The Cobra Effect —Greed, Deception and Snakes in The Street

A Startling Tale of Unintended Consequences in Delhi

A story from the era of the British Raj in India relates how a plague of cobras infested Delhi. The deadly snakes were a common sight on city streets, and to eliminate the problem the Brits offered a bounty on all dead cobras that people turned into government offices.

Hugely successful, the reward program created employment in the new cobra hunting industry and Delhi’s streets were cleared of the venomous snakes. But the number of cobra skins turned in to authorities for payment continued, reaching a steady, recurring level, with government officials at a loss to explain why. Upon investigation, the bureaucrats discovered that the new snake-hunting industry had spawned a snake-breeding industry. Entrepreneurs would breed the snakes, kill them, and then turn the skins into officials for the reward.

City bureaucrats immediately terminated the snake bounty program, but in an act of defiance, the snake breeders dumped their live snakes back onto the streets of Delhi, creating another crisis.

Insight and Application

The Cobra Effect is an example of a perverse incentive, an enticement or reward system that causes undesirable results beyond the original intention of the planner. Other examples include:

· A technology company deciding to pay the programmers by the line of code they wrote, resulting in large, bloated software as programmers attempted to maximize their pay,

· Government authorities instructing a Russian nail company to produce double the quantity of product than the previous year, resulting in management re-tooling their line to manufacture half the size of nail, thus hitting their target.

· During the 1940s and 50s, the Government of Quebec, upon realizing that the federal government paid institutions three times more for the care of psychiatric patients than orphans, declared thousands of children in provincial care mentally ill so they could reap the additional money. Many of the children said they were put in straight jackets and given electro-shock therapy even though nothing was wrong with them.

· In 2002, during the Afghan war, officials offered large rewards for farmers who destroyed their poppy crops. Although intended to crush the region’s opium trade, the program incentivized the farmers to plant as large a poppy crop as they could. Additionally, many of the farmers first collected the poppy sap for sale to criminal rings before destroying their crop, thus effectively getting paid twice.

Incentives are a powerful driver of human behaviour but can often produce results that make the situation worse rather than better. Careful monitoring of the interim outcomes is necessary to ensure that long-term results remain beneficial and true to original intent.

This is a story in the new book I’m writing, Leadership Parables, which will feature leadership lessons in highly memorable short story form. But I need your help. If you remember an anecdote that influenced the way you think about business and leadership, tell me about it. If your suggestion is selected, you will receive a copy of the book and credit as a contributor. If you would like to know when the book is released, please add your name here. And, if you have an idea to share, please contact me at kurian@strategypeak.com.

Also, check out my first book, The 7 Essential Stories Charismatic Leaders Tell, click here: https://amzn.to/2PSHgmB