How to use first principles to determine whether 'competitor threats' are genuine or false?

Good question, not understanding this can drive one crazy with anxiety. Let's talk about how to use "First Principles" to see it clearly, without any fluff.

So-called "First Principles," simply put, means stripping things down to their bare essentials, seeing the core, indivisible point. It's like asking "What is a car?"—not "a horse-drawn carriage with wheels," but "a personal tool that can move from point A to point B." From this root, Tesla could emerge, not just a faster horse.

Judging competitor threats requires the same approach. Don't look at how much funding they raised today, or what new features they launched tomorrow; these are all "clothes." We need to strip them down to their core.

You can ask yourself these questions, peeling back the layers:

Step One: Ask yourself, why exactly do my users pay me?

Don't say "because my product is good," that's too vague. You need to dig down to the most fundamental need. For example, if you make a note-taking app. Users pay you not because you support Markdown, nor because your interface is beautiful. These are bonuses. The fundamental reason they pay you might be for "quick, reliable recording and retrieval of information, to avoid mistakes at critical moments." This "sense of security" from "not making mistakes" might be the root of their payment.

Step Two: Ask yourself, do your competitor's new moves shake this root?

Now, a competitor has also launched a note-taking app, it's free, and has more flashy features than yours. Is this a threat? Not necessarily. You need to see if their free, flashy features shake that "sense of security" root for your users.

• If their product, though free, has server outages every other day and loses sync, then they are not only not a threat, but actually help you filter out free users who don't prioritize "reliability." Your paying users will become even more loyal. This is a false threat.
• But if they use some technology (like P2P sync) to achieve something more reliable, faster, and still free than you, directly undermining your "reliability" root. Then this is a real threat, and a fatal one. You need to quickly find a solution, either by becoming more reliable than them or by finding a new "root."

Let's take another example: you run a restaurant specializing in "fresh ingredients and great taste."

• A new restaurant opens next door, decorated like a nightclub, constantly inviting influencers for reviews, and offering buy-one-get-one-free deals. Is this a threat? Maybe, maybe not. If your core customers are families looking for "taste" and "quality" for their gatherings, they might not care for influencers, or even find it too noisy. As long as your food quality doesn't decline, they won't leave. This is a false threat. You just need to hold your ground, and perhaps even reinforce your "family" and "quality" labels.
• But if the restaurant next door secures an exclusive supplier, allowing them to get the same or even better ingredients at half your cost, then prices their dishes at 70% of yours, and hires a chef whose taste is comparable. This shakes your root (the value-for-money behind "fresh ingredients and great taste"). Customers will vote with their feet, realizing they can get equally good food for less money, and they will leave. This is a real threat.

To summarize, how to distinguish between real and false threats:

• False Threats (Noise): These are usually superficial and imitable. For example: copying a feature, imitating your interface, engaging in short-term price wars, or having more aggressive marketing than you. These things are like clothes; they wear them today, you can wear them tomorrow. They don't change the rules of the game.
• Real Threats (Signals): These always touch upon the essence of things. For example:
  1. Disruption of Cost Structure/Efficiency: They use a new model that allows them to do the same thing at 1/10th of your cost.
  2. Substitution of Core Value: They make your core advantage (like "reliability" mentioned above) worthless, or they can provide this core value in a superior way.
  3. Elimination of User Migration Costs: They make the process of users "defecting" from you to them extremely simple and painless.

So, the next time you feel anxious, don't just stare at your competitor's moves. Calm down, take a piece of paper, and write down: "Why do users truly choose me? What is that most fundamental, irreplaceable thing?" Then, see if your competitor's actions are using a bulldozer to dig up your foundation.

If they're just setting off a few firecrackers in your yard, just listen to the noise and carry on. But if they're digging up your foundation, don't sleep; get up and fight.