The Cobra Effect

A couple of weeks back I bought some clothes online, Jocks to be exact. They are being delivered to a friend in America who is bringing them to me in Hawaii at a conference we’re going to be at together. It’s probably a bit more effort than it’s worth, but I just can’t bring myself to pay three times as much here in Australia. (and I did get a few years’ worth). When I was checking out, the website had a box for a coupon code. So I Googled the website url with the word coupon. I then found another website which gave me a coupon for a 15% discount. Bingo! For me anyway, not for the online shop, which just gave away 15% for nothing. An unintended consequence of whatever their promotion was.

Stephen J. Dubner and Steven D. Levitt shared another great example of an unintended consequence on the Freakonomics Podcast. In Mexico City there was a pollution problem – too many people driving too many cars. So they implemented a system where cars could only drive on certain days, depending on their number plates. The unintended consequence was that people who needed to drive every day bought a second car. And because people started needing a second car, instead of buying a newer (more efficient, cleaner) car, they bought two older cars. The ultimate effect – more pollution, not less.

It’s what economists call the Cobra Effect, named after an initiative in India that back fired. There was a problem with the number of cobras, so the government offered a bounty for every dead cobra. Because of the reward, people soon started breeding cobras just to get the money. When the government realised this they cancelled the reward. The cobra farmers then released all their cobras, and they were left with more cobras than there had been to begin with.

Running our businesses and our practices is all about influencing behaviour, but humans are difficult to predict. And whether its incentivising staff, or promoting a product or program, we need to watch out for unintended consequences, and make sure we don’t get bitten by a cobra.

Love to hear your thoughts, what unintended consequences have you seen (or caused) recently? You can leave them below.