Your Typical Thirties Crisis

You start to ask questions like;

  • What am I doing here?
  • What’s life all about?
  • What’s the meaning of our day to day existence?
  • What’s most important?

Some say the answers will never come. And after awhile the questions go away. Settling into the scripted american dream.

I say those questions are worthy of being explored.  Worked on daily through life experiences. Growth will get you closer to the answers and may even change the questions you ask.

If you knew you were going to die in two years.  How would you spend your time? What would you do for leisure, your family, your hobbies?

“Most of the luxuries, and many of the so-called comforts, of life are not only indispensable, but positive hinderances to the elevation of mankind”. -Henry David Thoreau

Break life down to the basics.  What we are, what we do, and how we live mean more than what we own.

No Replacement

IMAG0021

What I have come to realize over the years is that there is no replacement for actually doing the exercise you are training for.  I can bike all winter long on a stationary bike, but when rubber hits the trail it’s just not the same.  You have to actually do the activity to get better at it.  Same goes for running.  A treadmill at the gym won’t provide the results of actually running.

Good Business – Mihaly Csikszentmihalyi

Good Business - Mihaly Csikszentmihalyi Good Business - from the author of Flow

A book I found at the library recently.  Comes from the author of flow (post on my discovery of his work).

The goal of Good Business is to discuss business success with a broader commitment to social goals.  At first this reminded me of another book I read called Business Secrets of the Trappist Monks. Which is all about going from a selfish business mind to a selfless model of service.  I will re-read it again soon and post notes, because I feel it is worthy.

There seems to be a trend around this notion of selfless service in business along with building a great culture.  It could be the future of excellent businesses.

Currently two types of people hold the position to give spiritual and material needs to a community.  They are scientists and entrepreneurs.  Science helps us live a longer healthier life and business gives us a meaning beyond ourselves.

Looking at human nature you would think that greed would win.  But, there are increasing numbers of business leaders that care about contributing to the greater good.  Rather than solely focused on profits.

Patagonia is a company I keep reading about and is another case study in this book.  They built an amazing building with exposed beams, etc.  Why? They want to give the feeling that they are going to be around in another hundred years from now.  Not just prepping the company to be sold.

The owner states people need some stability in their lives.  You need to have a vision that is meaningful and offers hope to people for their own future and their families.

What does it require to be a business leader that helps build a better future for everyone involved?

“We have a philosophy of trying to have every single product we make be the best in the world.  Not among the best-but the best. Every single thing, whether it’s a pair of pants or a shirt, whatever.” – Chouinard, Patagonia owner.

To build a enterprise that will last one has to believe in the value of ones work. It a company does not strive to be the best in the world at what it does it will attract second rate employees.  A company that strives to be the best will attract first class workers who care.

Whats interesting is Chouinard began by building hardware that was destroying the mountains.  He saw that and then created new hardware that could be removed.  After transitioning into clothing he saw that industrial cotton was a  terrible process.. relatable to factory farming.  Then, said he will never use a piece of industrial cotton again and began using organically grown cotton.

His ability to pivot when he does not believe in a product is very impressive and inspirational.

The leaders of Cummins diesel engines stated he could have moved somewhere cheaper labor could be found.  But whats the point if you have to thousands of people who know and trust you?

At this point in the book that main take aways are;

  1. Believe in what you do striving to be the best.
  2. Think long term with enduring values and improving human well being, not profits.

 

Happiness

Money, security and comfort are the building blocks, but people also need there talents are fully engaged, growth, low stress, excitement, and deeply enjoyable experiences. This is a process of flow which the book will dive into deeper.

Along with flow a business needs to have a meaningful pattern, and a path of growth that leads to cognitive, emotional, and social complexity.

To thrive a business needs to foster the growth of flow and social complexity.

Money and material only make us happy up to a certain threshold.

Relationships are related to happiness.

Businesses should aim to make products and services that make people happier. Review Abraham Maslow’s hierarchy of needs.

Once all of our other needs are taken care of the highest level of happiness is to express oneself and using 100% of physical and mental powers we were born with to innovate and grow.

A business is successful to the extent that it taps into these forms of happiness.

  • A car sale helps ensure survival, built with green processes give safety and security, gives the owner a sense of belonging (jeep), enhances self esteem, and self actualization by allowing the person to express their taste, driving skills, and lifestyle.

Market value is dependent on the anticipated happiness it is expected to provide.

But it is not all about the product.  A business also needs happy people in a good culture.

As the middle class strives to consume status symbols of a bigger house, better car, and expensive vacations they are giving up growing as an individual,  and developing close relationships.  Most companies take advantage of this fact that people think possessions will lead to happiness.  They contribute to promote materialism as long as there is a demand for it.

The best indicator that someone is happy is they no longer desire anything else.

Because if we feel like we lack something we cannot be happy.  But, very few people have achieved a level of lacking want that are fully happy.  This is why business needs to enhance human well-being.

Two Pillars of Happiness

  1. Differentiation – Seeing that we are unique individuals, and responsible for our own survival and well being, and authentically developing this uniqueness wherever it may lead and enjoying the expression of being in action.
  2. Integration – Even though we are unique, we are all connected in a network of relationships with others, material, symbols, environment.

A person who is is fully differentiated and integrated has the best chance to be happy.

To be successful you have to enjoy doing your best, while also contributing to something meaningful to you beyond yourself.

Humans generally shift back and forth from selfish to selflessness as they age.  One year olds are dependent on their parents, then once they hit two they like to do things on their own and shift occurs.  This happens about ten different times for most people as they grow.

