In this episode, Jared moves from incentives to the broader concept of alignment of interest.

Incentives create movement, but alignment determines whether that movement ultimately leads people toward the same beneficial future. Alignment does not require people to want the same things. In fact, different preferences often make mutually beneficial exchange possible. Parents and children, employers and employees, businesses and customers, spouses, advisors and clients can all want different things while still being strongly aligned.

The challenge is that incentives that work in the short term can create long-term misalignment. Grades can replace learning. Profit can become disconnected from customer value. Compensation can reward growth or activity without rewarding lasting success.

Jared argues that ownership and skin in the game are among the strongest tools for creating alignment because they connect decisions to consequences, costs to mistakes, and rewards to success. He applies this idea to company management, financial advisors, his own career, and broader life decisions.

True alignment must also include downside. We cannot expect to fully participate in upside while escaping the consequences of poor decisions. Costs, risks, and failures are part of the same system that makes meaningful returns possible.

The episode closes with three questions for diagnosing alignment: What future am I trying to build? What incentives are shaping my behavior? And are those incentives actually aligned with that future?

Detailed Sequential Outline

I. From Incentives to Alignment

• (0:16) A Thank You to Listeners: Jared opens by thanking listeners for listening, sharing the podcast, sending feedback, and helping it grow. He promises to continue putting in the reps required to keep the podcast aligned with its mission of helping people invest better in the areas of life they care about.
• (1:32) Incentives Are Not the Whole Story: The previous episodes established that incentives strongly shape behavior and can help us predict outcomes. But that can make incentives sound too simple, as though one properly designed reward will move everyone in the same direction.
• (3:04) People Want Different Things: Different people have different preferences, desires, rewards, and consequences. The same incentive can attract one person and repel another.

II. Alignment Does Not Mean Wanting the Same Thing

• (3:40) Vegetables and Dessert: Jared uses the simple example of parents trying to get a child to eat vegetables. The parent wants the vegetables eaten; the child wants dessert. Their desires differ, but an incentive can create alignment where both get something they want.
• (4:49) Different Routes, Same Beneficial Outcome: Alignment does not require identical preferences. People can want very different things and still structure those differences into mutually beneficial exchange.
• (5:29) That Is Business: Business works because one person values a product or service more than the money required to buy it, while the business values the money more than retaining that specific product or service.
• (6:27) Difference Makes Alignment Possible: Marriage and employment work similarly. Spouses do not want identical things from one another. Employees primarily want compensation and opportunity; employers want output, problem-solving, and value creation. Different incentives can still point toward mutual benefit.
• (8:32) True Alignment Goes Beyond the Transaction: A business is truly aligned with its customer when the customer is better off because of the purchase and the business earns a profit by serving that customer well.

III. Incentives Create Movement; Alignment Determines Direction

• (8:45) The Central Distinction: Incentives create movement. Alignment determines where that movement leads when multiple people are involved.
• (10:05) Short-Term Incentive, Long-Term Misalignment: Incentives are often immediate, while alignment becomes clearer over time. A reward may produce the desired behavior today while creating a worse outcome later.
• (10:25) Wells Fargo and Sears Revisited: Bank employees rewarded for opening accounts and mechanics rewarded for finding repairs responded to the incentives they were given, but those incentives eventually became misaligned with customers, employees, and the companies themselves.
• (11:02) Grades Can Replace Learning: Grades can motivate students to study, but they can also become the target themselves. Students optimize for GPA and teachers teach toward the test rather than toward understanding.
• (11:35) Profit Can Also Become Misaligned: Profit is a powerful and usually useful incentive, but it becomes destructive when the path to profit is disconnected from customer value and solving real problems.
• (11:58) A Strong Incentive Is Not Necessarily a Good One: The key question is whether the rewarded behavior serves the intended long-term outcome for everyone involved.

IV. Ownership Creates Alignment

• (12:32) Ownership as a Foundation: Jared connects alignment back to the wealthy mindset: long time horizon, abundance, and ownership. Ownership changes behavior because owners participate in the future outcome.
• (12:52) The Fixer-Upper: Friends of Jared bought a historic home that had previously been a rental and spent years improving it. Their comment—“It used to be a rental”—immediately explained much about its previous condition.
• (13:44) Owner Versus Renter Mentality: Owners benefit from maintenance and improvements and bear the cost of neglect. Renters can still care deeply, but they do not participate in the long-term value in the same way.
• (14:53) Equity Changes Employee Incentives: Companies often use stock or options to turn employees into owners. Equity gives workers exposure not only to their paycheck but also to the long-term value they help create.
• (15:51) We Value What We Invest In: Ownership works partly because investment changes what we care about. We do not only invest in what we value; we come to value what we have invested in.

V. Skin in the Game

• (16:09) Connecting Decisions and Consequences: Jared describes skin in the game as one of the strongest forms of alignment. It connects action and result, upside and downside, incentives and responsibility.
• (16:09) More Than Money: Skin in the game can include reputation, credibility, track record, time, energy, emotional investment, and years of commitment.
• (17:45) Long-Term Employees Become Invested: Someone who spends decades building a company can remain deeply connected to its success long after retirement because of how much of themselves they invested in it.

