Think about the activity you spend most of your time on. Whether that's your job, a major hobby, a game, think about the people who you would consider good at that activity. Do you consider yourself good?

Of course, one could argue that people's skills don't fall into a binary classification like "good" versus "not good", but let's assume for our purposes that we've got some linear ordering. For example, for a game maybe it's by rating (which still has meaning despite the possibility of non-transitive player matchups). Or if it's a job, imagine that there was only one spot available, and the person who would get the job between two candidates is "better".

There are two broad categories of ways to classify people as "good" or not. If you consider yourself good, then "good" probably starts somewhere below yourself. On the other hand, if you don't consider yourself good, then "good" probably starts somewhere above yourself.

These two classifications have something in common: the cutoff is relative to the person doing the classifying. Most people have the experience where they believe that they are good at something, then five years later they've learned a lot and realized that they were actually not very good back then. As you learn more, your "good" cutoff generally tends to rise.

The fact that different people have different thresholds can lead to awkward interactions. For example, suppose that Alice and Bob are two people with the same hobby, and Alice is considerably better than Bob. Bob might believe that Alice is good, but Alice doesn't consider herself good.

How might Bob feel in that situation? One unfortunate possibility is that Bob hears that Alice doesn't consider herself good, but he sees that he is significantly worse, and so deduces that Alice believes that Bob's skills are very bad. In that case, Bob might feel insulted, despite the fact that Alice is directing criticism toward herself.

Conversely, how does Alice feel in this situation? Bob might keep raving about Alice's skills to his friends, but Alice might feel that Bob is overstating them, and doing a disservice to the people who are even better than her. This could make Alice very uncomfortable.

Now imagine another pair of people, Charlie and Dennis. Similar to Alice and Bob, Charlie is significantly better than Dennis. Just like Alice, Charlie doesn't consider himself good, and looks up to even better people. On the other hand, Dennis considers himself good.

To Charlie, Dennis appears like an arrogant newcomer who massively overstates his qualifications. On the other hand, to Dennis, Charlie appears as a disgruntled oldtimer who is just unwilling to accept the new talent.

These interactions are often unpleasant, but most of the time no ill will is involved. Perspectives are different, and the relative nature of "good" means that when large disparities of skill are involved, there will often also be large disparities in perception of skill.