Confidence vs. Hubris: Here's How to Spot the Difference.
Confidence is great. But too much can leave you blind to strategic threats and missed opportunities.
Last week, I wrote about the pitfalls of letting your team fall into the “Zero-Sum Trap.” It’s the defensive mindset that happens when you believe that gaining a dollar of revenue can only happen by taking it from someone else. Today, I’d like to discuss the opposite mentality: one where over-confidence from early success leads to blindness to threats that may be lurking around the corner.
It’s called the “Hubris Blindspot.”
It’s exactly what happened to Blockbuster when they didn’t understand the threat that Netflix posed to their legacy model of renting movies from physical stores:
The Hubris Blindspot is different from what happened to companies like Enron, FTX, Theranos, and Nikola. Those businesses intentionally misled customers, committed fraud, and engaged in other unethical and illegal activities.
Rather, the Hubris Blindspot is what happens to smart, well-intentioned, and even morally oriented teams who have become blinded to strategic threats and potential opportunities. The result isn’t pretty. It can cause you to lose your seat as the category king or prevent you from winning the battle for a new, exciting market that’s emerging.
We’ll cover three things today:
Examples of how the Hubris Blindspot can affect any brand.
My own experience, where the Hubris Blindspot hampered the potential of a promising startup I helped build.
Questions to can ask yourself to see if the Hubris Blindspot has started to work its way into your business.
If Hubris Can Take Down These Brands Down a Peg…
For so many businesses, things were going great… until they weren’t. Take a look at these examples:
Kodak used to sell most of the world’s camera film and became one of the world’s most valuable companies in the process. But even though it had invented the digital camera back in 1975, it never brought it to market. They filed for bankruptcy in 2012.
Yahoo! was a darling of the early Internet era. But it couldn’t see that its portal-based approach to web browsing would be superseded by a new category: search. It even turned down an offer to buy Google for a mere $1 million in 1998.
Blackberry’s innovations turned smartphones from niche devices to de rigueur for business executives. It was even valued as much as $83B back in 2008. But it couldn’t see a world where physical keyboards weren’t the standard. That changed when the iPhone was introduced in 2006.
Drift used to be one of the hottest companies in B2B SaaS. With a well-thought-out POV around “conversational marketing”, $139M in funding, and executives with a huge social media following, they seemed unstoppable. But they didn’t see that their category (essentially a sophisticated chatbot and email engine) would soon be overtaken by platforms that offered a broader suite of tools. While Salesloft later acquired Drift for an undisclosed sum, it could have been so much more.
My Own Experience with a Hubris Blindspot
It’s easy to pick on other brands, so let me share my own story of being blinded by hubris. In the mid-2010s, I helped start a company called Causely. We started with an important insight: while many local businesses relied on awareness and word-of-mouth, they weren’t equipped to generate attention on then-emerging platforms like Facebook and Instagram.
We found a way to solve that: we could use cause marketing as an incentive for their customers to talk about those businesses on social media. Every post that tagged the business would trigger a donation to a worthy non-profit. It was a win for everyone.
Our model worked exceedingly well at first. Growth came relatively easily, and we were donating tens of thousands of dollars to our non-profit partners each month. I fully expected we’d grow into an 8- or 9-figure business, and I’d ride off into the sunset with a fat acquisition check in hand.
But I was wrong.
Our early confidence blinded us to a few realities that put a ceiling on our growth. For example:
While our product worked well for a few specific industries, like fitness, it was not a good fit for many others.
Social media platforms change rapidly, and so do their usage habits. What’s normal behavior one year can become passé the next.
Identifying the right way to expand your solution, is expensive, messy, and can burn through lots of time and capital.
One profit model wasn’t sustainable. (Try operating a SaaS business by giving away 25% of your gross, and you’ll see what I mean).
Our team over-indexed on first-time startup employees, which meant many of us (including me) didn’t know what we didn’t know.
In the end, we were acquired by an Australian company (then called Skyfii, now Beonic) that wanted to expand to the U.S. But the exit wasn’t large enough to provide any windfall for our team. But had we operated with a bit less hubris and a bit more humility, we might have been able to create a different outcome for ourselves.
Warning Signs ⚠️
It’s hard to know the difference between healthy confidence and hubris. If you’re currently winning, you should feel proud of what you’ve accomplished. In fact, a healthy level of confidence can be just what you need to make big bets for the future, attract talented and ambitious people, and sustain your momentum. (Without it, you might fall into the “Zero-Sum Trap”).
But let your confidence turn into hubris, and you may find yourself learning about threats, potential opportunities, and blind spots before it’s too late. Here are some warning signs that hubris might be creeping in:
Celebrating funding milestones instead of customer outcomes. (My memory is still tainted by those COVID-era LinkedIn banners touting, “We just landed our $46M Series B!”)
No discussion of category maturity or category strategy. One theme among companies that operate with hubris is that they don’t see that their category is becoming obsolete until its too late. It’s a harsh truth to recognize, but putting your head in the sand is far more harmful.
Getting wrapped up in your latest valuation (a vanity metric) instead of business outcomes, like net profit, unit economics, or cash flow.
Laughing off competitors. I get it. You’re the big dog, and everyone else is just an upstart wishing they could be as successful as you. That’s true until one day, you realize that you’re no longer the cool kid.
Not recognizing that early adopters act very differently from the early majority. Early adopters tend to buy out of curiosity, not because they have a business need. If you’re getting a strong response from them, great! But don’t assume that the same playbook will help you scale.
Grandiose visions for the future that don’t make an obvious connection with your business today. If your CEO keeps rambling about how you’ll “change the game” with some hazy vision of the future you can’t seem to explain to anyone, watch out.
A focus on “disrupting” an industry rather than creating value. If you end up being a disruptor, so be it. But if that’s the goal rather than an outcome, you're thinking about it wrong.
Spending patterns that over-index on celebration and perks instead of investment in the business. It’s funny how the companies with the biggest parties and the most lavish perks seem to be short-lived. I’m all for recognizing the wins, but good business leaders understand that a surplus is best used as an opportunity to build for the future.
Under-investment in research, R&D, and customer insights. Sure, if the present state will continue indefinitely, then you don’t need any of those things. Is that your plan?
Unwillingness to overlook the sunk cost fallacy and cancel big projects before they cause even more damage. (Apple just canceled its electric car project, even though it had already spent a decade and billions of dollars. If that doesn’t take humility, I don’t know what does).
Anything I missed? Probably. My point is that hubris can start to creep in in all sorts of ways. If you see a few of these cropping up in your own business, then maybe it’s time for a frank conversation and a reset. I hope that by reading this post, you have a better chance of heading that off in time.
Thanks for reading. I own a consultancy called Flag & Frontier. I help clients define their category strategy, align their executive teams around their strategic narrative, and win their category.
Find out more about working with me by booking an intro call.
You can also say hello on LinkedIn 👋.
Cheers,
John