last highlighted date: 2024-10-30
Highlights
- Cobra Effect is based on a story which may or may not have taken place during British colonial rule in India. Despite its unconfirmed authenticity, it remains a powerful illustration of how bad incentives can undermine good intentions.
- In my view, it should be taught as early as possible to anyone who intends to run, manage, or operate any system of almost any complexity. The story goes something like this: in colonial India, under British rule, the city of Delhi had a problem with Cobras. To control the Cobra population, the government offered a bounty for every dead Cobra. Huge numbers of dead Cobras were handed in, but the Cobra problem got worse, not better. Why? Because people realized they could Profit from this bounty, not by killing cobras in the wild, but by breeding cobras, raising and killing them specifically for reward. This led to small-scale cobra farming operations.
- When the government became aware of this practice, they discontinued the bounty program. Without the incentive, the cobra breeders released their now worthless snakes into the wild. As a result, the cobra population in Delhi ended up increasing rather than decreasing, exacerbated by the government’s own policies. The reason this story resonates is that it reflects something we all know: intentions don’t drive human behavior; incentives do. A good recent example might be Mexico City’s “hoy no circula” program intended to reduce pollution by banning cars from the road one day a week based on their license plate numbers. This policy led to an increase in car ownership. Why? Because people bought additional cars with different plate numbers to bypass their restriction, thus increasing pollution.