Success Creates Blind Spots

Andrew Wilkinson and Shaan Puri discuss how success and financial incentives can create significant cognitive blind spots, making it difficult for people to see or accept changes that might threaten their current position or success.

• People resist understanding things that threaten their income

  • Quote: "Never expect a man to understand something that his paycheck depends on him not understanding" - Upton Sinclair
  • Example: Business owners won't acknowledge failing business models if they're currently profitable
  • Similar to the innovator's dilemma where successful companies miss disruptive changes

• Incentive alignment is crucial

  • People won't take actions that don't benefit them directly
  • Example: Larger agencies won't refer small clients to smaller agencies without proper incentives
  • Even small downsides can prevent desired behavior if incentives aren't aligned

• Dealing with blind spots requires:

  • Regular reassessment of investments and positions
  • Question if you would make the same decision today without existing commitments
  • Acknowledge that everyone has these biases - you're not immune
  • Proactively fight against these natural tendencies

• Resources for understanding cognitive biases:

  • "Influence" by Robert Cialdini - covers thinking traps and biases
  • "Psychology of Human Misjudgment" by Charlie Munger - speech about cognitive mistakes
  • Regular study and awareness of these concepts helps spot them in real-time

• Future-proofing against disruption:

  • Don't overestimate near-term changes
  • Remember all forecasts are based on past experiences
  • Example: Newspaper industry in 1998 couldn't see coming disruption
  • Stay vigilant about potential threats to current business models