What It’s Really Like at Ray Dalio’s Bridgewater: 5 Insights from a ‘Cult’ Hedge Fund 2/5
Part 2/5. Read Part 1 here.
In our first installment we discussed Bridgewater’s unusual culture and the internal emphasis placed on the principles. While written evaluations of employees’ knowledge of the principles were far from perfect, establishing a common set of principles unlocked tremendous benefits.
Slowly but surely, I stumbled across the first insight from my experience: Investing time upfront to decide and agree on ‘how’ and ‘why’ things should get done is vastly more productive than spending that same time ‘just doing it.’
This week we’ll continue looking at life at Bridgewater with a breakdown of how the principles should work (discussing them on paper first before discussing them in practice) and lessons learned along the way.
The Principles on Paper
While the principles themselves have since been published since my time at Bridgewater and continue to grow- their ever increasing unwieldiness and diminishing marginal returns was a personal frustration- they can largely be grouped into three core tenets which I call the ‘triple-A rules’: autonomy, accountability, and automation.
Rule 1 — Autonomy
It’s not lost on me that testing employees’ adherence to a set of guidelines sounds like the exact opposite of encouraging autonomy. Yet when those guidelines promote the ideals of self-organizing teams and data based decisions winning out over the gut-feeling opinions of the most senior management, then a broad adherence actually empowers employees rather than restricts them.
The objective is to foster what Bridgewater calls an ‘idea meritocracy’- a system in which the quality of an idea matters more than the source of an idea. In theory, this frees talented employees to second guess their superiors and existing processes, regardless of their experience, age, pay grade, or title.
The potential benefits are obvious- a larger company with the no-nonsense ‘wizz kids run the show’ power dynamic of a startup promises disruptive innovation executed at corporate scale. In such an environment improvement is continuous and relentless- nothing is ever done the same way twice simply for having been done so before. If these ideas sound familiar- they should. Working at Bridgewater, I adopted an Agile/Lean mindset long before I had ever heard of Agile or Lean Startup.
For example, while a traditional manager might assign employees specific tasks to achieve management’s vision, Bridgewater managers are asked to delegate open ended goals, trusting employees to self organize and implement the best vision which achieves that goal.
Rule 2 — Accountability
Accountability is arguably the most crucial and controversial triple-A rule. For better or worse, whenever Bridgewater comes up in the news, it’s mainly for reasons related to accountability.
At its core, accountability is just a big word for the idea that employees- not their managers- ensure they are getting work done. Willpower and work ethic are necessary aspects of accountability, but they are only the surface- successful teams push each other to be their personal bests.
Accountability is vigilant participation in your colleagues’ work, not passive observation. Honesty, not civility.
If this sounds awkward, combative, or painful, that’s because it is. The principles emphasize that you are going to make mistakes, you are going to let people down, you are going to hurt yourself and hurt people you care about- we’re only human.
This is easy to admit at a conceptual level- we all know intellectually that we are flawed. But acknowledging it on a subconscious, behavioral level is another matter entirely.
For the longest time I tried to please everyone, and it wasn’t until the tail end of my career with Bridgewater that I even realized it. If you asked me if I expected to be perfect, I would answered honestly and emphatically ‘of course not.’ Yet time and time again when someone asked me to do something for them, or needed my team’s help for a project of their own, I found myself saying ‘yes, I can help you.’ My intention was to help, but it was based not on an understanding of the project’s value, but on a desire to not let anyone down, to never disappoint my teammates.
Yet the inevitable result of trying to help everyone was to fail most of them, far more than I would have by only agreeing to help a few.
And that’s ok- we are flawed beings in a flawed world. There will always be too many problems for us to fix them ourselves. Too many friends to spend as much time as we’d like with each of them. Too many opportunities in life to fully embrace every single one.
What matters is not that we never let anyone down- that’s impossible- what matters is that we make smart tradeoffs about which things are too important to fail, and which things we can afford to say upfront, ‘I can’t help you.’
Insight #2 — There will always be too much to do, making a difference requires knowing when, how, and what to say ‘no’ to, and the willpower to say ‘no’ to people and things you care about
Rather than maintain the corporate illusion that we are all perfect, the principles ask employees to explicitly call each other out on their humanness. By promoting an atmosphere of open accountability, failure becomes understandable and acceptable- as long as you fail at the right things. And while getting singled out by a teammate in front of the entire team (or department) certainly causes emotional duress, it also enables team members to improve and rely on each other to succeed.
For example, if I think I’m the world’s best CEO at pitching to VCs, but I mess up pitch after pitch and you never correct my many imperfections, you may think you’re being kind, but in reality all you’ve done is set me up to make the same mistake on an even bigger stage next time.
In a reversal from polite society that I wish we saw much more of in the ‘real world’, going out of your way to point out someone’s weaknesses is not the crime at Bridgewater, the crime is noticing their flaws and not doing enough to bring them to light.
Rule #3 — Automation
Automation- at Bridgewater and everywhere else- is really two steps lumped into one: standardization and scaling. Workflows, data, and processes must first be standardized before any real tech solutions can be scaled to anything resembling ‘automation.’ This is a fundamental prerequisite all businesses face- and is a common misconception I’ve faced when working with companies to automate and capture value from their data. Until AGI exists, automation is not an out-of-the-box, plug-and-play solution. While machine learning and AI gets all the attention, standardization itself does incur some direct benefits, including reduced key man risk, consistency of results, and making processes more scaleable. All problems faced by startups especially.
Take a product owner who’s had a string of great design decisions, increasing user adoption rates just going off their gut instinct. The problem is that the process isn’t data driven or systematized, and is thus not replicable in the long-run (eventually the product owner will leave), not improvable (since you can’t refine a model which hasn’t been modelled), and isn’t scalable (since short of cloning the product owner you can’t train ‘gut instinct’).
To help prevent this, Bridgewater emphasizes process automation- a good idea in theory- but where the Agile manifesto still explicitly recognizes the significant of people, the principles place a greater emphasis on documentation. Employees are encouraged to obsessively write down unwritten rules and convert daily tasks into lists of steps.
The ideal Bridgewater employee doesn’t fight to keep their job, they fight to render their role obsolete by replacing themselves with an automated script. In theory, an entire company operating like this reduces man hour costs, eliminates key man risks, and sees the best employees naturally ‘rise to the top’ as they free themselves from the noise of the day to day.
The principles themselves are a testament to this focus on automation- they are Ray Dalio’s attempt to systemize his own management style, codifying everything which enabled him to build Bridgewater in the first place so it can be repeated long after his retirement- something he has unsuccessfully been trying to do for nearly a decade.
These three tenets- autonomy, accountability, and automation- don’t capture everything in the principles, but they do paint a good picture of how life at Bridgewater works, in theory.
Autonomy unlocks employee potentials, accountability ensures these potentials are consistently met, and automation maximizes the scope and impact of each employee’s impact.
Days can be tough, especially when you feel that every mistake is out in the open- but when you realize that it’s alright to be flawed, and what really matters is making a conscious, informed tradeoff about which things should drop, you find you are able to achieve a lot more of what you care most about.
