The Cobra Effect

Have you heard the term “the Cobra Effect”?

If not, it’s time that you learn about it.

The Cobra Effect is a term in economics. It refers to a situation when an attempted solution to a problem makes the problem worse.

This name was coined based on an incident in old colonial India.

By some reasons, there were too many venomous cobra snakes in Delhi. People were dying due to snake-bites and it became scary for almost everyone to step out of their houses.

The government of the day had to get into action to stop this menace and it offered a silver coin for every dead cobra. The results were great, a large number of snakes were killed for the reward.

Eventually, however, it led to some serious unwanted consequences. After a short-term dip in cobra population, it started going up.

This was because few people began to breed cobras for the income. When the news reached the government, the reward program was scrapped, causing the cobra breeders to set the now-worthless snakes free. As a result, the cobra population further increased. The solution for the problem made the situation even worse.

The unintended consequence for a well-intention-ed idea led to making the problem worse.

Are you trying a new solution?

or

Planning to tackle an existing problem with a new idea?

Well, it’s time to pause and think about how people would respond to the new idea that may sound great on paper!

Specially the solutions that try to affect how people behave.

There’s always a certain group of people who have a tendency to game the system -intentionally or otherwise.

They have a tendency to take short-term advantage of any situation though that may lead to harm to them and society-at-large only in the long run.

Every solution has consequences and those consequences may lead to certain situations where rather than solving a current problem, you may end up with more complex problems.

Here is another example:

The Nano Car - a small car that could never it make it big!

The car once touted as the world’s cheapest, Tata Nano, seems to be running into a dead end as sales and production is down to a trickle. The poor demand has resulted in Tata Motors shutting down the plant in last month.

A car considered as a brilliant product, launched in a segment having a billion dollar opportunity. Hope ran high, the company expected all present and potential two-wheeler owners would shift to the Nano.

But they forgot to dig deeper – a car marketed as ‘the cheapest car’ created huge initial interest. But it never took off.

Later on, Ratan Tata admitted that the reason for the failure of this idea was none other than the term which became synonymous with Nano – “The cheapest car”.

Buying a car in India is associated with social status and prestige; if a person owns a car, he is assumed to be successful and settled. But the word ‘cheap’ in its marketing campaigns spoiled everything.

The company also failed to analyse the competition from used-cars. Used cars (2nd hand cars) from other companies, which were much better in quality, space and mileage were available to the same customer -segment at the same or lesser price than Nano.

An intelligent team of people failed to think about the above likely outcomes because it became temporarily blind by the brilliance of such a great idea, by the idea of tapping a billion-dollar opportunity.

What's in it for you?

Next time you or your team has some brilliant idea, get your brilliant guys together in a room and think about the Cobra- effect before implementing that idea.

You can always fine-tune the idea to minimize the negative implications by spending few extra hours/days before rushing to announce it.

Don’t implement while you’re under the awe of the brilliance of a never -tested, nice-looking solution or idea, think about the Cobra-effect first.

Author - Unknown