The Cobra 🐍 Effect: How Bad Metrics Drive Bad Behavior (and What to Do About It)
Countering Goodhart’s Law to Build Smarter, More Effective Goals and Metrics
In this issue:
The Cobra 🐍 Effect
The Newspaper 📰 Tax
Goodhart’s Law
Countering Goodhart’s Law: The 2-D Framework
Common Mistakes to Avoid
Download The 2D Framework Worksheet!
Complementary Frameworks & Recommended Resources
Summary & Final Thoughts
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The Cobra 🐍 Effect
About a hundred years ago, in British-ruled India, there was a rising population of wild cobras in Delhi.
The British government, concerned about the number of venomous cobras, adopted an ingenious crowd-sourcing idea.
They offered a bounty for every dead cobra.
At first, the plan worked brilliantly. The locals got into motion and started killing snakes left, right, and center. Soon, the snake population started to dwindle, just as intended.
But as with many well-intentioned policies, the story didn’t end there.
Somewhere along the way, ambition met loopholes.
Enterprising people spotted a flaw. They realized it was easier to breed cobras than hunt them. A guaranteed income stream was born.
Guess what happened next?
Before long, snake farms emerged at every nook and corner of the city.
Eventually, the government realized what was happening. Alarmed by rising numbers despite the bounties, they scrapped the program.
The breeders, now stuck with worthless snakes, did the simplest thing – they released them.
And just like that, the wild cobra population soared, higher than before.
This story — known as the Cobra Effect — is a textbook example of Goodhart’s Law in action.
The cobra problem was never about the number of dead snakes. It was about safety. But the metric (dead cobras) became the focus, and soon, the goal itself (reducing danger) was lost.
The Newspaper 📰 Tax
Now, let’s look at yet another historical example that illustrates Goodhart’s law.
In 1712, the UK government imposed a tax on newspapers. This tax, known as the Stamp Act, was introduced to raise revenue and control the spread of information.
A duty was imposed on each printed sheet of newspaper.
Obviously, the publishers of the time didn’t appreciate this ‘gesture’ by the government, as it directly impacted their financial margins (which were thin to begin with.) Many publishers had to shut their doors as they were not able to sustain.
And then something interesting happened.
Just like with the Cobra example, enterprising publishers came up with a brilliant idea. Considering how the tax was calculated, they responded by increasing the size of each sheet rather than reducing content.
This allowed them to print more on fewer pages, effectively circumventing the intent of the tax.
In this case, the government's goal was to regulate or limit the circulation of information by taxing newspapers. However, by targeting the number of pages, the tax created an unintended incentive for publishers to adapt in ways that defeated the policy’s purpose.
Instead of reducing publications, the result was larger, more cumbersome newspapers that still spread information widely.
Once again, Goodhart’s Law in action.
Goodhart’s Law
Goodhart’s Law, which is named after British Economist Charles Goodhart, is an adage that states:
“When a measure becomes a target, it ceases to be a good measure.” — Goodhart’s Law
Many years ago, I worked at a software company, and the company conducted what they called “bug bounties”. The quality engineers who would find the largest number of bugs would get rewarded.
Well-intended as it was, the problem with incentives like these is that they are unintentionally setting the measure as the target.
As a leader, if you focus solely on achieving specific metrics or targets, you may unintentionally incentivize behaviors that optimize for those metrics at the expense of broader organizational goals. I call those “true goals”.
In the example of software bugs, the “true goal” of the organization was to improve the quality of the products. The number of defects logged was just a metric.
In the cobra example, the “true goal” of the government was to make the city safer for the citizens. The number of dead cobras was just a metric.
In the newspaper tax example, the “true goal” of the government was to reduce the circulation of content. The tax on every sheet of printed paper was just a metric.
In all these examples, we can see the impact of Goodhart’s Law in action.
Okay, now that we have a better appreciation and understanding of Goodhart’s Law, let’s turn our attention to making this law work for you in your role as a leader. How would you set goals and metrics to avoid the trap of Goodhart’s Law?
Doing this methodically will help you accelerate your journey to the true goals of your business.
Next, we will:
Discuss a simple two-step formula to “cobra-proof” your goals and metrics so you can always stay ahead of the law
Review common mistakes you should avoid while using this formula
Make it real: Put the power of this formula into practice with a downloadable worksheet, which includes step-by-step prompts to guide you through the application process
Review some complementary frameworks that work well with this formula
Review additional resources to further your understanding
Close out with some key takeaways
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