Why Wall Street Always Blows It, by Henry Blodget

http://www.theatlantic.com/doc/200812/blodget-wall-street

by kicker • 18 years ago

5 1 18 years ago

lsemel• 18 years ago

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.

Why Wall Street Always Blows It, by Henry Blodget

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