Over the past few weeks, I have seen and heard evidence of increased competition in both public and private credit markets. As valuations rise and prospective returns decline, I think it wise to remember Thiel’s mantra of avoiding competition. Just as businesses do best in the absence of competitors, investors perform best when they do not have to compete for opportunities.
“Competition means no profits for anybody, no meaningful differentiation, and a struggle for survival. So why do people believe that competition is healthy? The answer is that competition is not just an economic concept or a simple inconvenience that individuals and companies must deal with in the marketplace. More than anything else, competition is an ideology—the ideology—that pervades our society and distorts our thinking. We preach competition, internalize its necessity, and enact its commandments; and as a result, we trap ourselves within it—even though the more we compete, the less we gain… If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most.
-Peter Thiel, Zero to One