The highest point one may reach is the person who has developed and refined their uniqueness while being in control of their thoughts, feelings, and actions.  While at the same time enjoying human diversity, and feeling at one with the infinite cosmos.  The person is truly happy because they need nothing else.

Business that doesn’t contribute to human growth and well-being is not worth doing, no matter how much the profit.

Then comes the question, how broadly is human growth and well-being extended for a CEO?  Most CEOs would say the shareholders are the only humans they have to look after.

But, as most great leaders would agree that is false and one needs to look after;

  • shareholders
  • customers
  • employees
  • owners
  • communities
  • natural environment
  • vendors

What should be optimized is not profit, but the value the company creates and adds to human lives.  The companies goal should be to add quality of life to customers through products and services, and similar add to employees lives through individual development, job security, and dealing with their aspirations.

Does all this mean that the people running these companies are martyrs to the well being of others? Not really.  Doing things this way creates a joyous way of doing business.  People who are driven by the desire to do their best, and to contribute to society, believe in what they are doing, and are happy doing it is a great task.  What else could you ask for?

Enjoyment is the foundation for memories that, in looking back enrich lives, and give one confidence for the future.

It is not possible to succeed as a leader unless one enjoys what they do.

What does it actually mean to enjoy something?

The answer is getting into a state of flow. Examples of flow for me are rock climbing, reading a good book, painting a helmet, riding my mountain bike, working out.

Flow is important in business because if a person doesn’t enjoy their job they will not be that great at it. Almost any activity can lead to flow.  Even the most mundane tasks. The person who is engaged with the world, interested, curious, and excited is never at a loss to experience flow.

8 Conditions of flow:

  1. Clear goals – Rock climbing the goal on the mind is not the top of the mountain. It is the next move without falling. True enjoyment comes from the steps one takes towards the end goal, not actually achieving it. Savor the steps along the way and don’t be so concerned with the outcome. So don’t worry about a successful performance, but more about how you feel during the performance.  If what matters in life is happiness not success, then the journey is what counts, not reaching the destination.
  2. Immediate feedback – Helps you know that what you are doing matters. And has consequences. Feedback may come from others, but its best if it can come directly from the activity itself.
  3. Balance of opportunity and capacity ( a task is challenging, but doable) – Challenge and skills should be high and equal. A difficult task is exciting.  But if too hard it will cause anxiety, and if too easy it will cause boredom. Most people find their jobs too confining, and family life too predictable.  So they seek outside stimulants. The key is to find the opportunity in any situation. There will always be a dozen things to do and enjoy.
  4. Concentration deepens – When you’re doing something that has clear goals, and immediate feedback you will become involved in it. Even if the activity is not important.. like a video game.  When intensity rises we will find ourselves deeply into it. Avoiding the monkey mind of daily distraction.  Where awareness and action merge into one.  You are a piece of the bike you are riding, not separate.  When things become effortless and you don’t exist. It really comes down to our ability to concentrate on a narrow task.  We cannot focus on many things at once.  You can’t rock climb and make phone calls and be in the zone.
  5. The present is what matters – You are focused on the task at hand and not thinking about your everyday life issues. Our mind will tend to wander without a task to work on. And when we have nothing to work on the mind will dig up negative things to focus on and make us depressed. In flow this is not possible as we are focused on what we are doing and not letting the mind wander off wherever it wants.  It is in the present.  It provides an escape.  Some people will turn to alcohol, sex, drugs, etc for this escape, but getting into flow is a much better option.  It will produce a positive outcome through challenges, effort, and building skills versus negative ones found in the former. It is an escape that pushes you forward rather than backward. Einstien said that art and science are the best means to escape from reality that humanity had created.  But I would say we have even more nowadays.
  6. Control is not a problem -In flow one has a strong sense of control over the situation, and more so over one’s own performance over the environment.  Being used by the creative forces.. possessed by the muse. What matters is doing one’s best for the sake of doing the task at hand, and knowing that the best one can do should be enough to prevail.
  7. Time is altered – Time flies by.  But sometimes the opposite happens as well. Flow will adapt to the action at hand and speed up, slow down based on how absorbed it is. We actually control the experience of time.
  8. Loss of Ego – Awareness of one’s personhood temporarily disappears. They forget their social persona, rank, name, status and everything that it entails.  One forget self consciousness.  Their feats, desires, defeats, ambitions, etc. What is important is that when one enters a state of flow and forgets oneself.  After the event and when the self reappears a person has a boost in their self esteem.

“happiness cannot be attained by wanting to be happy-it must come as the unintended consequence of working for a goal greater than oneself. The truth of this insight is borne out by our own findings.” – Viktor Frankl

You don’t have to save the world to be in flow.  If a action produces flow it is worthy doing for that cause alone.  Don’t do a task for the money or fame.  Do it because you love it.

“You are entitled to the work, but not to its rewards.”

Something that is worth doing doesn’t require an external reward. It is intrinsically rewarding just by doing the activity. Rock climbing isn’t about getting to the top of the mountain. The enjoyment is the climbing itself.

Many athletes no longer enjoy their sport because it becomes about a paycheck and contract.

The point to remember is that just because we are paid to do something doesn’t mean we can’t enjoy doing it. Surgeons are highly paid and enjoy what they do under a flow state.

Whole – Rethinking the Science of Nutrition

by T. Colin Campbell [ NOTE: Read the China Study for the nuts and bolts of his whole foods plant based diet ]

Nutrition is the doorway to human health.

