To make sure you understand the mental models that affect you and those around you, check out the posts from Teddy Daiell on mental models. In this post, the Red Queen Effect.
Short Description: Survival in a competitive environment usually requires adaptation and velocity, so doing nothing often means being left behind.
Another Description: “Species must constantly adapt, evolve, and proliferate in order to survive while pitted against ever-evolving opposing species.” (Wikipedia)
Operational Improvements and Capital Investments by Competitors in a Commoditized Market – E.g., Installing the latest productivity software or manufacturing equipment.
Predator / Prey Relative Evolution
Drugs / Disease Relative Evolution – E.g., antibiotic resistance.
Fighting the Last War – Using strategies and tactics just because they worked last time, even if they are not relevant to the present circumstances.
“The great lesson in microeconomics is to discriminate between when technology is going to help you and when it’s going to kill you.” ~ Charlie Munger
“Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” ~ Lewis Carroll
“If all animals evolved at the same rate, there would be no change in the relative interactions between species. However, not all animals evolve at the same rate.” ~ Farnam Street
“The promised benefits from these textile investments were illusory. Many of our competitors, both domestic and foreign, were stepping up to the same kind of expenditures and, once enough companies did so, their reduced costs became the baseline for reduced prices industrywide. Viewed individually, each company’s capital investment decision appeared cost-effective and rational; viewed collectively, the decisions neutralized each other and were irrational.” ~ Warren Buffett”
Key points include:
- Related remedies
- Related concepts
- Neutralized capital investments
Read the full article, Mental Model Fundamentals: The Red Queen Effect, on LinkedIn.