Principal-Agent Problem

Julius Caesar famously said, “If you want it done, then go. And if not, then send.” What he meant was, if you want it done right, then you have to go yourself and do it. When you are the principal, then you are the owner—you care, and you will do a great job. When you are the agent and you are doing it on somebody else’s behalf, you can do a bad job. You just don’t care.

The smaller the team, the more everyone feels like a principal. The less you feel like an agent, the better the job you’re going to do. The more closely you can tie someone’s compensation to the exact value they’re creating, the more you turn them into a principal, and the less you turn them into an agent. Unfortunately the media and modern society spend a lot of time brainwashing you about needing an agent, an agent being important, and the agent being knowledgeable.