What many of us are led to believe is proper nutrition is false.

The medical profession has kept this information from you on purpose.

Adopt a whole, plant based diet as discussed in the China Study book.

When reading or listening to health advice ask yourself, what financial gain do they get by telling me this?  The author has none.

Our current medical system is the 3rd leading cause of deaths in the US.  Wrong prescriptions, bad machines, surgeries gone wrong, hospital infections, etc.

  • What you eat everyday is more important than your genetics, or environment
  • Food can heal you faster than prescription drugs with less side effects
  • Food prevents disease
  • Its never too late to benefit from the healing power of a healthy diet

What is a Whole Food Plant Based Diet?

Plant based food as close to its state in nature as possible.  Eat a mix of fruits, veggies, raw nuts, seeds, beans, legumes, and whole grains.

Don’t eat animal products, or processed food. Stay away from added oil, salt, and sugar.

Aim for 80% carbs, 10% fat, and 10% protein.

What can this type of diet give you? It deals with the root causes of disease:

  • Prevent 95% of cancers
  • Prevent stokes and heart attacks
  • Reverse heart disease
  • Reverse type two diabetes
  • Ideal weight for body type
  • Eliminates most migraines, acne, flu and colds, intestinal distress, chronic pain
  • Improves energy
  • Cures erectile disfunction
  • improves our world through various forms including improving water, stopping factory farming, etc.

Don’t worry about specific amounts of anything.  Just eat a variety of foods this way and your body will take care of the rest.

It is much easier to go all the way into this type of eating than 80-90%.  Its like a smoker trying to quit.. while still continuing to have 1-2 smokes a day. Your taste buds and body changes when you go all the way. Which will make it easier to succeed in the long run.

Don’t listen to anyone else’s opinion on nutrition unless they are an expert in biochemistry, cardiology, epidemiology, and a dozen other ones to have the correct experience. If they have the background you then need to look at the study and see if it is true.  Was everything done honestly and correctly?  Is it the whole truth? Does it matter, or is it just marketing hype?

Whether or not you should adopt an approach requires three questions:

  1. How quickly does it work?
  2. How many issues does it solve?
  3. How much will health improve during the intervention?

A plant based diet improves the elimination of free radicals that are caused by oxidation.  Plants contain antioxidants.

High protein based diets promote free radicals and oxidation.

Good example – typical person is hitting their head with a hammer each day and complaining that nothing cures their headaches.  Well it makes sense to put down the hammer.  Same goes with nutrition.

Kale and spinach have twice as much protein per calorie than a lean cut beef.

Animal protein turns on cancer cells. Cows milk promotes cancer cells growth. 

When we take a part out of a system to study it, we blind ourselves to the whole system and how it functions as a whole.  Same goes for nutrition. An apple does a lot more inside our bodies than just the sum of its parts in pill form. There are too many variables to be able to single out a nutrient.

Food is the most important topic there is, but it is not promoted or discussed in a healthy way in mainstream media.

But if there was an issue with our food supply we would have a very serious issue.

Most people that are involved with nutrition is focus on amounts.  Amount a nutrients, fatty acids, vitamins, minerals, and most of all calories.

We believe the more we keep track of our inputs.  The more we can control our health which we think is our output.

That is false.  Nutrition is not a math formula.

What the body does with the food we put in it is what controls nutrition.

We cannot know how much a nutrient will be absorbed and used by the body. Because it depends on what the body needs at that time. It chooses what it wants to use, and what it discards.

So the amount you consume of something does not equal in a linear relationship what the body uses.

So high doses of some type of vitamin does not mean your body will use it.  Or you may actually screw it up and throw things off.

Food also varies in nutrients.. within even two pieces of fruit side by side.  They could vary greatly to what is inside them.

When you combine or eat different foods it also is a factor in how much of a nutrient is absorbed.

This uncertainty leads us to the fact we don’t know what our body will actually use (bio available) and what is actually in the food we are eating.

Don’t make nutrition more difficult than it needs to be.

Our bodies match that of herbivores instead of carnivores in nature.

 

 

 

 

Career Renegade – Jonathan Fields

How to make a great living doing what you love.

Jonathans goal:

  • Make a great living
  • Love what he did
  • Be around people he loved

“The simple truth is you can turn nearly any passion into a big, fat heap of money. However, it often requires mining aspects of those passions you never knew existed or bringing them to life in markets and ways that defy the mainstream.

We are here to let our lights shine as brightly as possible, to drink in the joy of friendship and family, to serve and better the greater community, and to tap into and aspire passion in everything we do. We are here to come alive. In doing so, we serve as an example to others that a life beyond muddling by is not only possible, but mandatory.”

He set out to get into the fitness industry.  Got some certifications while he was still practicing law and then quit to become a personal trainer at an elite gym.  He knew he would never be the best trainer in the world.  But, he also knew that he could build something that would provide a great living for him.

After six months he learned the business hands on with industry research. He then took what he learned there to build a private gym that targeted wealthy, educated adults who wanted to get healthy but hated big box gyms.

While it was success he sold his interest in it and moved on.

He looked for what was fun, cool, and made him feel good. Which was yoga and wellness.  He asked:

  • Can I build this passion in a way that would differentiate what I do from what everyone else does?
  • Does the world really need it?
  • Can I make a living at it?

He then dives deep into the craft, blends his experiences in his background and business, and achieves a level of success that allows him to be well paid.

What Makes You Come Alive?

What would you do for free out of a sense of passion?

