32. Play Stupid Games, Win Stupid Prizes

Competition will blind you to greater games. You’re one step away from a better market.

Businesses that seem like they’re in direct competition really aren’t

Nivi: I think when you’re being authentic, you don’t really mind competition that much. Yeah, it pisses you off and it inspires some fear and jealousy and all the other emotions that come along with it, but also you don’t really mind because you’re more oriented towards the goal and the mission and worst case you get some ideas from them. And there’s often ways to work with the competition in a positive way and it ends up increasing the size of the market for you.

Naval: Yeah sometimes it depends on the nature of the business. Silicon Valley tech industry businesses tend to be winner-take-all. At least the good ones. And so when you see competition it can make you fly into a rage because it really does endanger everything you’ve built.

Whereas if I was opening a restaurant and a more interesting version of the same restaurant opens up in a different town that’s fantastic I’m just going to lift from them what’s working and drop what I can see that they have already figured out is not working. So it does depend to some extent on the nature of the business.

That said, even the businesses that seem that they’re often in direct competition really aren’t. They can end up adjacent or slightly different. You’re one step away from a completely different business and sometimes you need to take that one step and you’re not going to be able to take it if you’re busy fighting over a booby prize.

You’re playing a stupid game you’re going to win a stupid prize. It’s not obvious right now because you’re blinded by competition, but three years from now it’ll be obvious.

My first company got caught up in the wrong game

To give a simple example, when I was first starting companies, one of my first ones was called Epinions which was an online product review site for all the products out there that was independent of Amazon and that space eventually turned into TripAdvisor and Yelp which is where we should have gone.

We should have done more local reviews because there’s more value to having a review of a scarce item like a local restaurant that it is of an item like a camera which was going to have a 1000 reviews on Amazon.

But before we could get there we got caught up in the whole comparison shopping game and so we ended up merging with DealTime and we competed with mySimon and Bizrate which became Shopzilla and PriceGrabber, NexTag and a whole bunch of these price comparison engines. And we’re all caught in fierce competition with each other and that whole space went to zero because it turns out that Amazon won e-tail completely. So there was no need for price comparison, everyone just went to Amazon.

But we got the booby prize because we were caught in the competition with a bunch of our peers when really we should have been looking at what the consumer really wanted and being authentic to ourselves which is reviews, not price comparison. And gone more and more into more and more esoteric items that needed to be reviewed where customers had less and less data and wanted reviews more badly. If we had stayed authentic to ourselves we would have done better.

Chapter 33 >>