@JamesC You may be interested in this video of a talk by Martin Kleppman which gives a very clear introduction to CRDTs for use in a collaborative text editor.
If I understand correctly, the answer to your question is there has to be some consistent way of resolving the conflict, and that’s what a CRDT is providing. (“Consistent” here means that when both users independently apply the conflict-resolution procedure, they both end up with the same document.) It is obviously logically impossible for two concurrent inserts at the same position to occupy the same space, so something has to give.