Race to the Bottom

Avoid the pressure to undervalue your services.

Competition is great. Competition encourages us to be the best version of ourselves. Growth comes from discomfort, and competition pushes us outside of our comfort zone. But in the quest to win, competition can also nudge us into stupid long-term decision making.

When we’re overly focused on winning a battle, sometimes we lose the war. It’s important not just to win, but to win in a sustainable fashion. Avoid Pyrrhic victories, where the cost of victory is so high that you are effectively defeated.

An economic example is the race to the bottom. A race to the bottom is a situation where competition is so fierce, and the pressure to cut cost so great, that quality or profit are compromised.

Some real-life examples of races to the bottom include:

  • devaluation of software development. Due to mobile apps we’ve seen downward pressure push app prices to less than a dollar, or even free.
  • government policy. In order to remain competitive with other countries or states, governments are pressured to reduce taxes, regulation, or protection to unsustainable or unsafe levels.
  • labor surpluses. When labor supply is greater than demand, wages can be depressed to the point where they are no longer liveable.

It’s very tempted to get caught up in a race to the bottom, but it’s generally not a wise competition strategy if you can avoid it. If you are an instructor, understand that your time has value and you should be compensated accordingly.

Further study