Why Smart Brands Make Dumb Decisions

Reading Time: 7 min

Intelligence can’t protect you from the costliest mistake in business.

Tropicana lost $50 million because executives got bored with their logo. LEGO nearly went bankrupt because they trusted a spreadsheet over a sneaker. These were issues of perception, not of resources.

This perceptual error occurs when you think that if you understand your product's value, the customer will too.

It's the Inside-Out Trap.

And it's rooted in the way we're wired to make decisions.

The Principle: The Biology of Bad Decisions

Even with lots of data and high-priced consultants, brands still make major blunders.

This failure stems from a specific blind spot in the human brain called Egocentric Bias.

This is a biological reality rather than simple arrogance.

Neuroscientists have pinpointed a brain structure known as the Default Mode Network (DMN). This network is for self-referential thoughts, daydreaming, or when the mind is at rest. In other words, it helps control how we think about ourselves.

But recent fMRI studies reveal a critical twist. The DMN is also the brain's default network for figuring out what other people are thinking.

This creates a structural problem. The brain effectively uses the "self" as a template to model the "other." It projects your own feelings onto other people.

The DMN uses your own thoughts and attitudes as a proxy for understanding other people, like your customers.

The brain does this because it's wired to conserve energy. And, the DMN doesn't use much energy. So, thinking about others by proxy is the easiest, lowest-energy way to simulate a mind.

To see the customer’s reality accurately, your brain must actively suppress the DMN. And then activate another region: the right Supramarginal Gyrus (rSMG).

The rSMG acts as a correction mechanism that separates your feelings from their feelings.

It allows you to have a more realistic understanding of the way other people view the world.

But there's a big problem: energy cost.

Activating the rSMG to suppress the DMN requires a lot of energy. It's not something the brain will do by default. And it will avoid trying to do it.

So, when executives operate under stress or fatigue, the brain conserves energy. It fails to activate the expensive rSMG and reverts to the cheap DMN.

As a result, you stop solving problems for customers and start solving problems for yourself.

The Compound Effect: Biological Groupthink

This individual bias gets worse when you enter the boardroom and Groupthink takes over.

Groupthink isn't just social pressure. It’s a biological state that limits your ability to detect errors through two processes:

1. The Sedated Alarm Bell (dACC): The dorsal Anterior Cingulate Cortex (dACC) acts as the brain's "alarm bell" for mistakes. But in a group, this alarm gets turned down. Your brain offloads the responsibility to the room. Your brain reduces vigilance because it assumes someone else is watching.

2. The Pain of Dissent (Amygdala): The brain uses the same pathways for social rejection as it does for physical pain. So, when you consider disagreeing with the group, the Amygdala (the threat center) activates. It hijacks the logic center to silence you.

Together, these two processes result in Shared Information Bias.

Groups spend their time discussing facts they already agree on because it triggers a reward. And they skip unique or conflicting data because handling it feels uncomfortable.

When decision-making is shaped by the Egocentric Bias and Shared Information Bias, you might think you really understand the customer. But really, you just understand yourself. And everyone in the group agrees.

This can convince you that you're on the right path when you're headed towards failure.

Part 1: The Traps (When Inside-Out Thinking Fails)

When the Inside-Out view takes over, companies often confuse their own preferences with market needs. This is most evident when brands value aesthetics more than function, or when they favor logic over identity.

Case Study A: The Aesthetic Error (Tropicana)

In 2009, Tropicana made a $50 million mistake by prioritizing design over psychology.

The Context

At the time, Tropicana dominated the orange juice aisle, generating over $700 million a year. But executives at PepsiCo felt the packaging looked "dated". They wanted to modernize the brand with a sleek, minimalist look.

The Trap

The design team broke the customers' ability to recognize the product.

Shoppers rely on patterns to find products. For decades, Tropicana’s pattern was simple: an orange with a straw in it. The new design removed the orange and the straw. It even rotated the logo sideways, forcing customers to crane their necks to read it.

The Result

By "cleaning up" the design, the brand broke the cognitive map customers used to find the product. The minimalist look also made consumers mistake it for a generic store brand. Sales collapsed 20% in less than two months.

Competitors like Minute Maid stole their loyal customers overnight.

The Lesson

Just 46 days later, Tropicana panicked and reverted to the original packaging. They learned that you cannot buy what you cannot find.

Case Study B: The Segmentation Trap (BIC "For Her")

Tropicana failed by focusing on aesthetics. BIC failed by focusing on segmentation.

The Context

In 2012, BIC looked at the numbers and decided to create a new revenue stream by targeting women. They launched the "BIC Cristal For Her"—a pen with a thin barrel and pastel colors.

