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The Principles of Ray Dalio, The Founder of investment firm Bridgewater

According to a recent ranking by LCH Investments, Ray Dalio is the most successful hedge fund manager of all time Mr. Dalio, who runs Bridgewater Associates rendering to a passionate, and unfamiliar management philosophy, that principle “radical transparency.” The firm is headquartered in an isolated Westport, Connecticut where all meetings, interviews, and interviews are recorded and listed. Ray stresses that no employee should suppress criticisms from each other, and encourages anyone to call out anybody including him. Employees keep track of these criticisms in a patented app called “Pain Button” that they have on their company iPads. According to few new media reports, Dalio and co-CEO Greg Jensen are currently not too keen on each other after Dalio alleged Jensen of lacking “integrity,” which in the company means a dedication to keeping all criticism public within the company. Dalio is asking management and stakeholder committees if they agree with his valuation that all recordings of Jensen at meetings disclose tensions he has with Dalio which Jensen couldn’t find a heart to be open about and confront Dalio. Every employee of Bridgewater Associates has a copy of Dalio’s comprehensive management guide, “Principles,” which contains 210 modules. The 2011 edition has been available on Bridgewater’s site for a few years and has been downloaded more than two million times, according to sources.

Here you can find 25 of the most characteristic principles Place the utmost importance on truth “Create an environment in which everyone has the right to understand what makes sense and no one has the right to hold a critical opinion without speaking up about it,” Dalio writes. Dalio is a firm believer that even though the truth can be petrifying (for instance, when your boss points out one of your blemishes), it’s what is required for the best performance. Dalio has even fired employees for gossiping behind a coworker’s back. “If you talk behind people’s backs at Bridgewater you are called a slimy weasel,” Dalio says.

Teach your team that it’s okay to fail if it results in learning something. Dalio believes that managers need to anticipate mistakes from both their employees and themselves. And analysis of those mistakes should be swift and as unproblematic as possible. “Create an environment in which people understand that remarks such as ‘You handled that badly’ are meant to be helpful (for the future) rather than punitive (for the past). While people typically feel unhappy about blame and good about credit, that attitude gets everything backward and can cause major problems. Worrying about ‘blame’ and ‘credit’ or ‘positive’ and ‘negative’ feedback impedes the iterative process essential to learning,” Dalio writes.

Get in sync. Dalio asks his staffs to work at a level where there is a mutual understanding of what needs to be consummated. One way to achieve this is by using conversations about a certain project as a means of reaching decisions rather than just brainstorming. He also relies on that it is a manager’s obligation to weigh the value of coworkers’ opinions. In the same way, that you’d value cricket advice from Sachin Tendulkar over advice from a friend, Dalio writes, you should value the opinion of a worker with a proven track record over someone without one.

Understand that making a hire is the most important decision you can make.

Before you begin a search for an employee, determine not just the job’s qualifications, but which specific qualities you want in that hire. And make sure that the person you are hiring naturally shares your values. Recognize everyone’s differences. Bridgewater employees are given personality tests so that managers can determine how they can best be managed. Dalio’s test is basically his version of the Myers-Briggs test. Build your team carefully. When bearing in mind of a job candidate, Dalio places the most importance on morals (“deep-seated beliefs that motivate behaviors”), then abilities (“ ways of thinking and behaving”), and then skills (“learned tools”). He proposes finding a candidate who doesn’t just want the job but wants to be part of the company.

“Don’t hire people just to fit the first job they will do at Bridgewater; hire people you want to share your life with,” Dalio writes, adding that you should “look for people who sparkle, not just ‘another one of those.’” Run your team like a machine. “Micromanaging is telling the people who work for you exactly what tasks to do and/or doing their tasks for them. Not managing is having them do their jobs without your oversight and involvement. Managing means 1) understanding how well your people and designs are operating to achieve your goals, and 2) constantly improving them. To be successful, you need to manage,” Dalio says. And to manage effectively, everyone needs to know what the team’s longterm goals are and what individual employee’s tasks are. Dalio says it’s compulsory to avoid the term “we should,” since an objective should be concrete and assigned to a specific party.

Be direct and honest with employees “The main reason Bridgewater has improved at a much faster rate than most other companies over the past 30 years is that we seek out problems and find systematic ways of eliminating them,” Dalio writes. He thinks that managers and their employees shouldn’t keep a grudge and bring it out at their convenience but fight them all, in the sense that they should never let even small problems float by without being addressed. Be accurate with evaluations. Don’t be under the impression that criticizing your employees will harm them. Discuss their performance with them accurately, and do so in a way that results in a plan for improvement. And don’t wait for monthly evaluations to let them know how they’re doing. “Child psychologists, dog trainers, and other behavior modification specialists will tell you that constant, no-exception feedback is fundamental to good training,” Dalio writes. Guide your employees’ evolution. If you’re telling an employee exactly what they need to do to complete a task, then you’re either micromanaging or the employee is inept. “So give people your thoughts on how they might approach their decisions or how and why you would operate in their shoes, but don’t dictate to them. Almost all that you will be doing is constantly getting in sync about how they are doing things and exploring why” Dalio says.

