You know that feeling when you try to fix something and somehow make it ten times worse? Welcome to the cobra effect, where good intentions collide with human nature in the most spectacular ways possible.
Back in colonial India, the British had a snake problem. Venomous cobras were killing over 20,000 people yearly across the country. Their solution seemed brilliant: pay locals for every dead cobra they brought in. What could go wrong?
Everything, as it turns out.
When Rewards Create Problems
The cobra bounty worked beautifully at first. Indians rushed into the streets, hunting down these deadly serpents. Dead cobra count went up, everyone felt good about progress, and British officials patted themselves on the back.
Then something interesting happened. Locals realized they’d stumbled onto a goldmine. Why hunt dangerous wild cobras when you could breed them at home? Soon, cobra farms popped up everywhere. People were literally creating the problem they were being paid to solve.
When the British caught wind of this scheme and cancelled the bounty program, things got even worse. All those farmed cobras? Released back into the wild. The snake problem exploded beyond the original issue.
This wasn’t isolated to India. In Vietnam, the French tried paying for rat tails to combat a rodent plague. Predictably, people started catching rats, chopping off their tails, and releasing them to breed more valuable tails. The rat population actually grew.
The Real Villain: Bad Incentives
You might think people were just gaming the system, but they were actually responding exactly as humans always do. We act in our own self-interest. When survival is on the line, you optimize for the reward, not the intended outcome.
The Soviets learned this the hard way with nail production. First, they rewarded quantity, so workers made thousands of tiny, useless nails. Then they switched to rewarding by weight, and suddenly factories produced massive, impractical nails that nobody wanted.
Every single time, people adapted their behavior to maximize rewards rather than solve the actual problem.
This happens because poorly designed incentives turn problems into profit centers. When you pay per cobra killed, cobra scarcity becomes a threat to income. When pharmaceutical companies profit from sick patients, health becomes less profitable than treatment.
Look around you. Crime, war, drugs, poverty, homelessness. Each has become its own industrial complex where solving the problem would eliminate the revenue stream.
The Solution: Reward Outcomes, Not Inputs
Smart incentive design focuses on results, not activities. Instead of paying per dead snake, reward communities for measurable reductions in cobra sightings over time. Instead of counting rat tails, reward neighborhoods for actually decreasing rat populations.
Free markets naturally do this. You don’t buy nails by weight; you buy nails that actually work for your project. Customer satisfaction drives quality because businesses profit from solving problems, not creating them.
One beautiful example of good incentives: bottle deposit systems. Oregon’s 1971 bottle bill charged customers a small deposit on drinks, refundable when they returned the container. Return rates shot above 80%, litter plummeted, and recycling became self-sustaining. The incentive flipped from “easier to throw away” to “I get money back.”
Beyond Money: Culture Matters
Even perfect incentives hit limits. That’s where culture becomes your secret weapon. When people genuinely care about long-term outcomes and feel connected to something bigger than themselves, you barely need external rewards.
Strong cultures create alignment between individual and group interests naturally. Weak cultures require endless rules and complex reward systems to prevent gaming.
Your Action Plan
Next time you’re designing any system involving other people, ask yourself: Am I rewarding the behavior I actually want, or just the appearance of it?
• Focus on outcomes, not activities • Add time limits to prevent problems from becoming revenue streams • Give people skin in the game so they experience consequences • Stay flexible and adjust when things aren’t working • Build culture that values long-term thinking over short-term gains
Remember: when you attach profit to a problem, brilliant people will work very hard to keep that problem alive. The cobra effect isn’t just a historical curiosity; it’s happening all around you right now.
What incentives are shaping your world today? More importantly, what are they actually rewarding?
If this post sparked a thought, shifted your mindset, or gave you something meaningful — don’t let it end here.
Buy me a coffee to power more of this work. Every cup helps me stay independent and keep delivering value.
Ready for next-level insights?
Upgrade your subscription and unlock exclusive content made just for committed readers like you.
