The market is simply other people. Competition is not the contest it might appear to be. Two companies are in competition when they are exchanging value with each other. The market is where that value exchange happens, and whoever produces the most value always wins.
Whatever you’re doing — and whether or not you realize it — your goal is to produce more value than anyone else. This applies to the conversation, to writing, to the art of all kinds. When you read a book or watch a movie if the story doesn’t engage you, if the language is clumsy, if the characters lack dimension… at some point, you will stop reading or watching. Your mental attention span is very limited, and your time even more so.
Corporations sometimes don’t compete on price. They compete with each other in producing value and selling it. Even in business-to-business markets, the only real competition is for value creation and appropriation.
In your career, you should strive to do two things: create value and capture it. The two go hand in hand. Whatever value you hope to capture relies on the value you have already created. And in fact, this is true in all areas of life.
If you produce more value than anyone else, it doesn’t matter if they have ten times your resources. You are still the most valuable person. Whoever creates the most value wins, and can ask for compensation that equals their contribution.
All productive work is done to produce value. Value can come in the form of money, or pleasure, or an improved world.
A brilliant programmer or a charismatic salesperson might get a short-term advantage, but they still won’t stick around if their competitors deliver more value. So the definition of winning needs to be built outwards from the very beginning. The core product might only be one component in an overall strategy that helps everyone produce more value.
Value comes from production, so each of us must have some abilities to produce — if not for ourselves, then for others. If you can’t produce value, someone else will eventually trade you away for something that they need to be produced, with or without your consent.
Growth is driven by the law of value. Google grows because it helps advertisers to capture the maximum amount of value from their ads. LinkedIn grows because it can connect users to better jobs, which help them capture more value from their labour. The success of these companies doesn’t depend on market share, or how good any particular product is, but on how much customers benefit from using them. If their customers benefit less, they’ll switch to other products that are better at helping them to get what they want.
Economies are not zero-sum. Everyone can win, as long as they’re good at producing value.
Human beings are not adversaries competing for scarce resources, but potential partners in the production of value. As soon as an economy consists of more than one person, there is potential for win-win trades. Economies are created by people working hard to produce things of real value. The trick, in our complex world, is to create more value than you capture.
We live in a winner-takes-all world. Some people are rich because they created more value than their peers did. If you create more value, you get paid more, get promoted faster, get more of what you want.
In a competitive market, companies will be driven by the pursuit of value. Each company will have internal incentives to serve its customers well. Those that do not will decline, and more creative companies with better ideas for value production will take their place. “Growth” is a keyword in the description of a successful and creative company.
In any business, a company has a choice to make about where to compete for value. It could compete on price, or quality, or convenience, or service level.
One way to think about competition is as a fight for value. If you make something of value, people pay you for it, but if you fail to make something of value, people ignore you. The reason startups disrupt industries is because they have a different strategy from incumbents about where to compete for value. Where incumbents typically compete on the basis of their current products, startups usually try to find a new thing to make of value.
The source of all value in the world is human imagination. It’s not just that we can imagine new things, but that we can also combine existing things in ways no one has previously imagined. This applies to producing physical products, but it’s even more true for services.
Put your imagination to use and you would never stop creating value, building products people want, and providing solutions the world needs.