Part III: Work Principles (i)

For any group or organization to function well, its work principles must be aligned with its members’ life principles

It pays for all organizations to spell out their principles and values clearly and explicitly and to operate by them consistently

An organization is a machine consisting of two major parts: culture and people. Nothing is more important than to get the culture and the people right

A great organization has both great people and a great culture
Great people have both great character and great capabilities

A manager’s ability to recognize when outcomes are inconsistent with goals and then modify designs and assemble people to rectify them makes all the difference in the world

“Looping”: process of converting problems into progress
Having clear processes for resolving disagreements efficiently and clearly is essential

Meaningful work and meaningful relationships

Being part of a great community on a shared mission is even more rewarding than money

“[Bridgewater is about] working like hell to achieve a standard that is extraordinarily high, and then getting the satisfaction that comes along with that sort of super-achievement. Our objective is constant improvement. Money is a byproduct of excellence, not a goal. Team spirit is essential” (Ray Dalio, memo 1996)

Idea meritocracy

Idea Meritocracy = Radical Truth + Radical Transparency + Believability-Weighted Decision Making

When people can’t be totally open, they can’t be themselves
Be radically honest and transparent with each other, have thoughtful disagreements, and have idea-meritocratic ways of getting past disagreements to make decisions –> excellent work and excellent relationships
Independent thinking: thinking for yourself and challenging each other’s ideas
Work is either 1) a job you do to earn the money to pay for the life you want to have, or 2) what you do to achieve your mission, or some mix of the two. I urge you to make it as much 2) as possible, recognizing the value of 1)
You have to work in a culture that suits you. That’s fundamental to your happiness and your effectiveness. You also must work in a culture that is effective in producing great outcomes

Culture that fosters meaningful relationships –> radical truth and transparency that allow us to hold each other accountable for producing excellence

1. Trust in radical truth and radical transparency

Being radically truthful and transparent ensures that important issues are apparent instead of hidden, and is fundamental to having a real idea meritocracy

Operate truthfully and transparently, so that people know what’s really going on. It’s a real asset that people know they can trust what we say
You have nothing to fear from knowing the truth

Having integrity and avoiding duality

Aligning what you say, think and feel will make you much happier and much more successful
Having nothing to hide relieves stress and builds trust
Never badmouth people behind their backs
Judging one person by a different set of rules than another is an insidious form of corruption that undermines the meritocracy

Radical transparency forces issues to the surface and it allows the organization to draw on the talents and insights of all its members to solve them
When weighing an exception, approach it as an expected value calculation, taking into consideration the second- and third-order consequences
Meaningful relationships and meaningful work are mutually reinforcing, especially when supported by radical truth and radical transparency

The most meaningful relationships are achieved when you and others can speak openly to each other about everything that’s important, learn together, and understand the need to hold each other accountable to be as excellent as you can be

You have to work in a culture that suits you. That’s fundamental to your happiness and your effectiveness. You also must work in a culture that is effective in producing great outcomes.

2. Cultivate meaningful work and meaningful relationships

Meaningful relationships are invaluable for building and sustaining a culture of excellence: they create the trust and support that people need to push each other to do great things
Relationships have to be genuine
Be loyal to the common mission and not to anyone who is not operating consistently with it
How do people approach their work – are they working just for their paycheck or are they looking for something more?

