What's up everyone this is Alex Lieberman co-founder and executive chairman of morning brew welcome back to founders journal my personal audio diary where I give you the business builder the tools you need to think better in order to build better

whether that's building a business a team or a new product today I'm talking about the power of incentives let's hop into it.

As I've spent more time in and around business I have realized that few things are more important than incentives sounds boring but they're super important the right incentives can accelerate a business the wrong incentives can literally

think of business that is not an exaggeration and so what that means is one of the most underrated jobs of a business leader not just a CEO managers VPs senior VPs is to create a set of incentives across your team and your company that drives the right

behaviors intuitively this makes sense right all humans are self interested as much we don't want to believe it that is the case we all seek love we seek success safety connection validation and whatever gives us an opportunity to do that time has proven over and over that we will do even if it's at the detriment of a business or someone else

and because incentives are all around us I think the best way to show you their power is just to provide some really concrete and interesting examples of incentives gone wrong and some of incentives gone right

I want you to leave this episode with a renewed appreciation for the power of incentives as well as things you should think about as a leader when creating incentives for people on your team.

I'm going to tell six quick stories four stories about incentives gone wrong two stories about incentives gone right let's do it the first story I call the cobra effect.

So back in the day Britain was ruling India and the city of Delhi was infested with cobras and so what the government did about this cobra infestation was they enlisted the public to help out

and so what they basically said was we need to eradicate the snakes you the public if you bring cobra skins to us to prove that you have killed cobras will give you a bounty will pay you for it

and things started well citizens were killing off the snakes they were bringing the skins to the government people were getting paid

but then some enterprising citizens of Delhi created a cottage industry of cobra farming people were smart and they basically said hey the more cobras that we kill the more we get paid

so let's make as many cobras as humanly possible so we can get paid more people were literally breeding cobras for their skins

and so the British paid out more and more money but the cobra infestation did not obey and cobra farming only added to the problem what ended up happening was authorities finally got smart about this they realized the scam that was happening and they withdrew the bounty

and the farmers when they were no longer incentivized to kill the cobras ended up letting the cobras free they no longer kept them in captivity

ironically because of a perverse incentive they're ended up being more cobras on the streets of Delhi after the bounty program than before a similar thing happened in Vietnam in the early 1900s

so in 1902 in Hanoi basically Vietnam was under French colonial rule and colonial government created a similar bounty program where they paid a reward for each rat that was killed because there's a rat infestation similar to the cobra infestation

and to collect the bounty people would need to provide the tail of the rat again is proof similar to the cobra skin

well what ended up happening was government officials ended up seeing rats running around Hanoi with no tails

what was happening is Vietnamese rat catchers would capture rats they would cut off their tails they'd bring their tails in and they would release the rats back into the wild

so they could produce more have more supply to then cut more tails and turn them into the government

and there's a proverb that perfectly describes both of these stories that are so similar in many ways

...