I've heard it said that competition is bad for creativity. Certainly, there are some pretty bad examples, such as Microsoft's infamous "stack rankings", where employees were graded on a curve and fired if their rank was too low. In that case it was something more akin to a fight for survival, and understandably it led to some pretty survivalist employees. However, outside of those circumstances, I actually think competition is healthy, even vital, to creativity.
One very difficult thing is to know where the maximum is. Let's say you want to be a really fast runner, so you train and train, and every day you get faster. But as you go along, your improvements slow down, and eventually plateau. Is this the fastest it is possible to run? Or could it be that there's just some way to go even faster that you haven't thought of? Getting it wrong either way is pretty bad. If you think it's not possible when it is, you're needlessly holding yourself back. But if you think it is possible when it isn't, you're set up to just fail non-stop until you eventually give up.
But all of this changes when you have a rival. Only one of you can be the fastest at one time, which means whoever is coming second definitely knows that they could do better. And if they do, the positions switch and now the ex-number-1 needs to figure out what has changed. Each runner has their own approach, so there's a decent chance one of them will come up with something the other won't have considered. Multiply this by hundreds or thousands and that collective engine is pretty good at improving itself.
Most importantly, knowing that the metasystem is improving takes the pressure off you as an individual to figure out what the limit is. Is it possible to run faster than 44.7km/h? Usain Bolt has to worry about that, but you don't. And he can be reasonably certain that if it is possible, someone will figure out how, if not him then one of his rivals.
Of course, in sports there are all sorts of physical and biomechanical limitations to what you can do, and in some other fields the upper limits of possibility are well-defined and known in advance. Things are much harder when there is very little in the way of underlying universal truth or easy approximation of what is possible. Creative work, in particular, is very difficult to measure. Is this the best book it is possible to write? Is one good book every year the most you could reasonably expect to write? Have we basically run out of clever ways to reinterpret Shakespeare plays?
The answer to all those things could be yes or no, and you'd be hard-pressed to find a way of even approaching the question formally. Instead, to explore those limits we have to rely on the iterative process of competition, driven by lots of individual attempts to find improvements. It's not exclusive to creativity, either; many areas with ill-defined limits often get this same treatment. For example, it used to be thought that working and having a family were incompatible, but people have found ways to do it, often by sacrificing in other areas or making surprising changes.
Two things stand out about that: firstly, that people aren't necessarily competing with each other directly, they just want the best result possible, and the best is defined in terms of other people's results. And secondly, the tradeoffs aren't automatically good ones. Maybe you think that you're the best guitar player you can be, until you see someone else who has moved in with their parents, quit their job, and does nothing but practice the guitar every waking hour. You could do that too, if you wanted to be good as bad as they do.
That, perhaps, is the biggest benefit of competition. Not just knowing what better looks like, or knowing that it's possible, but knowing what it would take to get there. Sometimes that's a path you can follow, and other times it's a warning sign.