Sep 2, 2022
Today, we get to talk about a
very fun concept known as the cobra effect or the cobra problem. It
is something I included in my upcoming book,
What Your Employees Need and
Can’t Tell You, and I
was very surprised at some of the early readers who work in the
field and wrote comments like “WOW!” or called out this concept by
name in their endorsement blurbs for the book.
As I have said on the show
before, there are hundreds of concepts, biases and heuristics in
behavioral economics and behavioral science that are impacting our
actions every day – it is near impossible to keep up with all of
them, and sometimes you find a little golden nugget like this one
which can be a new discovery for people even when they are experts
in the field. I’m definitely not saying that I am the first person
to talk about it or that no one knows about it. Rather, when I
realized that it might be a little more obscure than I thought, it
became a clear contender for its own dedicated episode sooner than
later – plus it is awesome and the story of how it got that name is
really interesting. Wanna hear that story and how you can use the
cobra effect in business? Listen in…
- [00:41] Today, we get to talk
about a very fun concept known as the cobra effect or the cobra
problem. It is something I included in my upcoming book,
What Your Employees Need and
Can’t Tell You.
- [03:18] It all started way back
when the British ruled India and the city of Delhi was infested
with cobras. In order to help with the problem, the British set up
a bounty and would pay anyone who brought in a cobra skin to help
clean up the streets and keep people safe…but things didn’t work
out quite as intended.
- [04:45] And while the effect
got its namesake from this cobra incident, it is by no means an
isolated problem. Apparently, there was a very similar problem in
Hanoi in 1902 when the French put in their sewer system, which
essentially became a rat superhighway.
- [06:21] Just like the cobras,
when the French got wise of the scheme, they did away with the
bounty and everyone let their rats go free creating an even worse
(quickly multiplying) problem.
- [07:49] Our next example comes
from Bogota, Colombia, which tried to cut down on pollution and
congestion on the roads in 2008 by limiting how often you could
- [09:42] In my research I also
found a story where the government of Quebec gave considerably more
money to mental health programs than to orphanages from 1940-1960.
So, to try and help those orphaned children who otherwise would
have had nowhere to go, the Catholic Church of Quebec reportedly
misdiagnosed many children with mental illnesses to get more
- [11:10] The main lesson from
the cobra effect is that “no loophole goes unexploited.” Incentives
are great and they can absolutely work, but you need to be really
thoughtful about what someone might do to benefit from whatever you
- [12:16] It is always so
important to look beyond the surface solution and consider the
problem you are really solving before you move forward with a
course of action. When you think about the problem, it is important
to get out of your own perspective and understand what someone
really needs and what is practical for them.
- [13:58] You need to consider
the problem you are trying to solve AND how it lines up with the
real behavior of other people, as well as what they have control
over and what you have control over in the new world you are
proposing. Nudges and other tactics can only get you so far. You
also have to really get out of your own way and think about how
someone might see this differently than you.
- [15:41] There are lots of valid
and useful incentives and not everyone is going to take advantage
of the loophole or even see it…but if the loophole is big enough
and there are enough people willing to jump through it that can be
a time where your solution makes the problem worse.
- [17:42] Every decision has an
impact – even the decision to do nothing – and changing one thing
can change many things that are related even if you don’t think
about them (and it isn’t always in a positive way).
- [19:11] It is important to
spend some more time thinking about those possible loopholes, and
it is important to get into the mindset of the person who would be
in the situation.
- [19:49] The ability to be “in
the moment” with someone else, to empathize and imagine we are part
of that experience and show “How might we?” is so valuable and such
an amazing skill. When you put yourself in that space, you can
think differently, and that is really helpful when you are looking
for exploitable loopholes.
- [21:03] Melina shares questions
you should ask if you are considering implementing a payout (use
your free worksheet to follow along).
- [22:19] Even small incentives
can cause people to look for loopholes and to find opportunities
for their own benefit.
- [25:38] Rules need to be put in
place to adjust for possible loopholes. Maybe there are
restrictions that need to go in place, but if there are too many
restrictions, take a moment to consider if the plan is a good one
or if it is time to go back to the drawing board.
- [27:54] It is better to be
thoughtful about these loopholes and restrictions up front instead
of looking back after the fact and regretting the choices you could
have made differently once you have the power of
- [29:02] If you haven’t already,
will you consider pre-ordering a copy of my upcoming book,
What Your Employees Need and Can’t Tell
You? In it, I talk
about the cobra effect, and so many other important concepts from
behavioral science and how they can be applied to business to help
teams work and communicate better together.
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