I think the point he is making is that competition will prevent others from being able to FOOM and 51% everyone else and "win" outright to the point that it is dangerous. Or competition will prevent one player from getting the "powder keg".

Competition can do that if it is fair competition and a good game design. That is why rules and regulations are important in any game or it becomes Calvinball where the only rule is there are no rules and "it can't be played the same way twice" [1], which sounds great until you start losing to cheats. Though even that has some aspect of competition, the changing of rules in your favor while others change the rules in their favor.

The flaw in the thinking is that there will be "fair" competition. Any game design with good regulations and caps on game theory advantages (especially the cheat) "fair" competition is attainable. In game theory, if the other side cheats and your side keeps cooperating, you will lose every time. There is a great little game theory game that highlights it here called The Evolution of Trust. [2]

In a market with collusion, or excessive advantage, this may not be possible to retain fairness. Even right now we can see with overweight/top heavy wealth players in capitalism if there is collusion or one player gets too big, and there is no anti-trust or "blue shell", then that player will win every time. AI needs an anti-trust or "blue shell" to knock down any player that is too advanced, but that might not be possible. Doing that is barely possible in a market run by humans now.

The market is a garden, you have to help the seeds and cull back the overgrowth at the top. This is so the whole garden can thrive, lower seeds, middle plants and large production. Right now the large overgrowth gets all the benefits, policy control, water and nutrients, taking over the garden and even harming themselves with the overgrowth.

Most real world game theory and design would be horrible game design where the larger player always wins. Now imagine a game that the larger player controls the game design, you'd never be able to nerf them.

If one player can get the "powder keg" everyone, we need the game to be able to "blue shell" the bigger and potentially colluding/cheating player.

[1] Calvinball https://calvinandhobbes.fandom.com/wiki/Calvinball

[2] The Evolution of Trust https://ncase.me/trust/