You won the lottery but had to work the rest of your life.  What would you do? Write it down.

For me:

  • Creating
  • Working out
  • Studying health and wellness, business, lifestyle and writing about them
  • Ride my bikes
  • Be in nature, traveling, taking photos of waterfalls
  • Help others
  • Spend time with people I love, and dogs

Out of those there are things that obviously are not going to be able to support me in a career.  As much as I wish they would.

The one thing out of that list I could see a career in health and fitness to be meaningful and lucrative.  The goal is to do it in a way, and with people that make each day a joy. What makes that possible is flow and people.

You can achieve the state of flow through a wide range of activities.

Along with author I find myself in a state of flow when mountain biking on single track.  The past and future don’t exist.  All that is.. is the present.  And I am fully engaged.  If I lost focus thinking about the next days tasks I risk hitting a tree and seriously injuring myself.

It’s forced meditation.

Writing takes him there as well.  I again have to admit that reading and writing this puts me in a more mild state of flow.  Which may be why I gravitate towards this activity when I cannot ride my bike (its winter in the midwest right now).

Being in a state of flow is critical in being happy in work and life.

I recently just discovered the flow concept and started writing about it.  To help myself learn it better I will write more about it:

  • Working toward a clear goal with a well defined process.
  • Gets you into a state of deep concentration.
  • Total lack of self-consciousness.
  • Time stands still.
  • Continuous direct feedback through people, or the task at hand helping you adapt and accomplish your goal.
  • The task challenges you greatly, but is doable.
  • Control of the means to finish it.
  • Rewards you intrinsically and is meaningful to you.

The more of these elements that are present in what you do the more state of flow you will be in.  Look at my list and think of what puts me into a state of flow the most.

I would say working out, bike riding, and researching, writing, designing.

While some people are content to be alone.  Most thrive when we are around like minded other people. This is the great aspect of being an business owner.  You can select who you work with and create a culture around that likeness.

You can’t have a dream job and hate the people you are around.  You have to love the people and culture and job at hand.

Summary up until now:

  1. What would you do for work if you knew you could support yourself from it without worry?
  2. What activities put you into a flow state? If none.. what has the potential?
  3. What type of culture or people make you feel alive?

What item on your list calls to you the strongest that incorporates flow the most and puts you around people you love?

For me.. thats working out.  It was what I was drawn to first and if I knew I could make a living doing it what I would do for work. When I am not worried about making money and work.. I still workout daily.  I get into a state of flow when I workout, and could surround myself with people and culture that fits me around this activity.

People who follow someone else’s path is good.  Because it thins the herd of people willing to create their own path.

Redeploy Your Passion

If your passion won’t easily pay the bills it is wise to bring it to a micro-niche, or alternative market that puts more value on it.

An artist that takes her wine paintings and starts selling them in vineyards, or artist who takes her skills to making edible creations.

What fields, careers, paths, or jobs value what I do (demand would be high), but are in short supply?  That marketing your passion to this audience will allow you to be:

  • Different.  You are strongly different and create more value above the normal market expectations?
  • Hunger. Do people really want what you are offering?  Would a big enough group of people come to you?
  • Price Availability. Does the price generate demand and allow a constant flow of people willing to spend the money for your product or service? Can you offer different price points or formats to meet different market demands?

Organize your brainstorming with Bubbl.us. It is a free mind mapping tool.

To see what people are talking about and sharing use Popurls.com and Addictomatic.com

Sell Information

Are there things that could be done better, or not being done at all?

Are there supporting activities that would put you close to the action, but allow you to make a living?  Say being a fitness trainer for a bike racrer, rather than trying to be the racer..

You are looking for gaps in the market of needs not being met.   And there are information gaps.

When looking at the activity that makes your heart sing:

  • Where does your information come from?
  • Is there information that you have a hard time finding?
  • Do a lot of other people want that same information?
  • Would it be valuable to funnel and filter information? Just providing the gems and throwing out the rest.
  • Would it be valuable to gather and organize information?
  • Do you have unique insights that would be valuable?
  • Have information that would solve a problem or encourage more people to participate?
  • Do you have depth of knowledge, passion, and resources to be a constant flow of information?

People will likely pay for information that will boost their learning of a topic they are passionate about.  The more rare, unique, and in high demand information the better.

An old example of this is selfgrowth.com.

How to test and exploit that info gap you found:

  • Downloadable info products.  E-books written in word then transferred into PDF.  You can then sell it on your website if you can drive traffic to the page.  Put it on affiliate sites like click bank. Or make it available as a print book through lulu.com.
  • Audio / Video.
  • Online content.  Blogs can make money if done right.  If you offer high value info you can do direct ads, have sponsors, adsense, etc.  Pro blogger is a good resource for this. Create a premium content area like Greg Plitt does, offer consulting services, create a network with other bloggers, and market select products like Joe Rogan does.
  • Newsletters. Email autoresponders, or print

Teach

Is there an educational gap you could exploit and teach others?  Maybe partner with someone to make it happen so that you don’t need to be an expert.  Just be the organizer and producer and take a percentage.  You can then partner with others who have large lists.  The partner will often take 50% of the revenue though.

Test and refine teaching your passion locally before scaling it is a good idea. And do it for awhile so that you know it can sustain itself.

If it passes all the tests you can then clone yourself with media to teach for you 24/7.

Create the course objectives, decide what format fits the media best, and then start producing.

Final Cut pro, Lulu, Camstasia, etc. can all be tools to help you develop these materials.

