Everywhere you look the world is getting more competitive. Business, sports, consumer goods, online information, music; everything is much, much more competitive. With globalization and instant international communication, that competition is intensifying at an accelerating rate. What will happen to our economies and societies when we reach peak competition?
Not Your Grandma’s World
I think it’s worth stating that the world has changed a lot in the last century. Most people have a hard time extrapolating current trends into the future and are reluctant to believe the shear magnitude of changes that are in store for us.
The automobile, air travel, electricity, indoor plumbing, radio, television, computers and the internet all have drastically altered our lives. It’s easy to forget that all have become commercially abundant in the last 100 years.
Think about that.
Consider how different it would’ve been to live a century ago. Think of how few options people had. Imagine how difficult life must have been. Even average lifespans were 20 years shorter.
We’ve made incredible progress in the last century, yet, the rate of technological change continues to accelerate. The next couple of decades will bring even more profound levels of change.
I believe we already live in a world of great abundance and our ability to overcome resource scarcity is dramatically improving. A key factor in this new economic reorganization is what I call peak competition.
Competition is intensifying in all areas of our lives. Extrapolate these trends out a couple of decades and it’s not hard to envision to a future where competition is so fierce, that people no longer bother to participate. In fact, it’s already happening.
A good example is university education. 50 years ago, a university degree guaranteed an upper-class income. In our current competitive climate, even an MBA has become all too common. What’s next, will everyone get a PhD?
We’re already seeing more and more students opting out of higher education altogether. Why waste huge amounts of money and years of your life when you can start your own company for next to nothing and do meaningful work now? In fact, Peter Thiel pays promising youth to skip university.
Why Competition is About to Get Much More Fierce
With the internet, cheap international travel, low cost shipping and distribution, global outsourcing, even English as the international business language, competition is no longer just from the business down the street. The whole world is your competitor.
That extreme competition combined with with a surplus of most goods and even food in richer countries are leading to saturation in industry after industry. We innovated to the point of diminishing marginal returns. More innovation is making us worse off. Improvements are largely cosmetic or marketing driven.
Sure we can get cheaper food if it’s highly processed and uses low cost fillers and high fructose corn syrup, but we’re also waking up to the health problems our overly processed diet is causing. It turns out that real, natural food is better for us. Go figure.
There is still room for real innovation in areas like alternative energy, quantum physics and molecular biology. We certainly need our best and brightest competing at the leading edges of science, but the vast majority of the world will never understand those complex issues well enough to contribute.
For most consumer focused business, peak competition will lead to supply surpluses and drive out any profit opportunities. A tiny percentage at the top will control the vast majority of the market just like Google or Facebook do now.
The Key Factors Driving Peak Competition
Maximum Consumption. We getting negative benefit from more consumption. Buying big houses and fancy cars requires us to work longer hours at jobs we don’t particularly like. Buying and owning more stuff requires more time, money and energy for shopping, maintenance and cleaning. The more we work, the more we consume. The more we consume, the more we need to work to pay for it all.
More competition in consumer goods, services and information is largely pointless at this point. Does it matter if 10,000 or 100,000 business books are published ever year. Do we need the 86th iteration of an abdominal workout machine? What happens when there are a billion websites or smart phone apps? How many TVs, sofas, running shoes or kitchen appliances do you need in a lifetime?
The developing world is rushing in to join the consumer lifestyle, so there is still a lot of room for demand to increase in the short run, however, this will largely be for lower cost products and services. There will be huge competitive pressures to lower prices on mass produced goods like $10 smart phones and $3000 cars.
Difficult Becomes Easy. From publishing a blog, to designing a logo, to managing your business relationships, there are free or inexpensive tools and services that increase quality and reduce costs with less time investment. While the world gets much more complex, each individual task in our life is getting easier. When everyone can start an online business, everyone does.
Towards Free. Automation, outsourcing, low-cost international transportation, comprehensive logistical systems and new technological discoveries lower the costs of almost everything over time. This is a basic tenet of economics. Price = Marginal Cost. When the cost of producing one more unit is close to zero, prices go to free. That’s why bands give away their music online. It’s why famous authors blog for free. It’s why Craiglist destroyed the classified ads industry.
Crowdsourcing. Services like Mechanical Turk, 99designs, Fiverr and even Wikipedia show that people are quite happy to work for next to free on many tasks. Websites, online videos and opensource projects all represent billions of man hours of free work. Expect much more of this in the abundance economy. This is another factor in the end of work.
