Jigar
@jogi47
Naval cover image

How to Get Rich: Every Episode

Naval

The Principal Agent Problem

2min Snip

00:00
Play full episode
The principal agent problem is a concept that arises in microeconomics where the incentives of the owner (principal) and the employee (agent) may be misaligned. The owner wants what is best for the business and to maximize profits, while the employee may prioritize personal gain or pleasing the owner. This problem is often observed in public companies with widely distributed ownership, where executives may engage in self-serving actions such as issuing low-priced stock options or conducting stock buybacks to boost their compensation tied to the stock price. Incentive design becomes critical in addressing this problem, as almost all human behavior can be explained by incentives. Understanding human behavior through actions rather than words is a key aspect of studying signaling and signals.

Get the Snipd
podcast app

Unlock the knowledge in podcasts with the podcast player of the future.
App store bannerPlay store banner

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Share
& Export

Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode