All thinkers

Michael C. Jensen: 2 ideas worth knowing

2 ideas from Michael C. Jensen, each explained in a minute and credited to the original work. Free on Savvy.

• The person you hire to act for you doesn't have your exact incentives

  Whenever one party (the principal) delegates decisions to another (the agent) — a shareholder and a CEO, a patient and a surgeon — their interests rarely align perfectly, and the a…

  — Michael C. Jensen & William H. Meckling, Theory of Agency

• Hiring someone to act in your interest doesn't guarantee they actually will

  Whenever a principal hires an agent to act on their behalf — shareholders hiring a CEO, patients trusting a doctor — their interests rarely line up perfectly, and the principal can…

  — Michael C. Jensen, William H. Meckling, Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure

Five ideas worth knowing, every week

The week's best cards and a puzzle, credited as always. Free, unsubscribe any time.

Subscribe