Maximum Quality. In most industries, all the efficiency has been squeezed out of the system. It’s near impossible to get more quality or lower costs. Incremental innovation can’t improve things very much. In the Olympics, records are broken by fractions of a second. We are at the limits of the human body and in what we are able to consume to have a good life.
Outsourcing. Even specialized technical work has become a commodity. Why pay $300 for a dental cleaning with your local dentist when you can get better quality care for $30 on your next vacation to Thailand or Mexico? Why hire a local computer programmer when you can get one at a tenth the cost in Eastern Europe? Competition is global. It’s pretty hard to compete on price when half the planet still lives on less than a couple dollars a day.
Population Growth. The global population is expected to grow by another two billion people by mid century. There will be 9 billion people on this tiny planet in less than four decades.
The Rising Middle Class. We have rapidly growing middle classes in China, India, Russia and South America. More affluence combined with population growth will mean two to three billion new consumers and workers in the next couple of decades. That’s almost a doubling of what it is currently. If you think it’s difficult to compete with overseas workers now, wait until billions more highly educated and harder working citizens around the globe start fighting for a piece of the American dream.
They will be new markets to sell to, but it won’t be for leading edge products with high profit margins. Lower income countries tend to choose older technologies, cheaper products and counterfeit goods. These are already the most competitive markets in the world.
Abundant Energy. The cost/output ratio of alternative energy sources like solar are increasing at 30% plus per year. With growth rates like that, it is absolutely inevitable that we will reach abundant and practically free energy sources. It’s already happened with information and communications. Energy is next.
Abundant energy is a game changer. Transportation will approach free. Ocean water desalination will turn deserts into productive agricultural land. If we get there fast enough, we might even be able to rescue the planet from irreparable climate change and pollution.
3D Printing. The technology is here to print physical objects on a small scale printer, just like we do with documents on color printers. As this technology scales, it will get better and cheaper, just as everything else in the world. Imagine “printing” consumer goods, buildings, human organs and food at home. There are early versions of all of these already in existence.
Technological Singularity. Computer processing power is improving at an exponential rate. It’s inevitable that artificial intelligence surpasses human intelligence. Computers will out-think humans. We have no ability to comprehend the outcomes of the singularity. Humans will simply be unable to keep up with the rate of technological change.
What Peak Competition Means for the World.
While it’s impossible to accurately foretell the future, the trends are very clear. Competition will intensify, driving down costs and improving choice and quality in practically every area of our lives.
When everyone can get information for free online, print goods at home, when energy is plentiful and cheap, when there is no longer any economic benefit to industrial competition, everything about our current way of life will be altered beyond recognition.
40 hour workweeks for 40 years of work are an anachronism in this age of abundance. There is no point to strive to make more money or consume more when everything is abundant and low cost. There is already a large and growing movement of digital nomads and others with alternative lifestyles opting out of consumer culture. This will most certainly increase.
There will always be demand for human connection, but anything that can be systematized, automated or outsourced, most certainly will be. Our cult of productivity, as epitomized in books like The E-Myth, are a sure route to mediocrity. We can’t view human beings as mindless cogs in a machine, only to be optimized. The world needs to look beyond that industrial age mentality. Peak competition will make sure of that.
Of course, truly scarce resources like prime real estate, popular travel destinations, wildlife safaris, real food and natural environments will become exorbitantly expensive. Fair access to truly scarce resources will likely become a large source of friction between countries in coming decades.
This topic is worthy of another post, but it’s important to consider that all of our financial, government and other institutions are social constructs. We created them. They can change and they will. The water we drink, the air we breathe, our natural environments and the wild animals we once had, are all real. You can’t eat financial derivatives.
Furthermore, why is it that only in the developing world can the poor afford to eat real food? In ‘modern’ countries, food is increasingly processed.
Why is that poor countries like Cuba can provide universal health care and education for all of it’s citizens when the richest country in the world can’t?
Could it be that our economic and political institutions are not designed for the greater good? Could it be that putting profits ahead of people and the planet is much more destructive than we’ve ever imagined? Maybe what we’ve been calling ‘progress’ has actually been a regression?
The world hasn’t seen any major innovation in our social institutions since the advent of mandatory public education, old age pensions and universal health care about a century ago. Even the information revolution has yet to substantially influence education, government and society. That’s going to change faster than we think.
It’s unlikely that this is going to be a smooth transition. Humans don’t like change. Only disruptive new technologies, economic collapse or environmental calamities drive necessary adjustment.
Look around, the revolution has already begun.
What do you think? Are we headed to peak competition? What are the flaws in my reasoning? Please let me know in the comments. I’d really like to develop these ideas further.