I think you could ask a similar question about how profits work in practice. In a hypothetical perfectly efficient market, all profit margins should be zero. But in practice the world is full of transaction costs, imperfect information, and scarcity. Maybe something similar applies to reasoning about the "acquire your competitors" strategy. In a perfectly efficient market it shouldn't work, but in practice the number of startups willing to take this approach is limited (because the number of available engineers investors is limited, and in competition with other sectors), plus you only have bother acquiring the ones that manage to succeed as a company first, which is somewhat difficult. Maybe we should expect the "acquire your competitors" strategy to be partially effective, if you combine it with a relatively good underlying business and relatively high barriers to entry. Not something that necessarily always works, but a piece of the puzzle?