In most iterated competitive systems, leverage and efficiency tend to go up over time.
The result is a growing disparity between winners and losers, where the winners get allocated increasing amounts of resources to keep growing at the expense of the other participants in the system.
Take a forest, for example.
The trees that are most effective at competing for sunlight are the ones that grow the tallest and are able to spread their branches the widest.
The less effective trees eventually fall behind and are covered by the canopy of the “winning” trees, depriving the former of the sunlight they need to survive. Soon enough, the less effective trees die off, freeing up resources for the winners to absorb and grow even bigger.
This is the natural dynamic of most competitive systems. This is why a mature forest tends to be dominated by a small number of tree species, compared to a young forest.
Consider how this also applies to the competitive landscapes of web search (Google), computer operating systems (Microsoft), banking (JP Morgan Chase), food production (Nestle), luxury cars (Volkswagen), entertainment (Disney). These are the companies that grew bigger by killing off and/or absorbing their competition.
So here’s the question to think about: what’s the difference between the winners and losers here? How was Google able to take up so much of the search engine market share, such that Yahoo (in second place) didn’t even come close?
It wasn’t because Google had more servers, better computer systems, or even better marketing (remember, Google was much smaller than Yahoo when it first started out).
So what made the difference?
The answer, is that the Google founders had better judgement.
They designed the Google search algorithm in a way that gave priority to the web pages that, in their view, was more relevant to each user’s search query.
When people searched for something in Google, they’d find what they were looking for, 10% more often than if they did on Yahoo.
Although Google performed only slightly better than Yahoo, however, the leverage of hundreds of millions of users, and the increasing efficiency of computer servers, meant that the small value they provided (over Yahoo) was magnified over billions of web searches. To its users as a whole, Google wasn’t just 20% better – it was literally a billion times better.
And so, the bulk of the resources (rewards) went to them.
This is all to make a simple point: in a world of increasing leverage and efficiency, good judgement is the most valuable trait.
Now if we consider the retail trading landscape, with everyone now having access to high-speed internet, countless books, videos and courses to learn from, freely available information online, cloud technology, trading platforms with algorithmic capabilities, ever-increasing numbers of brokers to trade with, and a growing interest in trading, all the ingredients are in place to foster the same “winner takes all” dynamic.
And the thing that ultimately determines whether you end up winning big, isn’t speed or size. It’s whether you can make decisions 10% better than your competition.