i think it was a combination of cockiness and just not caring about 7s
they thought that they didn't need to put a whole bunch of resources into the sport and still end up with a medal. and even if they don't get a medal it's just 7s
Absolutely, but I think they have fundamentally underestimated the NZ public's desire to do well in the Olympics. Even for their own standards they have set in the past they have been terrible. Think about the side they have had in the Commonwealth Games prior to the last one:
1998 had All Blacks: Jonah Lomu, Christian Cullen, Bruce Reihana, Joeli Vidiri, Rico Gear, Roger Randle, Caleb Ralph, Dallas Seymour (basically the premier of New Zealand rugby outside backs - and Dallas Seymour). The only non All Black was sevens specialist Amasio Valence.
2002 had All Blacks: Mils Muliaina, Rodney So'oialo, Chris Masoe, Bruce Reihana, Anthony Tuitavake, Eric Rush, Roger Randle, Craig Newby - with a few more specialist 7's players such as Karl Ta Nana and Valence thrown back there. Most of the players were also playing Super Rugby.
2006 had All Blacks: Cary Jane, Liam Messam, Tamati Ellison, Sosene Anesi, Tanerau Latimer
2010 had All Blacks: Hosea Gear, Ben Smith, Liam Messam, Zac Guildford
Now in fairness some of the 7s players may go on to have careers as All Blacks (I suspect the Ioane brothers will), but what you can see if the NZRU has severely been cutting off the availability of these players as they have expanded the Super Rugby season and test series. It just makes no sense why a guys who aren't quite in that All Black frame weren't told to have a go at 7s. People argue that 7s is a different game - but obviously with the list I have just shown its not so different that the players didn't return even better 15s players afterwards.