The agency problem

An agent is someone who works on behalf of a principal. For example, a director in a company works on behalf of the shareholders. An employee works on behalf of the employer. A politician works on behalf of the public.

An agent is expected to work in the best interests of the principal. In return, the agent is entitled to some kind of benefit. The agent should avoid any conflicts of interest in his dealings. He should also not betray the trust of his principal.

The problem is our society is a low trust environment. It’s very difficult to find trustworthy people to deal with. For example, my plumber has been lying to me the whole week that he will come to fix a leaking sink at home. Eventually, I got someone else.

The huge unemployment problem is largely an agency problem. There are people with money who are unwilling to invest it in an unemployed graduate simply because they don’t trust them. I have a colleague who shut down his business because the manager was stealing from him. My wife shut down a bakery and bridal business because the agents were not up to the task. She recently pondered starting a beauty business but couldn’t find a good agent to run the business.

I have employed countless young men to manage a small garden at home but they all failed to do the job. When I launched a bigger agricultural project I got someone else.

In a low trust environment being a person of character is a great asset. Character assets can get you many principals to work with. This is how you change your fortunes. There are many principals looking for worthwhile agents.

Having character means doing what you say. It means keeping your word. It means being a person of integrity. It means exercising reasonable care and diligence in your work. It means working in the best interest of the principal.

If you find yourself struggling with money it may imply that you have an agency problem. This means there are very few people in this world who are willing to work with you. This sounds harsh but it’s the reality. So do some introspection and figure out how to become a better agent.

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