VI. Alignment in Company Investing

• (18:05) Management Should Own the Outcome: As a portfolio manager, Jared looks closely at whether company leaders are aligned with shareholders. He prefers management teams with meaningful personal ownership in the companies they run.
• (18:05) Owner-Led Companies: Founder-led companies often naturally provide this alignment, but the broader principle is owner-led. The leader should have substantial personal capital tied to the company’s long-term success.
• (20:19) Compensation Can Create Misalignment: Executives paid mainly for company size, revenue growth, headcount, short-term stock performance, or quickly vesting bonuses may be rewarded for building an empire rather than creating lasting shareholder value.
• (20:40) Pay for Long-Term Value Creation: Jared prefers structures where management benefits from the same long-term outcomes that benefit shareholders.

VII. How to Evaluate a Financial Advisor

• (21:05) Alignment Comes First: When Jared helps people who need a financial advisor, his most important screening question is whether the advisor is aligned with the client.
• (22:37) Question One: What Do They Own?: After accounting for differences in age, time horizon, and volatility tolerance, does the advisor personally own substantially the same investments they recommend to clients?
• (22:37) Would They Buy It Themselves?: If an investment is good enough for the client, Jared argues that the advisor should generally be willing to invest their own money alongside them.
• (24:36) Question Two: How Do They Get Paid?: A well-aligned advisor should benefit when the client’s portfolio grows and earn less when it shrinks.
• (24:36) Commission-Based Misalignment: Compensation based primarily on transactions, product sales, proprietary investments, or insurance creates incentives that can conflict with the client’s long-term interests.
• (25:48) Two Simple Tests: Do they own what you own? And do they make more money when you succeed? Those two questions can reveal a great deal about alignment.

VIII. Jared’s Search for Alignment in His Own Career

• (27:17) An Extraordinary First Opportunity: After graduate school, Jared joined an investment firm that gave him far more responsibility than his experience would normally justify. The challenge accelerated his learning and became foundational to his career.
• (29:31) Heavy Investment: Jared treated the job as though it might be his lifelong career. He invested heavily in work and education, often putting in 80–100-hour weeks while Alecia carried much of the family load with two young children.
• (30:14) The Missing Piece Was Alignment: Despite loving the opportunity and the people, Jared wanted his pay and responsibility tied more directly to his investment performance.
• (30:14) “Pay Me for My Production”: He asked to earn more when he performed well and less when he performed poorly, with more measurable responsibility attached to the outcome.
• (31:56) An Impasse: His supervisor told him he did not really want to bear both the credit and blame. Jared disagreed. When that alignment could not be achieved, he realized he would probably need to go elsewhere.
• (31:56) A Difficult but Valuable Move: An opportunity arose in another state where his success could be directly tied to client success. Moving meant uprooting the family and leaving deep community roots, but Jared and Alecia chose the long-term alignment.
• (32:56) Ten Years Later: Jared now owns the same companies his clients own and benefits when they benefit. The career move created the long-term ownership and alignment he had been seeking.

IX. True Alignment Includes Downside

• (34:42) You Cannot Separate Risk and Reward: Alignment has to work in both directions. Real upside requires the possibility of real downside.
• (34:42) Costs Teach: Attempts to remove the consequences of failure also weaken the connection between investment and return. Success loses meaning when reward is disconnected from contribution.
• (34:42) Bailing Out Poor Investments: Parents who repeatedly shield children from consequences can train them to continue making bad decisions. Similar problems appear when people expect medicine to erase decades of poor health investments or relationships to survive repeated problems that are never addressed.
• (37:52) Downside Makes Upside Possible: Jared argues that bearing real costs is not something to eliminate. Investments in money, fitness, leadership, career, and relationships all carry risk and sacrifice, but those costs give access to much larger returns.
• (37:52) The Asymmetric Return Profile of Life: In a well-invested life, the potential benefits can far outweigh the costs. That abundance-driven asymmetry makes accepting downside worthwhile.

X. Diagnosing Alignment

• (41:59) Alignment Is Not Sameness: People can have different values, preferences, jobs, costs, and rewards while still being aligned around a mutually beneficial future.
• (42:58) What Alignment Looks Like: Managers benefit when shareholders benefit. Companies profit by serving customers. Employees earn more by creating more value. Advisors invest alongside clients. Spouses pull in the same direction despite different preferences. Parents structure incentives toward their children’s long-term development.
• (43:36) Three Questions: Jared asks listeners to choose one important area of life and ask:
  • What future am I trying to build?
  • What incentives are shaping my behavior?
  • Are those incentives actually aligned with the future I say I want?
• (43:36) Change the Trajectory: One changed incentive may change an entire future path. Incentives influence behavior; alignment determines whether those behaviors ultimately build toward the same destination.