The Selective Perception of Human Brains: Why Startups Often Beat The Big Boys


You may have seen this picture before. Some see an old woman. Others see a young woman. Psychologists know that they can prime you to see the picture a certain way.

Men willingly believe what they wish. – Julius Caesar.

Companies fall from power. It wasn't long ago that people thought WalMart was going to rule the world. Not long before that, it was Microsoft. These days, everyone is worried about the power of Google. I'm not, because big companies, even great companies. eventually face stiff competition from newcomers, who either oust them, or at least keep them in check.

There are many reasons big companies fail, but the one I want to focus on is selective perception. One of the classic studies in the field of psychology showed fake playing cards to users to see how they responded (a red 5 of spades, for example). Here is what the authors conclude.

Our major conclusion is simply a reaffirmation of the general statement that perceptual organization is powerfully determined by expectations built upon past commerce with the environment. When such expectations are violated by the environment, the perceiver's behavior can be described as resistance to the recognition of the unexpected or incongruous.

Other studies on selective perception and alcohol have shown that expectations are more important than chemistry in determining anxiety levels, and that sports fan honestly don't see many of the infractions committed by their favorite team during a game.

This perception bias can be just as dangerous in the marketplace. Sometimes customer demand changes slowly over time, and companies adapt well. Other times, the change is very incongruous, and in these situations, companies often miss the change. They see what they want to see. They interpret the data in ways that reinforce their existing ideas about the marketplace. That's when startups can step in and capture lots of new customers.

Andy Grove was right when he said that only the paranoid survive. It pays to be paranoid because one of the best ways to guard against selective perception is to worry that it's happening to you, and that your competitors understand something you don't about the market.

If you are the market leader, and want to stay in that position, the best thing you can ask yourself about your market research is what would it take to prove this is wrong? By seeking disconfirming evidence, you will start to free your mind from the man-with-hammer-sees-every-problem-as-a-nail syndrome. If you are a startup, look for a market that is going through changes that the market leaders don't recognize due to their selective perception.

If you want a real world example, look at the new search results page of Both Businessweek and The Wall Street Journal wrote this week about how Ask's search results are displayed better than Google's. Is it the beginning of a change? Does Google have selective perception? Are they too focused on expanding into other forms of advertising instead of improving the user experience of their core product? It's not something I follow closely, but I can tell you that I use Google less than half the time for my searches.

Many pundits will say it is the job of the leader to set the corporate vision. I will add to that and say that a leader must also make sure the vision doesn't become tunnel-vision. Keep your guard up, and don't be afraid to relentlessly question your preconceived notions.

  • One cheap and simple way to beat the “only confirming evidence” trap:

    Clients have asked me, “How can I get better at recognizing my company’s (or my personal) weaknesses?” They were shocked when I told them, “You can learn more about your weaknesses by listening to the slander your detractors spread.”

    My reasoning is simple. People who like you will sugarcoat everything to the point where you can “miss the point.” But your detractors exaggerate your worst. There’s almost always truth in what detractors say or it wouldn’t be effective slander. It’s just that the bad is exaggerated and detractors ignore the good.

    So one good way to figure out where you’re falling short (and fix them) is to listen to your detractors and learn.

  • Eric

    Hi Rob. Love your blog. As someone who has seen the young woman / old lady illusion before, I wanted to point out that your picture is missing a crucial piece of the illusion: the necklace. This is the proper image:

  • Marc

    Great post. However, one of the reasons Google has remained on top is their ability to identify and acquire companies that have specific technologies that outperform their own.

  • One thing that makes Google different than any other big company is that they have all the information. They don’t have to do any market research, they have information on anyone’s research readily available to them. And they can’t be paranoid, because they can learn anything on anyone in a moment.

  • There are three important reasons that market leaders lose sight of what’s actually happening in the market. One is that, after a while, they talk to each other more than they talk to customers. When you do that, all you hear are filtered versions of reality.

    Related to that is the shift from talking about the benefits of your products or services and spending time talking about the details of their features. Benefits thinking looks outward. Features thinking looks inward.

    Finally, there’s the curse of success. A company is successful. They got successful because they have something good and were confident enough to pursue it. They know they’re successful. They expect to continue to be successful.

    The result can be that special arrogance called Hubris, which is inevitably followed by Nemesis.

  • Actually there is considerable evidence that the human brain is optimised for selection for discontinuity and change. The violation of expectation does NOT produce resistance, it produces excitatory stimulation. In fact, the frontal cortices exercise an inhibitory influence on this arousal, seeking to dampen it. It is over-training and miseducation that produces observer and perception bias. This is one of the reasons that entrepreneurial accomplishment is not predicted by education. The cure for this syndrome is rotation of executive talent, and cross-disciplining. And of course it is not just business that is challenged with this problem – medicine, education, and the legal system are also severely effected by this.
    Great topic and post, by the way. Neuro-science has progressed a bit from Harvard in the 1940s.

  • Rob

    Harbour Pilot,
    Yes, the human brain is optimized to notice discontinuity and change, but I would argue that much of the problem with selective perception is that change occurs gradually, and is only discontinuous if observed from the outside, which is why entrepreneurs do so well.

  • Yup, true enough. Hmm, well change can occur gradually – incremental improvement versus transformative and so on. Thing is, the clues that warn of transformative change are there, but people often miss the signs because they emerge in different fields. Sort of, the change in materials, leading to the change in computer manufacturing and design, leading to the feasibility of global supply chains, leading to the outsourcing of manufacturing, leading to macro economic changes… To the person only focused on say domestic demographics, the outsourcing phenomenon comes as a severe and unexpected shock.

    I was more ruminating on the question of programming of the cognitive interpreter and its role in your selective perception. Seems to me that people make the evidence fit their understanding most of the time. In some philosophies – scientific method, some aspects of the legal system, diagnostic medicine – there is a requirement for falsifiable hypotheses that I think is intended to combat in part this selective perception problem.

    The brain is wired for excitatory reaction to new stimulus, but programming is implemented to override the new stimulus with interpretation – hey that’s not a snake, that’s a piece of pipe… We get stressed and lazy, and allow our programming to override our natural impulses.

    Maybe a natural entrepreneur has as a core characteristic of NOT permitting this dismissive interpretation…

    Anyway, I always have been a bit of a contrarian
    Thanks for raising the subject – I have a number of concerns surrounding education and domestic competitive capability that I follow, and I am pretty sure this ties in at some point, it’s a very important subject.

  • All too often the big guys got big because they took some innovative risk.

    Most often during the innovative risk phase is when the top is trying to carve out a novel market position.

    But after successfully positioning their innovativeness as the new market leader, they have to constantly fight to defend that market position.

    But then what happens needs….Yep. You guess it. Some other company is studying their model and finding a way to encroach in on their market position.

    And yes…if the innovative big-boy-market-leader does not watch his back, he will soon find himself taking back seat the the new and more innovative kid on the block.