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On Competition in Business

Usually, there’s not as much competition in business as people think.

But when the time comes that two companies do directly compete, it takes on the characteristics of a poker game. Does the company that makes the better product or service always win out? Not necessarily. In a complex world, that’s just one of many factors. Sometimes people will fold a winning hand.

The key to winning a direct, head-to-head competition in business, like in poker, is to consistently present your opponent with difficult decisions. Give him the opportunity to make mistakes, and in the long run, he will.

You have to be aware of what you are representing, i.e. what inferences your opponent draws from your actions. In poker theory, we call this 3rd level thinking.

Thinking on the first level means only thinking about your cards. You play the hand you are dealt in a straightforward manner. This is akin to that clean, theoretical view of business in which the company that builds a better mousetrap always wins.

Thinking on the second level means thinking about the cards your opponent has. This is the first strategic level.

Thinking on the third level means that now you consider what cards your opponent thinks you have. The question to consider on this level of thinking is “what do my actions tell my opponent?” By understanding this, you can present him with difficult decisions.

On those rare occasions when businesses compete head-to-head, where differentiation is not the deciding factor, the more capable strategist will win. By consistently presenting your competitor with difficult decisions, giving him the opportunity to make mistakes, you give yourself the best chance to win.

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