Sometimes the most dangerous lessons are the ones we think we’ve learned too well.
I’ve written a few times about how Blockbuster blew up—but there’s a key piece of the story that I wasn’t aware of until recently.
The commonly told tale is that Blockbuster was stupid. They had the opportunity to buy Netflix for pennies on the dollar, turned it down, and now you’ll only ever see their logo in nostalgia-bait romcoms based on the early 2000s.
But Blockbuster wasn’t stupid. They were actually pretty smart and forward-thinking - they just had the cosmic misfortune of learning a good lesson at the worst possible time.
The part of the story most people overlook is that Blockbuster’s first big bet on an Internet company wasn’t Netflix. It was Enron.
Yes, that Enron. In the early 2000s, Blockbuster partnered with Enron to launch a video-on-demand service. Enron collapsed. The venture collapsed with it. Blockbuster’s bold step into the digital world turned into a disaster that taught them exactly one lesson: don’t trust Internet companies promising to revolutionise entertainment.
So when Netflix came knocking a few years later, pitching themselves as the future of home entertainment, the Blockbuster executives had every reason to be sceptical. They’d heard this before. They’d lost money on it. They’d been burned.
They just happened to learn exactly the wrong lesson.
This is the cruel irony of experience. It’s supposed to make us wiser, but sometimes it makes us wise about the wrong things. We learn to avoid the specific shape of the last disaster, while remaining blind to the completely different shape of the next opportunity.
Sometimes the lessons that protect us from past dangers are the very things that prevent us from seizing future possibilities.
There’s a concept in mathematics called ergodicity that captures this perfectly. In simple terms, some systems give you unlimited chances to play, and some don’t.
A trader who loses everything on a bad bet doesn’t get to play again. But a large firm that diversifies across thousands of trades will see its wins and losses average out. The same game, played by different players with different stakes, follows entirely different rules.
These are what mathematicians call non-ergodic systems - where one bad outcome can change the game permanently. And the lesson you learn from a non-ergodic loss - “never do that again” - might be exactly wrong if the next opportunity is actually ergodic.
The tragedy of Blockbuster isn’t that they failed to see the future. It’s that they saw it too early, got burned, and then flinched when they saw it again. They weren’t blind, they were scared. They weren’t foolish, they were fearful. And fear of the past made them miss the opportunity of the present.
There’s a subtle but fundamental difference between prudence and paranoia. It’s not always obvious, but you’ve probably seen this play out many times.
A bad relationship makes us shut down emotionally rather than learn to choose better partners. A failed business venture makes us avoid all risk rather than learn to evaluate risk better. A betrayal makes us trust no one rather than learn to trust more wisely.
The challenge isn’t just learning from experience - it’s learning the right things from experience. It’s being able to say “this went wrong because of X, not because of Y” and then watching out for X while remaining open to Y.
The next time you find yourself absolutely certain about a lesson you’ve learned, ask yourself: Am I learning from experience, or am I just afraid of getting burned in the same way twice? Am I being prudent, or am I running scared?
Some opportunities only come once, and learning the wrong lessons can be just as costly as not learning at all.
