Snakes & Rewards
Cobras & consequences
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Separate yourself from those who try to pull you down
The real ones never stray, it's sort of like Medusa (Yeah)
That's how you stay ahead of snakes (Woo)
- ‘The adventures of Moon Man & Slim Shady’ by Kid Cudi and Eminem
I had to do ‘virtual’ parent teacher meetings this week for two of my kids (aged 7 & 9).
I find these things generally quite bland as, unless they are highlighting a massive problem area, there is not a huge amount of value from them.
That is not a criticism of the teacher, as they are responsible for trying to manage a class of 25 young children, so I know how challenging that can be.
They did mention one or two areas to focus on for improvement such as handwriting, etc.
This created a new problem…how to get the kids to do extra work at home without it being a battle, whilst also having both parents working from home full time.
(I say a new problem but its really just a different version of a common problem…how to get the kids to do anything at home while I am working!)
As any parent knows, bribery is often the easiest solution when dealing with kids but is not a long term solution.
This made me think of the Cobra Effect.
For anyone not familiar with the term, the cobra effect occurs when incentives designed to solve a problem end up rewarding people for making it worse.
The term is used to illustrate how incorrect stimulation in economics and politics can cause unintended consequences.
The interesting thing about this particular term is that it originated from an occurrence during India under British rule.
The British government was concerned about the number of venomous cobras in Delhi. The government decided to offer a bounty for every dead cobra.
Initially, this was a successful strategy and resulted in large numbers of snakes being killed for the reward.
Eventually, however, enterprising people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped.
When cobra breeders set their now-worthless snakes free, the cobra population further increased to levels far beyond what had initially been identified as a concerning level.
Why Should You Care?
Incentives and unintended consequences can be a real issue when starting and scaling a company.
I saw it firsthand at Future Finance, where the focus was on continued growth in number of loans approved every month.
The incentives on the sales side were misaligned with the responsibilities of the underwriting team and often lead to tension between departments.
It sometimes led to situations where teams were trying to get one over on each other.
To resolve these situations, we made some key changes to ensure everyone was aware of their roles and were aligned.
One of the key changes was to have regular ‘Day in the Life’ style sessions where individuals from different teams spent time in other departments understanding the different roles and how all departments interacted in the wider scheme of the business.
So what can you do?
Ensure everyone knows their particular roles and responsibilities.
But also ensure that your team understand the responsibilities of the roles/departments where they have regular engagement.
This needs to be at a micro level and not just at senior management level.
It builds a better understanding of how all pieces fit together and how everyone is working together for the greater good of the company.
It should build a greater sense of togetherness across the company, especially at an early stage.
And remember, watch for the snake breeders!
Tell me why I’m wrong…
- Eoin
Left Field
How do I describe ‘Left Field’? It’s a place to put the content (newsletters/articles, etc) that we have amassed over recent weeks or previous years that really make us think or change our thinking on a particular topic. All the content will offer an alternative view of some topic in financial services, technology or sport (or a combination of all three!)
The Munger Operating System: How to Live a Life That Really Works
This fascinating post from the Farnam Street blog is based on a commencement speech given by Charlie Munger. Munger is best known as the right hand man of Warren Buffett at Berkshire Hathaway but also trained as a meteorologist during World War II and as a lawyer at Harvard before devoting himself to business.
Munger draws heavily from the study of psychology, economics, physics, biology, and history, among other disciplines, in developing his system of “multiple mental models” to cut through difficult problems in complex social systems.
Anyway, I won’t give away too much. Enjoy the article and feel free to get in touch to discuss more!
- Eoin
Can’t Sleep?
MoneyNeverSleeps podcast episode from this week:
Episode 114: Changes | Mick Sweeney on Markets, Society, Leadership and Digital
Mick Sweeney, CEO of PineBridge Investments in Ireland, joins the show to talk about what triggered his early interest in the financial markets, the nascent opportunity to transform the fund management industry in Ireland, the outcome of his long-term commitment to diversity, thoughts on post-pandemic global markets, societal changes driving new leadership styles…and his labour of love as a Leeds United supporter!
Book Recommendation: Highly recommend checking out ‘Sex On The Moon’ by Ben Mezrich. Its the remarkable true story of how a group of NASA interns broke into an impenetrable laboratory at NASA's headquarters and stole the most precious objects in the world: Apollo moon rocks from every moon landing in history.
Newsletter/Blog Recommendation: I highly recommend ‘Turner’s Blog’ by Turner Novak. Turner shares his thoughts on business and technology from his perspective as a venture capitalist. It is a fascinating insight into companies and markets.
This newsletter has been written by Eoin Fitzgerald and Pete Townsend
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