yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

Principal-Agent Problem: Act Like an Owner


2m read
·Nov 3, 2024

We spoke earlier about picking a business model that has leverage from scale economies, network effects, zero marginal cost of replication. But there were a few other ideas on the cutting room floor that I want to go through with you.

The first one was the principal-agent problem. So, mental models are all the rage. Everyone's trying to become smarter by adopting mental models. I think mental models are interesting, but I don't think explicitly in terms of a mental model checklist. I know Charlie Munger does, but that's just not how I think. Instead, I tend to focus on the few lessons that I've learned in life over and over that I think are incredibly important and seem to apply almost universally.

One that keeps coming up from microeconomics, because as we've established, macroeconomics is not really worth spending time on, is what's called the principal-agent problem. Principal in this case is principal with the "P" al, not "ple." So, it's not a principal that you follow; it's a principal who is a person who is an owner. A principal is an owner, and an agent is the person who works for the owner. So, if you can think of it as an employee, the difference being a founder and an employee.

I can summarize this by a famous quote that either was said by Napoleon or by Julius Caesar. It's generally attributed to either one, but he said, "If you want it done, then go; if not, then send," which is basically saying if you want to do something right, do it yourself, because other people just don't care enough.

Now, the principal-agent problem pops up everywhere in microeconomics. The way that they try to characterize it is that the principal's

More Articles

View All
Nietzsche - How to Become Who You Are
For Nietzsche, becoming who you are leads to greatness. And in Ecce Homo, he wrote, “[that] one becomes what one is presupposes that one does not have the remotest idea what one is.” The question of how you become what you are begins with the idea that yo…
Tremor Relief at Last | Brain Surgery Live
Yeah, as FGO, all right, we’re gonna, we’re gonna, we’re gonna, we’re gonna turn the thing on for the first time. You ready, dude? They’re on. Okay, let’s turn it off. Okay, let’s get you back. Where’s your ice? Okay, tell me the months here backwards, s…
Jeremy Grantham: What's Coming is WORSE Than a Recession
Do you think we’re in a major bubble now at right now in the United States? And do you think that the tech bubble has burst sufficiently so that the tech bubble burst is over? Throughout his over 50-year career, billionaire investor Jeremy Grantham has d…
Generating Wind Power | Live Free or Die
We got a whole slew of scrap line around our property, and we happen to have a treadmill that we could probably salvage the motor from and, uh, use it for a generator. Whoa, crazy! That was nuts! That was easy! What are you doing? I’m taking this thing a…
Computing the partial derivative of a vector-valued function
Hello everyone. It’s what I’d like to do here, and in the following few videos, is talk about how you take the partial derivative of vector-valued functions. So the kind of thing I have in mind there will be a function with a multiple variable input. So …
Ask me anything with Sal Khan: April 16 | Homeroom with Sal
Hi everyone! Sal Khan here from Khan Academy. Welcome to our daily homeroom livestream. The whole goal of this is for all of us to stay connected during times of school closures. Depending on the day, this is a time for all of y’all to ask questions of my…