The Principal-Agent Problem
+ hiking in remote O'ahu, better toothpaste, and films you missed
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The Principal-Agent Problem
The principal-agent problem is a concept from microeconomics that outlines the conflict in priorities between the principal (a founder) and the agent (an employee) who is responsible for helping run the venture a founder has started.
A principal separates control of the venture once they hire an agent. In most cases, the principal delegates a degree of control and the right to make decisions to the agent. But in almost all cases the principal still retains ownership of the venture and the liability of losses. This is the crux of the principal-agent problem: the incentives of the agent are usually not aligned with those of the principal, thus creating conflict generally through minimal effort and execution.
Understanding the principal-agent problem is important to an agent in order to succeed in any role and is the nexus of future success of the venture if you are a principal. Regardless of your place in the world, understanding this principle can help you succeed in all facets of life.
As an agent: you must begin to think, act, and execute like a principal. It is even more effective to align yourself with a great principal who will ensure you are empowered and promoted. This will eventually lead to more leverage within the venture that will ensure your path to success in the future.
As a principal: the goal is to (a) align incentives within your venture and (b) utilize heuristics that help you route around the principal-agent problem:
(a) If you are relying on employees, suppliers, other ventures, etc. - it is always important to make sure that the incentives are aligned in the same direction; if not, these relationships will fall apart. Humans tend to be more honest with their actions than with their words. The more ownership and incentive you can give individuals you work with, the more successful the venture will become, and the more likely it will be for the agent to do great work. As one of my mentors Francesco Cordua always says: "I pay for results, not effort."
(b) If you are seeking to create opportunities that negate the principal-agent problem, you must use heuristics designed to help mitigate these conflicts. The best example of this is to always work with small teams rather than with large firms. The larger the firm, the more separation there is between the principal and the agent. Even worse, most of the time even the principals in these large firms have no real ownership of the entity they are running (I.e any Fortune 500 company) and their incentives are usually more aligned with the market than their customers, product, and (even worse) their own agents. On top of that, utilizing large firms that farm out agents to do their bidding is the epitome of this conflict - they truly do not have any incentive for the work they are completing and will still receive their pay regardless of the outcome. This is why working with large consulting firms is always a terrible idea.
"If you can hack your way through the principal-agent problem, you’ll probably solve half of what it takes to run a company… If you think like the owner and you act like the owner, it’s only a matter of time until you become the owner." - NAVAL RAVIKANT
The Long Way Around
A brilliant piece of motion telling the story of a few adventurers as they embarked on a route traversing King’s Canyon and Sequoia National parks, considered one of the more difficult routes in the western US. One of the sponsors for the video, Mission Workshop, makes some of the best adventure bags on the planet.
David’s Natural Toothpaste
A staple of the modern routine, toothpaste (and its containers) truly have not innovated in the past few decades. David’s plans to change that with a toothpaste that is naturally sourced, great for your teeth, and comes in a fully recyclable container. It even comes with a nifty device to make sure every single drop is squeezed out of each tube. [$10\tube]
SEED
As more research is completed on the complexities of the gut microbiome, it is becoming increasingly more evident just how important gut health is for your immunity, skin, and general well-being. SEED has differentiated themselves by creating a daily symbiotic - a capsule with a pro- AND pre- biotic that is incredibly environmentally conscious. All containers, mailers, etc are 100% compostable or recyclable. [$50\month]
The Worm
Richard Danne, a rather unknown figure today, is responsible for plenty of very well-known graphic design that you’ve likely seen. Upon completing the NASA Style Guide in 1976 and subsequent launch of the famous Worm logo, this stunning piece of design has been adored by millions. In celebration of NASA bringing back The Worm, standards manual has made a book featuring the best utilizations of this design. [$64]
Oblivion
“To every man upon this earth, death cometh soon or late. And how can man die better, than facing fearful odds, for the ashes of his fathers, and the temples of his Gods.” Arguably one of the better films most have not seen, Oblivion takes place in year 2077 after the resulting war of an alien invasion destroys most of the habitable Earth. Before you potentially dismiss the chance to watch it, go ahead and watch the opening sequence and decide for yourself. I dare you stop watching.
Hiking in Remote O’ahu
A few weeks back I embarked on a multi-day hike through the remote western coastal mountains on the Hawaiian island of O’ahu.
The Kuaokala trail is a winding ridge trail that starts on the edge of an active naval base and slowly makes its way up the ridge until it tops out deep inside the Kuaokala Forest Preserve. A moderately intense hike with decent elevation gain, sun exposure, and slick volcanic mud combine to make it an interesting journey. You are constantly flanked by expansive and sweeping views on both sides of the ridge, occasionally catching glimpses of white sandy beaches.
We set up camp on top of this high point where two separate ridge lines convened just as the sun was beginning to set. From here we had a sweeping sunrise view of the pacific to the northeast, with a light breeze blowing in from the same direction. I raced to set up my tent then ran back out onto the trail, hoping to catch the final glimpses of what would surely be a glorious sunset.
In search of the perfect spot to watch the receding light of the day, I was stopped in my tracks by this fabulous view of the adjacent valley and the Pacific in the distance. It is remote views like these that push me deeper and deeper into the beautiful wilderness of the natural world around us. I spent the next 40 minutes standing here, watching every bit of light leave the sky.
Just before the sun kissed the horizon, it slipped into dense clouds in the distance, creating these magical rays of light protruding through. This was what I came here for. All of the sweat, prep, and logistics led to this magical moment. Moments like these we are reminded just how small we are in this natural world. Becoming one with nature is the only true path to understanding humanity as a whole.
Thank You for taking the time to read this monthly iteration of HOLOCENE. Consider becoming a member to receive weekly iterations just like this and get access to the entire archive, as well as our online community. Becoming a Founding Member will also give you free access to exclusive events and free yearly limited-edition merch.
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Have a wondrous and productive week!
RMA