This peer-group effect means that however hard you work to improve your school, people may still not choose to send their children to you, instead preferring a school they think other people think is better. The technical term for this second-order selection is a ‘Keynesian beauty contest’ and it explains how public schools and universities preserve their relative prestige for centuries. The businesses most similar to schools and universities in this respect are luxury fashion brands, where the same Keynesian feedback loop operates. It doesn’t matter which brand of sunglasses you prefer — what matters is whether other people admire them. Since collective consensus is less volatile than individual judgment, fashionable brands enjoy a kind of monopoly power. Seen this way, Harvard or Eton no more deserve charitable status than Chanel or Ray-Ban.
The solution? Go specialist:
Apple never defeated Microsoft on the desktop; it created a new playing field upon which it could win. Similarly, GoPro didn’t tackle Canon and Nikon on a wide front; they went narrow and oblique.