If someone isn’t working in a role, take them out of it. “People who repeatedly operated in a certain way probably will continue to operate that way because that behavior reflects what they’re like,” Dalio says. That means that if someone isn’t productive with their role, you’re doing neither of you a favor by influencing the role around their tendencies.

Consider whether they’d be a better fit elsewhere in the company and if not, then it’s probably best to fire them. Have criteria for what constitutes a problem “To perceive problems, compare how the movie is unfolding relative to your script — i.e., compare the actual operating of the machine and the outcomes it is producing to your visualization of how it should operate and the outcomes you expected. As long as you have the visualization of your expectations in mind to compare with the actual results, you will note the deviations so you can deal with them,” Dalio writes. And when you get to the root of a problem, avoid broad view. Use specific names and the specific ways they strayed from your expectations. Determine the root of problems. Don’t treat problems as if they are one-time occurrences which will never happen again, Dalio says, since they’re just the manifestation of a certain behavior or bias. Work with your employee to find these roots so that the expectation of the mistake being repeated is then lowered.

Help employees understand their problems and how they were resolved. Managers and their employees need to do an autopsy on resolved problems and place them in the context of the past and the future. Place everything in the context of how you want your “machine,” your team, to operate at its peak. Build your team around achieving your goals.

“An organization is the opposite of a building — the foundation is at the top,” Dalio says. The head of a company should define their goals and find managers who can help them achieve them by assigning tasks to their direct reports. These chosen managers should also hire employees who share their own goals, which fall in line with the company’s vision. Always achieve what you set out to do. “You can make great things happen, but you must MAKE great things happen. Times will come when the choice will be to plod along normally or to push through to achieve the goal. The choice should be obvious,” Dalio writes.

Recognize what you don’t know. “Successful people are great at asking the important questions and then finding the answers. When faced with a problem, they first ask themselves if they know all the important questions about it; they are objective in assessing the probability that they have the answers; and they are good at open-mindedly seeking believable people to ask,” Dalio says. Minimize risk.

Dalio deals with managing people the same way he does with investments. “Recognize opportunities where there isn’t much to lose and a lot to gain, even if the probability of the gain happening is low,” he writes. Remember the 80/20 Rule — 80% of the effects come from 20% of the causes.

Dalio says that a true leader should be able to determine the importance of the tasks in front of him and take care of the most important things first. “Be an effective imperfections. Solutions that broadly work well (e.g., how people should contact each other in the event of crises) are generally better than highly specialized solutions (e.g., how each person should contact each other in the event of every conceivable crisis), especially in the early stages of a plan. There generally isn’t much gained by lots of detail relative to a good broad solution,” Dalio writes. Find outcomes that will keep you improving.

Dalio suggests that rethinking on the events of a day and then coming to the conclusion whether they exceeded your expectations, met them, or fell below them.

Over a month (or any longer period of time) the frequency of met and exceeded expectations should be on an upward trajectory. Dalio says that your decisions should be made with this trajectory in mind. “Avoid the temptation to compromise on that which is uncompromisable,” and don’t try to please everybody with every choice you make for the team. Dig deeply to discover why people did what they did.

“Knowing what they did is valuable only in helping you figure out what they are like. Understanding the “why” of people’s actions will tell you about their qualities and as a result, what you can probably expect from them,” Dalio says.

He says that when employees understand each other better, they will be able to figure out, whom can be relied on a particular task, which could expedite processes to get faster results.

Look down on your machine and yourself within it from the higher level. Higher-level thinking doesn’t always mean that all the planning is done by higher-level beings. What it really means is seeing things from a topdown perspective—like looking at a photo of Earth from outer space, which shows you the relationships between the continents, countries, and seas, and then going down to a photo of your country, then down to your neighborhood, then down to your family.

“If you just saw your family without the perspective of seeing that there are millions of other families, and there have been many millions of other families over thousands of years, and observing how your family compares and how families evolve, you would just be dealing with the items that are coming at you as they transpire without the perspective,” he says. Understanding the rate of improvement.

“I often hear people say, “It’s getting better,” as though that is good enough when “it” is both below that bar and improving at an inadequate rate. That isn’t good enough. For example, if someone who has been getting 30s and 40s on tests raised his grade to the 50s, you could say he’s improving but the level is still woefully inadequate. Everything important you manage has to be on a trajectory to be “above the bar” and headed for “excellent” at an acceptable pace,” he says.
Don’t act before thinking. Often it can be seen that employees take a lot of effort in doing a work done. There will be nothing wrong with their dedication. But at the end of the day if your productivity is less, then that is all you will be accounted for. All this is because you haven’t really thought through a plan of action for yourself, which invariably pulls you down.

“Take at least a few hours to think through your plan. Those hours will be virtually nothing in relation to the amount of time that will be spent doing, and they will make the doing radically more effective,” he says. Learn from success as well as from failure.

“Point out examples of jobs that are well done and the causes of success. This reinforces good behavior and creates role models for those who are learning,” he says. Often when an employee comes into the establishment, the best training he can get is from someone who he chooses by himself unintentionally. It is important that he gets a briefing on the company’s history, and who made what possible. This gives him an idea of what he can bring to the table, and which of those strategies he can in cooperate without much hindrance.


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