

Why Wall Street Always Blows It, by Henry Blodget  - kicker
http://www.theatlantic.com/doc/200812/blodget-wall-street

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lsemel
The conflict-of-interest Blodget describes seems to be a central problem in
any situation where where one party is acting as an agent or performing
services for another party. In the case of the mortgage bubble, the interest
of the financial industry employees--to make the maximum short-term profit for
themselves and preserve their jobs--directly conflicts with the interests of
the investors whose funds they are managing. The same thing happens in
companies in other industries, where the short-term interests of the managers
to produce quarterly results conflicts with the long-term interests of
shareholders and the interests of their customers. This also happens on a
small-scale, when a small business owner or entrepreneur hires their first
employee, because the interest of an owner and a salaried worker are rarely
aligned. In these situations, everyone can be rationally pursuing their
personal self-interest based on the incentives presented to then, but it
ultimately leads to a worse outcome for everyone involved. I wonder if there
are any ways to work around these situations, whether they occur in a small
business, a large enterprise, or the economy as a whole.

