Back at school after the night at the beach, Gene flunks his trigonometry test. Later that night, Finny tells Gene that he works too hard and that he's probably trying to be the class valedictorian. Gene asks how Finny would feel if he, Gene, were valedictorian. Finny jokes that he'd kill himself out of envy. Gene thinks this joke is hiding a real truth beneath.
Gene begins to interpret his own feelings of envy toward Finny as Finny having feelings of envy for him. He's mixing up his own feelings with Finny's feelings, and in the process imagines a rivalry that doesn't exist.
Gene now senses that he and Finny are equal in their hatred of each other's successes: he envies Finny's athletic prowess and social charms, while Finny envies his academic success. He thinks their relationship has become a "deadly rivalry" and starts to suspect that all of the activities Finny comes up with are designed to sabotage his academic success.
At the pool, Gene realized Finny was out of his league. By now imagining there is a rivalry, he gets feel once more to feel he's Finny's equal. A neat trick, except that it makes him hate his best friend.
Gene intensifies his studying, and soon passes Chet Douglass as the best student in the school, on par with Finny's rank as Devon's leading athlete. Yet despite this rivalry, the two of them get along as well as ever.
The boys get along as well as ever because there is no rivalry: it's all in Gene's mind. Gene the thirty-year-old narrator knows this, and his writing is full of irony.
Gene also mentions his trip to the beach with Finny to Mr. Prud'homme, and is surprised when the teacher doesn't care that they broke the rules.
Gene even tries to get Finny into trouble.
Then, one night as Gene is studying, Finny barges in to announce that Leper Lepellier has agreed to jump from the tree. Gene thinks Finny's trying to distract him. He starts walking toward the tree, but angrily says it's going to hurt his grade. Finny, not at all angry, responds that it's just a game, and shouldn't come if he doesn't want to. Finny then says how much he admires Gene's intelligence and his seriousness about academics.
For the first time, Gene lets his jealous anger show. And Finny responds not with anger, but with kindness and an expression of genuine admiration for Gene's talents. Rivalry over, right?
Gene is in shock. As he and Finny walk over to watch Leper jump, Gene realizes Finny never felt any rivalry at all. He also realizes that this means that Finny is his moral superior.
But because Gene defines himself against Finny, Finny's moral superiority destroys Gene's sense of self, making him more jealous.
At the tree, Finny proposes they start with a simultaneous jump. Gene and Finny climb the tree, but while on the branch Gene's knees bend. The branch bounces. Finny falls to the riverbank. Gene dives into the water feeling no fear.
Earlier, Finny stopped Gene from falling. Now, jealousy pushes Gene to harm his best friend. And with his "enemy" gone, Gene ceases to feel any fear of the jump.