The Need for Stuff

Look deeply into your passion and you may find a demand for gear, or stuff that supports the main activity.  Maybe its the way the gear is provided, doesn’t exist, can be improved, bundled, adding a service or community, etc.

When you are doing the activity what needs pop up that are unfulfilled?

Can you build and sell something?

Community

The need to interact with like minded people.

Build a community using a blog, forum, etc. and then after respectfully start to earn money from it.

Make it Easier for People

Are their gaps in the way the product or service is being delivered, offered, or sold?

Are there people or places that you gain from easier, or better access to a type of service or product?

Apple didn’t invent music. It just gave them a easier and more enjoyable way to experience it.

John opened Sonic Yoga and made a video for people to learn yoga.

More

Look at what you like to do and ask whats missing?

Start testing your idea from your own use, and people close to you.

Spend time in this stage to find out if it will work before committing full time to it.

Test audiences for how many people search for what you have a passion for and want to offer by seeing how many people search for it:

http://tools.seobook.com/keyword-tools/seobook/

Then look at the volume, alternative searches that are related, and then if there is potential look at trends.

clusty.com will show websites that are about your search.

search.twitter.com will show you who is talking about it on twitter.

Use an alexa plug in and see how much traffic these websites are getting that are aligned with the searchers intent you are thinking about.  Hint.. they may be searching for porn, and you are thinking they are searching for a legitimate business.

Checking the alexa rank of sites that are ranking for these keywords and intent will verify this.

Keep in mind though.. just having high traffic isn’t always required.  If the business model can support itself with low search volume it still may be worth doing.

Clickbank.com products will also tell you about the market for what you are thinking.  Look at what information products are selling and how.  For how much?

Then, start looking at the competition. Look to see if there are magazines on your topic.  Also look at websites and blogs.  Are there advertisers?  What kind of ads are they running?  Where are they located and what are they appealing to?

How many comments are on the last 30 posts on the blogs?  Less than 5 each suggests a small community.

Then see what info is out there about your passions business already.  Put the “keyword” + :

  • business
  • income
  • career
  • trend

And see what you find. There may be some good reports already telling you about the industry and how people are doing in it.

Out of all these magazines and print publications are the best indicator.  If someone can afford those costs and still have advertisers lining up there is strong demand in that niche.

Checkout Craigslist if what I want to do is location based.  See what ads run multiple times and compare their offer and pricing to what I want to do.  Repeat ads tend to say there is market demand there for it.

Checkout eBay and see what is currently in high demand by going to :http://popular.ebay.com see whats been sold at http://listings.ebay.com

After these the next step would be to create a one page opt-in form and run some traffic to it and gauge demand.

Use all three PPC platforms for access to keyword tools.

You can also do a Facebook poll.

Do face to face interviews as well.  Find your target market and ask them questions:

  • Are you experiencing the same problem as me?
  • How strongly do you want a solution?
  • Would you buy what I want to offer?  How badly?
  • If no, how would you suggest I change it?
  • What would you expect to pay for something like this?

If there is strong competition in a market you will need to find a way to be different.  Or, you may want to work for them?

For some fields like law, medicine, etc.. you will beed to go through schooling to get into it.  But for most businesses it is more about demonstrating mastery, and expert positioning.

To gain knowledge in something you are new to look at podcasts, blogs, forums, books, free online courses.  Then you can also set up to paid training, conferences, events, certificates , mentoring, workshops, part time internship, etc after you have the basics.

This type of training can take your skills to the moon if you are willing to get the help from experts.  But, be sure you need it and are in the right place before investing.

Building a platform to position yourself as an expert is one of the best things you can do next.  You don’t need a degree to do this.  You publicly demonstrate mastery and add some entertainment to it.  Then spread it rapidly through technology.

Blogging can help you raise authority in a niche. Guest posting and writing articles for other popular info portals.

If you feel like you don’t have the wisdom needed yet.  Get others in the industry to give their thought and put them all together and add some of your own thoughts.  Doing this over time will have people coming to you as expert.  You are riding their coattails until you have built yourself up enough.

Online press releases can also gain you traffic and authority if it gets picked up by the right places.

Marketing

Marketing is basically letting people know about us, what problem we can solve for them, and provide them the solution as easy as possible.

Putting it All Together

Don’t be afraid to fail.  If you do think of it once and learn from it then move on.  Think about what would happen if you didn’t take action.

What would your life look like if you stay on your current career path?  Physically, mentally, and emotionally? Would you be dissatisfied, stressed, etc.?

Do you think if you are unhappy now that it will change after more years of the same?  Most likely not.

You can recover from failure.  But, you can’t recover from never trying.

Use process visualization to see the steps you are going to take in a daily effort to gather information to go after an ultimate goal.  Once a week write out a list of daily goals (3-5).  Visualize yourself taking action on those goals each day.  Once you know where you can go and have enough information you can work on outcome visualization.

But, continue to do both types.

You may take a short term hit on income, but think about the long term of finding a career that fills you up instead of drains you.

The best option for many people is testing and building your idea on the side while you stay at your job.  Although there still may come a point will you will have to make the jump. For example kona joe coffee.  It took Joe 20 years of being a doctor and playing around with the coffee business to realize he could improve someones life in a more stress free and fun way. And finally made the jump.

It can be much smarter to look at this process as a small build rather than try and make the change overnight.  But, realize that you are capping the potential of that side business and it may need your full time devotion to really take off and be a success.

No one else can stand in your shoes and know your dreams, fears, and take actions. You are the one responsible for your dreams and no one else.

