Managers vs Owners

Within the world of Commanders, there are two distinct roles they can inhabit:

  • Managers, who do not own the pool but do have a significant amount of control over it.

  • Owners, who do own the pool and often hire Managers.

As Commanders, both of these roles dictate a more cautious approach that emphasizes the preservation of the pool above all else. However, there are divergent agendas and strategies used by each to maximize their own benefit.


Managers operate within the parameters set by the pool's owners. They don't possess ownership but have substantial control and responsibility over the pool's direction and utilization. Their expertise lies in optimizing and expanding the pool's assets, often under the watchful eye of the actual owners or stakeholders.

They wield authority but are also accountable to the owners and stakeholders. Their decisions must align with the broader goals and strategies set by the owners, with some occasional wiggle room given to exceptional, trusted managers.

Success for a Manager is dependent on performance metrics. Managers are often evaluated based on their ability to grow, diversify, and protect the pool's assets, and if they fail to do any of those things to a given standard they may be removed.

An example of a Manager in this context is a Chief Investment Officer for a hedge fund. Their job is to manage the portfolio in a way that aligns with the strategy and risk appetite of the Owners, and their performance is watched closely. Although they may have a small amount of their own capital committed to the pool, they are largely managing the capital of Owners for their benefit.

Most Contenders put themselves on the path to be a Manager-Commander rather than make a straight-line towards Owner-Commander. It's a simpler path with obvious steps: get a degree, work on Wall Street, etc. Their goal is to be a Manager long enough to accumulate their own pool, and then make the switch to Owner once they hit a certain threshold of capital.


Owners are the architects of the resource pool, by building, buying or seizing it. Their absolute control provides them with a broader scope of decision-making power. Strategic direction for the pool is set by the Owners and they may delegate the day-to-day management to skilled Managers, even though there are some Owners who insist on managing the pool themselves.

Their dominant position in relation to the pool means they bear the brunt of the risks but also reap the largest rewards. Their investment is not just financial but often personal, tied to their legacy and reputation.

Examples of Owners in the finance world are wealthy individuals and family offices. These represents large pools of capital that are directly owned and controlled by a person or a small group of people. Their stake is connected to their net worth, and they often (but not always) hire Managers to grow and protect their wealth.

The Principal-Agent Problem

All of this is a way to create a more specific taxonomy around an ancient dilemma: the principal-agent problem. Principals (Owners) have the most at stake and want the agents (Managers) they hire to act in alignment with their goals. Agents want to maximize their own benefit while minimizing their efforts.

Anyone who has ever hired people is familiar with this problem, even if they don't know the specific term for it. You want to pay someone to do something to the best of their abilities, and they often want to charge as much as they can for as little work as possible. The best employees don't play this game, or at least don't do it in a flagrant enough way to get caught. Yet the world is filled with agents who know how to talk a big game and then deliver very little once the money's in their bank account.

What makes this particular case interesting is that, unlike an employee who just wants to pay their bills and live a comfortable existence without much effort, most Managers are educated, credentialed professionals. They've passed through many filters in order to reach their positions—yet they often act like the low-level slacker employee once they reach a Manager position. Furthermore, Managers in this context are capable of doing serious damage.

In finance, for example, most Managers don't have substantial amounts of personal exposure to the investments they make. They're paid on performance and assets under management in most cases, so their incentive is to swing for the fences. A big win, even if it was a dangerous bet, means happy Owners and big payday. A big enough loss means the Principals may be ruined, but at most the Manager gets fired and deals with a lawsuit (unless they committed a crime, which is a different story altogether).

A common complaint from the world of private equity is what's known as strategy drift, where Managers stray from the strategy they sold their limited partners (aka LPs, the Owners in the PE context) after they invest. For example, a Manager may tell an LP they want to allocate their funds into mature, cash-flowing assets, then swing towards unproven startups in a trendy category. This is a difficult problem to deal with after their capital is already committed, as the LP's money is essentially held hostage.

An ambitious Manager may also try to usurp the Owner if given an opportunity. They may work to develop the trust of the Owner and gain a level of access that allows them to take over, at which point the Owner gets blindsided. The Manager thus becomes the Owner, which is itself not an uncommon ambition.

Owners have no choice but to stay vigilant and monitor their Managers every step of the way. It's a difficult, dangerous game to play, but any Owner who ignores it will find themselves in peril before too long.

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