Incentives
nicole and
Incentives
Building something no one else can measure
sriramk.com
It is difficult to get a man to understand something, when his salary depends on his not understanding it.
– Upton Sinclair
The rabbit runs faster than the fox, because the rabbit is running for his life while the fox is only running for his dinner
Richard Dawkins • The Selfish Gene
One thing I didn’t realize until later in life is how the incentives of an industry shape your mood, your outlook, and even your character. In early stage investing, the incentives reward optimists, so it literally pays to keep an optimistic outlook. In journalism, the opposite is true. In law, the incentives often reward finding the flaw or the... See more
Katherine Boylex.com
You hire a contractor to fix your house, his incentive is to waste your money while yours isn't. You hire a financial advisor, her incentive is to get more fees. You get an investment advisor, they also want to get fees, plus a cut of the profits.
This is the principal agent problem, where the agent knows how to do something and often knows more, and you have to figure out how to trust them. Often, the biggest worry is getting ripped off, because the agents don’t mind if you lose your money or if you lose your floorboards, as the way they get paid is weighted towards the upside. The agents have a floor in terms of downside exposure, while principals like you want to be more prudent with money.
Incentives are everything.
“nobody ever got fired for buying IBM.”