Ask yourself, “Will this career choice let me spend the greatest amount of time absorbed in activities and relationships that make me come alive, while earning the living I need to live?”.

Hellen Keller – “Life is either a daring adventure, or nothing.”

What are you waiting for?

Linchpin – Seth Godin

“The only way to get what you’re worth is to stand out, to exert emotional labor, to be seen as indispensable, and to produce interactions that organizations and people deeply care about.”

This book is different. It’s about a choice and it’s about your life. it challenges you to rethink how you do your job.

Stop settling for what’s good enough and start creating art that matters.  Stop asking what’s in it for you and start giving gifts that change people. Then, and only then, will you have achieved your potential.

You have brilliance in you, your contribution is valuable, and the art you create is precious. Only you can do it, and you must. I’m hoping you’ll stand up and choose to make a difference.”

I thought Linchpin was just for someone in a cubicle looking to find ways to get up the corporate ladder faster.

Man was I wrong.

The lessons and information can be applied universally across many work situations and life itself.

To me.. another Seth Godin slam dunk.

Linchpin Notes/Nuggets of Wisdom:

  • The world has changed and companies are headed in a direction of hiring you to a faceless cog in their machine (business) for as cheap as possible.
  • School prepared you for this scam.
  • Most people are afraid to chart their own path and want to be told what to do out of fear. Fear of standing out, or up for something.  This economy is punishing the fearful and rewarding the bold artists. You need to ship your art even if it isn’t perfect or finished completely.
  • Organizations are trying to high a high percentage of easily replaceable laborers. Workers that are competent, obedient, and as cheap as possible.The danger in this is that one cog that doesn’t care about the company can destroy a companies brand.  Think Youtube videos of the kids making Domino’s pizza.
  • Making jobs (even white collar ones) obsolete by replacing them with machines and outsourcing their jobs to cheaper labor in other countries like China and India.
  • If all things (businesses are equal) the customer will pick the cheapest one. They have less time to make a choice than any other time in history.
  • Unions tried to fight back against becoming a commodity by collective action, but every union worker is the same as one another and it’s no different.
  • It’ unprofitable to establish a career around just doing what the manual says.
  • There is a choice not to become a cog, you can choose to chart your own path. You’re a unique human being with something to say/do.
  • Don’t let the lizard brain keep you average and safe. Just putting your head down, doing your work, and hoping to get picked.
  • Be fearless, but not reckless.  Feel the fear, acknowledge is and do it anyway.
  • You can actually enjoy what you do.  And in the process make a difference to your co-workers, customers, and release the genius in you.
  • “A genius is someone who looks at something that others are stuck on and gets the world unstuck.”
  • Companies can succeed by giving workers a platform to be a linchpin, faster service, more human and remarkable. Instead of cheaper, standard, good, ordinary.
  • Becoming a linchpin is connecting, innovation, creating order out of chaos, connecting people and ideas, embracing a lack of structure to find new working paths, being generous, doing more than required, caring, original, creative, passionate, rare, solving problems that other people haven’t predicted, in a league of their own, and making a difference in other peoples lives.
  • This is a skill that with daily practice of gift giving, making art, and human connections in a linchpin type manner you will become more and more indispensable.
  • Be an artist.  Give gifts.
  • Chart your own path and do not try to copy someone else’s.  That is not art.
  • Having a face to face connection to others is the best form of human connection.
  • You no longer need the factory.  The means of production today can be had with a laptop and a internet connection.
  • Linchpins world view says that exceptional insights, generosity, and productivity make markets bigger and more efficient.
  • Being an expert in your field allows you to know the status quo better and gives you insight to reinvent what everyone else assumes is true.
  • Emotional labor is the hard work you do to create art. It involves having vision and doing something about what you see. Making choices.
  • Emotional labor is rarely held as a competitive advantage. But it is available to all of us.
  • Your job can be a platform for expression, generosity, and art. Every interaction with a customer, or coworker is an opportunity to practice this art.
  • Challenge structure, expectation, and the status quo.
  • Troubleshooting is an art. A gift from the person with the trouble and the person solving it when everyone else has given up.  Putting himself on the line, and giving energy to the cause at hand.
  • ” If it wasn’t a mystery, it would be easy. If it was easy it wouldn’t be worth much.
  • Good isn’t good because its not remarkable and perfect isn’t good because you can’t get better than perfect. You want nonlinear, remarkable, game changing, artistic.
  • Optimism is the change agent artists need, because is allows them to believe they can make things better.
  • Transferring your passion to you job is a lot easier than finding a job that happens to match your passion.
  • Being good with people is a form of art.
  • All you have to sell is relationships. You can never always be the lowest priced. But you can change someone, connect with them, or make a difference in their life. (How to Win Friends and Influence People, would be a good read to learn more about this)
  • Creativity – Personal, original, unexpected, and useful.
  • Unique Creativity – Focused and insightful with domain knowledge, position of trust, and generosity to contribute. Most important is delivering unique creativity and shipping.
  • If you are not the best in the world at your unique talent its not real.  You need to develop other attributes, or get a lot better at it.
  • Your job is to make something happen by making your own map since you know your subject so deeply, and leading.
  • The act of deciding is the act of succeeding.

The Hierarchy of Value

  1. Lift
  2. Hunt
  3. Grow
  4. Produce
  5. Sell
  6. Connect
  7. Create/Invent

Tons of people can do the low level work, but rare is the person creating and inventing.

Example of value creation.