The Trap

BIC fell into the Pink Tax trap. They assumed women would pay a 70% premium for a pink product.

But writing is a gender-neutral act. By making a "pen for women," the brand implied a deficit rather than solving a problem. This suggested that women’s hands were too weak or fragile to handle a man's pen.

The Result

The backlash was legendary.

Women turned the Amazon product page into a platform for satire, posting thousands of funny reviews. One reviewer wrote: "Finally! For years I've had to rely on pencils... Bic has released a womanly pen that my gentle baby hands can use". Ellen DeGeneres even mocked it on national TV.

The Lesson

Segmentation without a real functional difference is simply condescension. Treating your customer as a demographic, not a person, leads to trouble.

Part 2: The Fixes (When Outside-In Thinking Wins)

When companies stop looking at their own spreadsheets and start looking at the real world, the results can be massive.

Case Study C: The Social Utility Fix (Liquid Death)

The antidote to the Inside-Out Trap is looking at the customer's reality, not just their purchase history.

The Context

The packaged water industry is worth over $300 billion. For years, every brand followed the same Inside-Out rule: Sell Purity. Brands like Evian and Fiji focused entirely on the liquid.

The Fix

Founder Mike Cessario saw something different.

He observed musicians at punk rock concerts pouring water into empty energy drink cans. Holding a crinkly, plastic water bottle on stage looked "soft" and killed the vibe. The musicians needed hydration (Functional Need), but they also needed to look cool (Social Need).

The Result

Liquid Death sold Social Camouflage in the form of water.

They put water in a tallboy aluminum can—the universal symbol for beer or energy drinks. Now, a sober person could hold a Liquid Death can at a party and visually blend into the crowd. The brand grew to a $1.4 billion valuation.

The Lesson

To succeed in a crowded market, you need to grasp your customer's social reality. Simply having a "better" product isn't enough.

Case Study D: The Small Data Fix (LEGO)

To understand why customers act, rely on observation instead of just spreadsheets.

The Context

In 2003, LEGO was on the brink of bankruptcy, losing nearly $1 million a day. Popular data at the time told a scary story: kids don't have patience anymore. They didn't have the attention span for long LEGO builds. Supposedly, millennials wanted instant gratification.

The Fix

LEGO tried a new approach: they sent researchers to live with families.

In Germany, a researcher asked an 11-year-old boy about his most prized possession. The boy showed him a beat-up pair of Adidas sneakers. He said the scuffs were great. They showed his friends he had mastered a tough skateboard trick.

The Result

Popular data said kids want it "easy," but the sneaker proved some kids don't. They want mastery. LEGO immediately changed strategy. They started making sets harder and more complex. Sales of the complex LEGO City line tripled in one year.

The Lesson

The Inside-Out leader trusts the neat data. The Outside-In leader trusts the messy reality.

The Framework: The "Empty Chair" Strategy

You cannot fix these problems by simply trying harder to be empathetic.

The biological pull of Egocentric Bias (saving energy) and Shared Information Bias (fitting in) is too strong. Your brain will naturally revert to the path of least resistance.

To stop this, you need a physical interrupt. You need a mechanism that forces your brain to do the high-energy work of seeing a different reality.

Jeff Bezos famously used the empty chair method.

In critical meetings, he would pull an empty chair to the table. He told his executives, "That is the customer. How do they feel about this decision?"

The chair served as a cognitive anchor. It forced the room to switch off their "Default Mode" and engage with the customer's perspective.

You don't need a physical chair. Use these three diagnostic questions:

1. The Stranger Test

Determine if your idea requires insider context to work.

• The Test: Check if a busy stranger with zero context would understand the value in 3 seconds. If you have to explain the "strategy" for the idea to make sense, you have failed.

2. The Boredom Test

Identify the source of the change.

• The Test: Clarify if the change is driven by customer demand or internal boredom. Companies sometimes get rid of effective assets, such as the Tropicana orange, just because they’re bored of them.

3. The Behavior Test

Distinguish between what customers say and what they do.

• The Test: Check if what customers do matches their survey answers. Build for the Old Sneaker (what they actually value) instead of the focus group (what they say they value).

The Bottom Line

Your brand lives in the customer's mind. Not in your office.

If you don't fight for their perspective in the boardroom, no one else will.

Onward,

Aaron Shields

P.S. When was the last time you audited your decision-making process? If your marketing feels flat, you might have lost the thread of the customer's perspective. Reply to this email and I'll set up a free 15-minute call to discuss how you can start bringing the customer back into your boardroom.