We develop a theory explaining how collectivism causes people to “blur” demographic differences, that is, to see less diversity than actually exists in a group, and reconciling contradictions in how collectivistic norms influence group performance. We draw on the perceived diversity literature, hypothesizing that collectivistic norms cause group members to blur demographic differences, resulting in perceptions that group members are more similar than they actually are. Whether this benefits or harms group performance depends on the group’s objective diversity and the relevance of the perceived diversity attribute for accomplishing the task. For conjunctive tasks, the group’s performance is determined by its weakest member, demanding high levels of cohesion. Our theory suggests that collectivism benefits group conjunctive performance when objective national diversity is high by blurring divisive relational differences but has no effect in groups with low objective national diversity. In contrast, for disjunctive tasks, the group’s performance is determined by its best member. We predict that collectivism harms group disjunctive performance when objective expertness diversity is high by blurring differences in task-relevant expertness but has no effect in low objective expertness diversity groups. We find support for our theory in two studies, an archival study of 5,214 Himalayan climbing expeditions and a laboratory experiment assessing 366 groups. Our results show that collectivism has benefits and detriments for diverse groups and that these contradictory effects can be understood by identifying how the collectivistic blurring of perceived group diversity helps or hurts groups based on the type of tasks on which they are working.