That’s a straw man argument. The competition is just not the single ‘other kid’; the competition is the hundreds/thousands of other applicants applying to that same school.
And no, it does not have to be the most selective college on the list. It can be any college that is not open admission or auto admissions once one meets the GPA+Test scores, if required as noted above. Competition is also for any merit money at a college that is a likely ‘match’ for admission.