A big component of the principal agent problem is a timeline mismatch.

· Bits and Bobs 11/24/25
  • A big component of the principal agent problem is a timeline mismatch.
    • If you have a principal agent problem: people who are not on board for the long term will choose the minor short term benefit at catastrophic long term cost.
      • Especially if they're incentivized heavily to make that short-term number go up.
    • Imagine a world where you were locked to a specific collective, for live, with no possibility for exit.
      • What's good for the collective is what's good for you… at least, much more than if you only expected to be part of it for some limited period of time.
    • We only care about things on the time horizon we expect to be involved.
    • Renter mindset vs owner mindset.
    • The reason no country allows tourists to vote is because if you had only short-term users voting, the country would be destroyed.
      • "Empty social security and split it equally among whoever is in the country right now" and then leave the next week.
    • So why doesn't that happen to public companies, which have a large number of "tourist" shareholders?
    • The reason everything isn't destroyed immediately in practice is because there's a mix of short- and long-term interest.
      • Those naturally overlap each other.
    • Imagine that every single shareholder was expecting to hold the stock for precisely three months and then sell it and never hold it again.
      • The shareholders would vote to plunder all the resources.
      • The decision would be catastrophic.

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