I choose to live out my values around excellence, meaningful work, and meaningful relationships

People in high-quality, long-term relationships behave with a high level of mutual consideration for each other’s interests

3. Create a culture in which it is ok to make mistakes and unacceptable not to learn from them

Creating an environment in which it is okay to safely make mistakes so that people can learn from them – okay to make mistakes and unacceptable not to learn from them
Mistakes are a natural part of the evolutionary process

If you don’t mind being wrong on the way to being right, you’ll learn a lot and increase your effectiveness
Willingness to repeatedly fail

Mistakes are like those little puzzles that, when you solve them, give you a gem. Every mistake that you make and learn from will save you from thousands of similar mistakes in the future
Parents and schools overemphasize the value of having the right answers all the time. Children have been conditioned to associate mistakes with failure instead of opportunity

Major impediment to their progress
Intelligent people who embrace their mistakes and weaknesses substantially outperform their peers who have the same abilities but bigger ego barriers

Difference between 1) capable people who made mistakes and are self-reflective and open to learning from them, and 2) incapable people, or capable people who can’t embrace their mistakes and learn from them
Everyone fails. Anyone you see succeeding is only succeeding at the things you’re paying attention to
Reflect when you experience pain: Pain + Reflection = Progress
Reinforce the merits of mistake-based learning –> “issue log”

4. Get and stay in sync

Attain alignment
Open discussion of differences ensures that there are no misunderstandings. By avoiding conflicts one avoids resolving differences
Spend lavishly on the time and energy you devote to getting in sync, because it’s the best investment you can make
Knowing how to move from disagreement to decision making
Being effective at thoughtful disagreement requires one to be open-minded (seeing things through the other’s eyes) and assertive (communicating clearly how things look through your eyes)

Most people have problems being assertive and open-minded at the same time
Being open-minded is much more important than being bright or smart

Start by assuming you’re either not communicating or listening well instead of blaming the other party. Learn from your miscommunications
Never let your “lower-level you” gain control
If you find you can’t get in sync with someone on shared values, you should consider whether that person is worth keeping in your life

5. Believability weight your decision making

The best decisions are made by an idea meritocracy with believability-weighted decision making:

Weight the opinions of more capable decision makers more heavily than those of less capable decision makers
The most believable opinions are those of people who 1) have repeatedly and successfully accomplished the thing in question, and 2) have demonstrated that they can logically explain the cause-effect relationships behind their conclusions

All views should be considered in an open-minded way, though placed in the proper context of the experiences and track records of the people expressing them

It would be harmful and plain silly to treat their points of view equally because they have different levels of believability

The quality of the life you get will depend largely on the quality of the decisions that you make as you pursue your goals –> know how to triangulate with other, more knowledgeable people
Don’t pay as much attention to people’s conclusions as to the reasoning that led them to their conclusions. Explore reasoning
Relative believability:

If you are less believable, you are more of a student and should be more open-minded, primarily asking questions to understand the logic of the person who probably knows more
If you’re more believable, your role is more of a teacher, primarily conveying your understanding and answering questions
If you are approximate peers, you should have a thoughtful exchange as equals

–> student to be open-minded first; once the student has taken in what the teacher has to offer, both student and teacher will be better prepared to untangle and explore the student’s perspective
Understand how people came by their opinions. Any opinion you have is made up of two things: the data and your processing or reasoning. Ask: what data are you looking at? what reasoning are you using to draw your conclusion?
Over time, a body of evidence builds up, showing which people can be relied on and which cannot. Every day is not a new day: track records matter
It’s more important to do big things well than to do the small things perfectly
Don’t hold opinions about things you don’t know anything about

6. Recognize how to get beyond disagreements

Don’t let important conflicts unresolved
Don’t let the little things divide you when your agreement on the big things should bind you – narcissism of small differences
Understand that nobody and nothing is perfect and that you are lucky to have by-and-large excellent relationships
See things from the higher level. Look down on yourself and others as part of a system

7. The who is more important than the what

Knowing what is required to do the job well and what your people are like
My goal is to create a machine that works so well that I can just sit back and watch beauty happen
1. Give the goal to people who can achieve it; 2. Hold them accountable; 3. If they still can’t do the job after you’ve trained them and given them time to learn, get rid of them
When putting someone in a position of responsibility, make sure their incentives are aligned with their responsibilities and they experience the consequences of the outcomes they produce

Basado en Principles. Ray Dalio. Editorial Simon & Schuster (2017)