Mini Ep. 80: Race to the Bottom

Speaker 1: Hey everybody, before we get started this week, I have huge news. She actually did it. We're pleased to announce that Beatrice Jin, top-ranked women's competitor in North America and long-time BJJ Mental Models Premium community member has published her first ever course with us, exclusive to BJJ Mental Models. It's called Stop Being Nice. It's a three-part audio series designed to solve real mindset problems that regular folks experience in Jiu-Jitsu. If you struggle to be aggressive and competitive in Jiu-Jitsu, you'll find the solutions here. If you're already a BJJ Mental Models Premium subscriber, you've already got access, and if you are not, good news, you can get it now and get your first week free, go to BJJmentalmodels.com and check it out today. Speaker 2: Hey, welcome to BJJ Mental Models. I am Steve Kwan. BJJ Mental Models is your guide to a conceptual and intelligent Jiu-Jitsu approach. And I have a mini episode here today that introduces a concept which comes from the world of economics and business, but I think it's very relevant to Jiu-Jitsu. It's been very helpful to me in my journey, and I think it'll be very helpful to you too, especially if you are looking to make a living out of this sport. Uh, this is a concept called the race to the bottom. Basically, it comes down to the the pressure that we all feel to reduce the price of our services to the point where they are now undervalued and we are ripping ourselves off. Um, a common example, right, is in my background, in the world of software development, when mobile apps became really popular, one of the downsides to the rise of things like the App Store is they created the standard where people are expecting mobile apps to be free or almost free in terms of we're only paying a few bucks for these things. If you look at the cost of software before mobile apps, you would be paying hundreds of dollars for this stuff because it's very expensive to make a good piece of software. Um, but mobile App Stores have especially created the expectation that software should be cheap and in some cases free. We all feel the pressure to drop the price of our services because, look, we're competitive. We want to get more business. That makes sense. Competition is a good thing. But just like competition can result in overbidding, if you think of bubbles or manias where prices go up way higher than makes any rational sense, the opposite can also happen where prices get artificially deflated because people get so obsessed with outcompeting people that they keep dropping their prices. And then in response, everyone else will drop their prices. And now you get a bidding war that goes down instead of up. This phenomenon is called the race to the bottom. This is where all of the players in the space behave irrationally to bid their prices down because they want to get more business. Now, to a certain extent, one of the benefits of competition in business is it encourages us all to give the most value for the least cost. That's how we get the most business. But we also need to make sure when we work out this formula that we're making enough money to succeed ourselves. It's not just about selling the thing, it's about making a profit out of the thing. And when we get caught up in this obsession of winning at all costs, sometimes we race to the bottom, we wind up selling things so cheaply that we actually lose money because the value of our time and the value of the materials that we may have provided for this outweighs any money that we may have got in return. This is what's sometimes called a Pyrrhic victory, where the cost of victory is so high that you're effectively defeated even if you win. A race to the bottom is a great example of this. The problem is if you do that, if you cut your prices that low, first of all, you wind up creating a situation where you're actually losing money on every sale. If it costs you $10 to make a product and you only sell it for $5, then you lose money every single time you make a sale. And it's easy to get obsessed and addicted to the process of making sales, but making sales by itself isn't enough. You have to make profit out of it. So you always need to be thinking about this when you're pricing things. Do the math, make sure that you're actually making money off of everything you sell. Not just making money, but making enough money that you can call yourself successful out of it. If we're not getting properly compensated, no matter how passionate you are about the sport, you will not be able to keep the long-term motivation to keep it going. If that means turning down customers, that's okay. And that might even be a good thing. Sometimes when we're starting off with something new, we feel like, man, I just got to get some customers in the door. What if I put my prices in the basement? And yeah, maybe I'm barely paying the bills or maybe I'm even losing money, but at least I'm getting business in the door. The problem is when you do that, you set the standard for yourself that your services are of low value. And when that happens, that means, um, first of all, it's going to be hard for you to raise prices later, but it also means you're going to attract the type of customers who are only interested in you because you're cheap. When you undervalue your services, you set the tone for everyone else in the sport that their services are also not valuable. If everyone starts doing that, then we create this reverse mania where everyone lowers their prices, they race to the bottom. The end result is maybe customers will benefit because they're getting an incredible deal, but you are starving. You're not paying the bills. And what is the point of building a job in Jiu-Jitsu, making a career out of this if you can't actually afford to live? Too many people in this sport underprice. We need to get to the point where people are being charged and compensated adequately for the work they do in this sport, the great work they do in this sport. And anyone who works in this sport can be a part of that process by standing up for themselves and advocating for fair market value. And if that means that you've got to turn people down, so be it, right? That's called having standards. If someone is only willing to do business with you, if you slash your prices by half and lose money on the deal, that's not a good deal. Don't take it, right? If you need help with this, that's completely understandable. This is the kind of thing that we specialize at here at BJJ Mental Models. There's a ton of free material we provide both in the full-length podcasts, mini episodes like this, and our newsletter, all of which are totally free. You can get them all at BJJmentalmodels.com. If you are a grappler or a business owner who's looking to really leave a footprint on the sport and find success here, that's what BJJ Mental Models Premium is for, as well as coaching and professional services if you're struggling with your performance or just getting your business to the level that you want it to be at. All of those details are at BJJmentalmodels.com, and if you've got any questions, there's a contact form there where you can ask me. I will respond personally. Thank you so much for listening to this mini episode. We will talk to you in the next episode. See you then.