want, etc.” And I guess it’s also like learning about who they are as people, how they talk, how they think, what makes them laugh, what they care about, etc., and so, like, there just isn’t really room to worry about competition in delivering the most possible attention to and affection towards people that I want to turn into customers.

Like I know it happens, but I haven’t even gotten to a point yet where it’s like, “Luke, I’m not paying you $x because I’m paying [competitor] $y.” And that day might eventually come, and if and when it does, then I’ll adapt.

You are an active participant in the construction of your company

Related to the point I was just making, you are an active participant in the construction of your life (s/o Mike Tomlin). You are an active participant in the construction of your company. You are an active participant in the development of your product and/or service. And you are an active participant in the acquisition and understanding of customers. So like we’re not just helpless against the forces of competition—we can choose to fight, to adjust, to interact, to learn, to grow, and to evolve in the face of shifting market dynamics. And I think that’s another attitudinal thing that is very important—constant iteration, self-awareness, self-understanding, and then nimbleness and flexibility in making moves based on what the market tells you.

That’s why I think it’s so important to fall in love with a problem and customer-set as opposed to a solution, because really the main competitive advantage of startups is this nimbleness, agility, and flexibility. And I think ego becomes like quicksand that traps and consumes the soul of a company and prevents it from moving forward and adapting and iterating to better serve customers. The moment we think we know better than customers is the moment we don’t deserve customers.

You’re your biggest competitor

Competition is a fun distraction

This is an interesting one: competition is really fun to talk about and to think about. There are so many really compelling and fascinating books and case studies on businesses that have competed in the past. And I totally get it. As a society, we love competition. We love seeing teams, organizations, people, etc., do battle. There is something so purely primal and universal about destroying an opponent. There are so many entertainment-adjacent opportunities and storylines around any battle. Rivalries are so fun, etc. (I think iCarly really nailed this home for me when there was the whole Fred vs Carly episode.) But it’s just like a fundamental human truth I think. Competition is sexy and battles are fun to watch.

That’s really why I think it’s such a dangerous distraction-area for startups, because the inclination is to do all sorts of competitive analyses—and yes you have to be able to talk about it and stuff—but also, like, it’s really not a value-driver when you don’t even have a real product in the market. So then it becomes more an exercise in like ego and vanity—because, like, oh look at me and look at all this wonderfully thorough and cogent business analysis I’ve done. But that’s all on paper and in your head. It’s not interacting with the world. It’s not serving customers. It’s not learning about customers. And it’s not actually advancing the interests and initiatives of the business like at all. So keep on doing that analysis and deconstructing that competitive landscape. I’m going to be talking to customers.

Competition is a high-class issue

Finally, jokes and silliness aside, I do acknowledge that competition can be real and I don’t want to pretend that it’s completely irrelevant. But I also think that if you have very real hardcore competition, like in the purest a vs b form, then that probably means you’re doing pretty well as a business—or you already have some traction, some product-market fit, and some resonance as a product. And so I literally pray to one day be mired in direct competition with people I can look in the eyes and think “you are my enemy.” Because that means I’ve built something that matters to a not insignificant number of people (which I define as >= 10). And, if and when that time comes, I trust myself to quadruple-down on customers and destroy my competitors.

Looking Forward

I’ve felt the distractions associated with worrying about competition lately and really wanted to put finger to key on the topic. I’m still figuring out some of my more nuanced beliefs around competition and will refine things with time and experience. But this was an enjoyable exercise for me.

I have no idea what I’ll discuss next week—but I’m sure it‘ll be fun. For me at least. 🙂 Have a wonderful week!

Sincerely,

Luke