Due to the increasingly intense global competition, today a nation’s power is more closely tied in with its university system than ever before. In fact, because the knowledge economy has an urgent need for highly educated specialists, higher education has become an emerging industry driving national economic growth. In response to the current situation, Germany has begun making fundamental reforms to its system of higher education. Universities in modern Germany have long subscribed to the ideal of Humboldtian homogeneity. However, in recent years the German government has implemented various measures designed to increase competition, based on the principle that the lion’s share of educational resources should be devoted to those with the most distinguished, the so-called Matthew effect. Framing the current state of higher education in Germany as a showdown between Humboldt and Matthew, in this paper I use document analysis to present the traditional ideal of homogeneity, discuss the measures recently adopted for increasing competition, and to investigate how much influence these measures have had on distinguished students and researchers. Traditionally as the hallmark of the Germany higher education, the Humboldtian model has come into being by the following factors: the legal structure, the regulations preventing the hiring of former students as teaching staff, the non-competitive allocations of funding in higher education, and the way in which the higher education system developed. However, due to such recent measures as the Excellence Initiative, performance-based budget allocations, and the ranking of universities, in recent years German universities have begun to emphasize the importance of differentiation and specialization, while homogeneity has begun to fall by the wayside. While some may see these changes as an actual paradigm shift, due to the continuing influence of the traditional system, as well as the limited effect of the differentiation measures, it is unlikely that the German system of higher education will become as hierarchically structured as ivy-league universities in the United States; instead, it’s more likely that there will emerge a moderate degree of differentiation. Furthermore, on the basis of the principle of the social welfare state, German government emphasizes the differentiation measures in pursuit of the equal opportunities in education, such as performance-based budget allocations which contain terms of gender quality, and it aims to strike a balance between excellence and equality.