Why do we need grades? Or not?

When I was 3 and went to kindergarten, I don’t remember why I studied. When I went to first standard in primary school, I distinctly remember why I studied. To not fail. This continued till I reached standard 6th and without any planning, got rank 1. Well, the boy who used to take that place had left the school. But I was nowhere even in top ten earlier. That was surprising. Like a snake, I had tasted the blood of attention. From no one, I became number one.
Was that a curse? I had pressure to maintain that rank. And who gave me that pressure? I myself. To myself. I continued to finish every grade with rank one until this fish was taken out of the pond and thrown in a sea of bigger school. Where I sucked to begin with. Why do I call that bad? Because psychologically, I formed in my head that not being ranked-one is not cool. What next, I went to a kick ass college and sucked again real bad. Why? I did not get as good grade as my peers got.
What if there was no concept of grades and ranks? Imagine an exam with 10 questions with no points assigned to any question. Should the desire to do all questions right not be enough motivation? Can the discovery of where I made mistakes not be enough feedback? Or for me to study,  reason should be to get grades better than my peer? Should my feedback be the result that I got rank two and not rank one?
Counter theory. We may have academic institutions without grading and comparison system. But how real is that? Once you get out of that school and enter workforce, your performance will be compared with those of your colleagues. That comparison will decide your appraisal. Moreover, in the ‘real’ world, there points and ranks for everything. Every company desires to be the leader or ranked one in the business it operates. So how will not having grades mimic the real world?
Even in the absence of any grade or ranks or marks, considering that example of 10-question exam, we unintentionally create bench mark for comparisons. “I got 3 of them right, how many did you get right?”. Someone hiking Himalayas alone, without the presence of any other human being around will also have a comparative goal in his mind – to hike at least more than what another hiker did who was here before him. Is that the human nature then? His physical presence does not even need to be there for him to create benchmarks of comparisons for others?
If that is the case, how do Montessoris and Waldorfs and Rishi Valleys and Aurovilles of the world succeed in nurturing human beings who are ready to face the real world in spite of having different foundation? A foundation  of grade-less-ness.

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