Think of France and the hand made Louis Vuitton bags, the Hermes handmade saddles, wine makers, etc.  They embraced custom and hand made.  ”Made in France? came to mean something that “Made in China” doesn’t.  Mechanizing and cheapening the process would make it easy to copy.

They relied on humanity which made it hard work which was scarce. Scarcity creates value.

Worth noting is the Purple Cow argument.  In the past companies made average products, and interrupted us in hopes we would buy.  But, we have stopped buying.  The only way to grow now is to stand out by creating something that people are happy to talk about to others.  Treating people with respect and letting word of mouth grow your business.

People don’t talk about things that are the same as everything else.  They talk about things that are different. An organization that is built around creating interactions that people deeply care about.

Consumers will say they just want the cheapest price for a commodity.  Although if they had the choice Seth thinks they would choose art.  Seeking out products and experiences that deliver more value, connection, experience, and change people for the better. Which is a learned skill set that you can learn how to do.

In a world that loves to race to the bottom the only way to win the race is to race to the top and stop playing by their rules.  You can’t out Amazon, Amazon.

Going to the top requires an organization to become more human, remarkable, faster, and has a personal connection with its customers. You then hire and develop linchpin workers by giving them freedom, responsibility, and respect using their own best judgement you have an indispensable company that people love. Workers will rise to unseen levels and customers will be delighted.

What a School Should Teach

“We teach people to take initiative and become remarkable artists, to question the status quo, and to interact with transparency.  And our graduates understand that consumption is not the answer to social problems.”

Schools need to teach people to produce innovative work, deep insights, and art.

Schools teach fear.  Fear to not fit in, fail tests, obey authority, show up everyday, don’t ask questions, memorization is important,  fear of not getting into college, etc. It’s not necessarily the schools fault.  Thats just how the system is setup.

Often being good at school doesn’t mean you will be good at your job.

The opportunity is changing the game.  Changing the interaction all the way down to chaining the question.

Schools need to be teaching people to:

  1. Lead ( be socially smart, open to connection, understand how to build a tribe)
  2. Solve interesting problems ( not to memorize dates, but questions like “what should I do next?”

Seek out new interesting problems at the one you are working on is solved.  And take on harder and more interesting problems as you go.

Law of Linchpins and Leverage

Capitalist need workers who will work for less than the value they create. They difference of what they are paid and what the company takes in is the profit.

The law of a linchpin leverage states: The more value you create in your job, the fewer clock minutes of labor you actually spend creating that value. Most of the time you will be doing what ordinary workers do, but you will also create brilliance in tiny bursts.

Its art, insight and bravery of creating something valuable that is rewarded.

There is no security in mediocrity.  Being only slightly better than the next person is insufficient.  It will wear you out.

Being worn out and exhausted makes it tough to do the work at the same time.  The insecurity of your job wears you out of the confidence and energy that you need to do your job.

Does Every Company Need Linchpins?

Some companies and industries really do not need linchpins.  Organizations that are monopolistic, static, safe, cost sensitive, and centralized should hire drones as cheaply as possible.

Cheap drones can be scaled, replaces, and disrespected.

This strategy is fine, but it is unlikely to lead to customer loyalty.

Also if you’re looking for a job, why would you want to work for a company like this?

If they are saying “You’e a cog, you’re replaceable, there’s someone coming in right behind you.  Hey, we don’t even have to meet you!” its time for change.  Move on and find a company that will let you become a linchpin. Don’t play the game if it is designed for you to lose. Play a different one. Don’t wait for the perfect opportunity to become a linchpin, or it is unlikely you will never get it.

If your boss won’t raise the bar, you should. The linchpin says “I don’t want a job that a non-linchpin could get”.

Don’t sell yourself so cheaply.  Giving away a day of your life for a few bucks.  When you are selling your time for money you cease to be an artist that you could be.

A days work is your chance to do art, to create a gift, to do something that matters.

Find a new solution to a problem that has caused others to quit. The art, genius, is to reimagine the opportunity and find a new way to lean into the problem.

As your art gets better and more important, demand for it will go up.  You can then be choosier to who you give it to.

When at the end of a day the day’s work doesn’t equal a days pay, that means that at the end of the day a bond is built. You have given a gift that has been received, and people are drawn closer to you.

There are three situations where an organization will embrace and reward someone with a depth of knowledge:

  1. The knowledge is needed very quickly and bringing in an outside source is risky, or time consuming.
  2. Knowledge is needed on a consistent basis and the cost of bringing someone from the outside in is too high.
  3. Knowledge is used in decision making and internal credibility and organizational knowledge go hand in hand with knowing the right answer.

It’s better to build a team that knows what to do.  Rather than waiting around waiting to be told what to do.

The future of an organization depends on motivated human beings selflessly contributing gifts of emotional labor.  The danger is trying to measure and improve this. It needs to happen organically.

Ruthlessly limit the number of people needed to coordinate a project, and have a linchpin run it.

 Resumes

If you are a linchpin you don’t need a resume.  It will just give the employer what they need to reject you. They just scan for keywords to fit into the cog profile.

What should you have instead?

  • Great letters of recommendation from people the employer knows or respects
  • A project they can see or touch/experience
  • A insightful and compelling blog

If you don’t have anything like this, what makes you remarkable?  You may just be brainwashed into compliance.

Great world class jobs don’t get filled by people sending in resumes. Projects are the new resumes.

