There’s a classic trick magicians love: they’ll make you watch the left hand, while the real move happens in the right. The trick? Misdirection. But beneath it lies a deeper truth—humans tend to focus only on what is in front of them, and not what actually matters.
That, in behavioural science, is called inattentional blindness bias — our mind’s blind spot when it’s too fixated on one thing to notice another.
Let me give you a more everyday example.
Every time I write an article, I proofread it. I check, re-check, read it out loud… and still, there’s a high chance I miss that one typo. But hand it to someone else, and they spot it instantly.
Why? Because I’m so fixated on my content, my brain auto-fills what it expects to see, not what’s actually there.
There was actually an academic experiment conducted on this very bias.
Pass the ball
Watch this short video here.
Your task: Count how many times the players in white pass the ball.
That’s exactly what psychologists Christopher Chabris and Daniel Simons asked their volunteers.
Most got the pass count right. But they missed the man wearing a gorilla costume, walking into the frame, beating his chest, and leaving.
That’s inattentional blindness: when we focus so hard on one thing, we become blind to everything else.
But what if I told you this same blind spot is quietly costing investors money—often in ways we don’t even realize?
The case of Asian Paints
Everybody had unshakeable confidence in Asian Paints because it had been the market leader in a fragmented industry for far too long.
Asian Paints’ stock delivered high returns between 2013 and 2021—both in terms of price appreciation and earnings growth. Investors believed in its brand, moat, and scale—and paid any price for it.
Enter Birla Opus with its ₹10,000 crore investment targeting that very moat which everyone thought was unshakable.
Even after their entry, most believed Asian Paints would remain the undisputed leader. And they still are—but simply not undisputed.
Asian Paints, once the price setter, became the price taker. Volumes shrank, and even margins compressed. Marketing spend surged. The stock corrected ~33% within 3 months (between 13 September 24 and 27 December 24), correcting to a valuation that was finally grounded in reality.
Yes Bank: The Growth Illusion
Between FY17 and FY19, before the bank took the final blow in FY20, its net interest income (NII) had nearly doubled, from ₹3,900 crore to ₹7,000 crore. The stock rallied, analysts cheered, and the growth narrative gained serious momentum.
But beneath the surface, cracks were starting to show.
Net interest margins fell to 2.5% in FY19—below the industry average. Meanwhile, gross NPAs jumped over 13x, from ₹1,272 crore (FY17) to ₹17,134 crore (FY19). Even its Capital Adequacy Ratio (CAR), which shows how well a bank can absorb losses, slipped below the RBI’s 10.875% requirement.
In hindsight, the warning signs were all there but they were drowned out by the excitement of growth.
The comeback of a Tech Giant
When Satya Nadella was appointed CEO in 2014, many investors were skeptical. The company was struggling in the mobile space and was seen as falling behind in innovation.
But while the market was busy focusing on what Microsoft wasn’t, Nadella quietly shifted focus to what mattered—cloud computing, AI, and enterprise software. Those who weren’t blinded by the noise and saw the fundamentals improving were richly rewarded.
If you had invested $10,000 on Nadella’s first day as CEO, it would be worth around $114,000 by 2024—likely even more today.
Sometimes, inattentional blindness bias isn’t just about missing the red flags. It’s also about missing the quiet green ones.
So, how do you beat this inattentional bias?
Truth is—it’s tough. Even experts fall for it.
But Warren Buffett once said, “Buy into a company because you want to own it, not because you want the stock to go up.” That mindset alone filters out a lot of noise. It forces you to study the business, not the buzz.
Here’s what helps further:
Don’t chase stories: Follow the numbers
Get a second set of eyes: A friend may spot what you overlook
Revisit the basics: Sometimes, what’s boring is what’s most important.
And importantly, when it comes to investments, be diversified. When it comes to investing in stocks, for example, you can have a strategy of say not investing more than 5% in a particular stock. So even if you go wrong in a particular stock due to this bias, your losses are contained.
I hope you enjoyed this newsletter and if you did, feel free to share it with your friends and family.
Also, if you have any topics that you would like us to cover or any other feedback, do write to us at connect@incredmoney.com
Till the next time,
Vijay
CEO – InCred Money
