The Absent Landlord

A landowner lived in the city and hired a manager to run his farm. The manager’s job was to maximize the harvest.

But the manager was paid a flat salary. A record harvest earned him nothing extra. A poor harvest cost him nothing. So the manager did what was comfortable, not what was optimal. He avoided risky but rewarding crops. He skipped the exhausting pre-dawn inspections.

The landowner visited once a year and saw a decent farm, never knowing what a great one would have looked like.

The manager wasn’t lazy by nature. The pay structure had made diligence irrational. The interests of owner and manager pointed in different directions, and neither could see what the other saw.