 The Gift of Emotional Labor

The gift is to the giver, and comes back to him..” – Walt Whitman

When you give something away you benefit more than the recipient does.  It makes you rich beyond measure.  Successful people race everyday to give away their expertise and spread their ideas.

You will benefit from emotional work.  Not just your company, but yourself. There is great reward in making someone smile, connecting to a human, being creative, taking initiative, putting on a show, or being surprising.  You won’t necessarily get more money for it though.  You are after the intrinsic reward.

Art = Anything that is passionate, creative, and personal. Its a personal gift that changes the viewer.  The more it changes someone the more effective it is.

Art is original and human through the work of emotional labor. It’s a gift and you can’t do it for the money.

The most visceral art is face to face, one on one with the artist and viewer.  Its also in the interaction and what you do.

Causing someone to change their mind is an art.  What if you were great at it?

Art challenges the status quo through something new and unique. It is taking a risk and doing something through emotional labor that is difficult.

Making a connection that is not in your job description is a gift. It is being open.

Gifts allow you to make art.  Given with no reciprocity in mind is key.  You can give gifts in anything you do in life and create art.  Even though you need to push down your selfish impulses, the gift is still for you as well as the recipient.

A gift brings tribe members closer together. A gift can make you indispensable. The best kind of gifts are art.

The reason giving a gift makes you feel uncomfortable should make you want to find out why.

Generosity generates income.

The lack of money being made in a transaction brings the two parties together and creates a community or tribe.  A bond is created.  And the giver usually comes out ahead.

When art is created with the sole purpose to be sold it becomes a commodity. Think of people charging for smiles.

Giving a gift is about the joy it brings. Its not about what one gets from the gift. Although in the future you may get something back in the form of a true gift from someone else.  It will make you like giving the gift even more.

The only way to successfully live in this world is to give a genuine gift.

Passion

“Passion is a desire, insistence, and willingness to give a gift. I will not feel complete until I give a gift.“. It’s an insistence on doing important work.  Even in the face of people not accepting your gift you still need to push forward with relentless to make a difference, solve a problem, and create change that would help people.  Chose to make a difference instead of following a manual.

You may need to give up parts of your art in order for it to spread and make a difference.  While still having enough passion about it to not let go of the parts that truly matter. There is a middle ground that needs to be taken sometimes.

“Wait! Are You Saying That I Have to Stop Following Instructions and Start Being an Artist? Someone Who Dreams Up New Ideas and Makes Them Real? Someone Who Finds New Ways to Interact, New Pathways to Deliver Emotion, New Ways to Connect? Someone Who Acts Like a Human? Me?

Yes”

Art has made its way into so many common items in our lives.  Think about the iPhone and how its design and function transform millions of people.  It is now in all industries and most products.

The reason to choose creating art as a path is because now it is the path to security.

For example, look at corporate layoffs.  The people who can be outsourced or easily replaced are laid off.  The safest job belongs to the artist.

Passion isn’t project specific.  Some get their sense of self from acting passionate.  Your challenge may not be finding a better job or boss, but getting in touch with what it means to be passionate.

Making things happen is what passionate people do.

When someone is a linchpin they combine art and passion.

Art is what you do when no one can tell you exactly how to do it. You take personal responsibility, challenge the status quo, and change people.

Can Your Work Become Your Art?

What needs to change to allow you to create art during the time you spend at work? Creating connections, giving gifts, inventing, and finding joy? In every job there is a way to create art.

The job is not the work.  What you do with your soul and heart is the work.

Can you expand the same amount of emotional energy on the job as you do off it?

Marketing

In the past marketing was thought of as a scalable, predictable, measured way of reaching an audience.  Urging people to buy with discounts and coupons through as big of distribution as possible (read to interrupt as many people as the company could afford).  But, it is really the job of an artist.

Marketing is changing people through your work.  Seeing things as they are, and then creating pictures, stories, and interactions that change the marketplace.

Successful marketing isn’t learned by following what is laid out in a book. You won’t get great growth by following a spreadsheet that everyone else is using as well.

If it is easy to quantify, it’s worth less.

Case study – Jones Soda. The owner doesn’t care what any other companies do. He just does what he needs to do and does it in a unique way.  Putting customers pictures on the bottles, weird flavors, sayings, etc.  Jones peaked in value at 300 million.

This sort of an artist work can be done with virtually any product.  Even Tofu.

To dive more deeply into branding and marketing, Seth’s book called All Marketers Are Liars / Tell Stories is a great read. [Add link here once I complete notes on that book.]

You’re not born to do a certain kind of art. You can do all kinds of art.  Writing a blog, the way you interact with a person, a different way to use technology.. its all art.

Focus on an audience that you choose, and listen to them, and exclude others.  Make this sort of customer happy.  Forgetting about the people who don’t like what you are doing.

Just do something awesome. Its easy to get caught up in the crowd that wants to keep you like everyone else.

Think – What do I want? What do I want to see in the world?  And then create that.

The moment when someone wants someone to pay them to do something, or a boss to tell them what to do they are no longer creating art.  They are a person taking orders. Their job is to please their boss.  They lose the goal of changing their customer. When someone is in control of your outputs and movements you are a cog and apart of their system.  You’re not an artist.

Customers don’t care how hard you worked on something.  They care about themselves and if a product, service, or interaction changed them for the better.

This is why emotional labor is so much more valuable than physical labor. The emotional labor is what changes someone. People care about that.

Art is not created outside of a box with no rules. Because then you have nothing to react against. You can’t ship if you are too far outside of the box. You need to think along the edges of a box. Thats where things get done, an audience is, and the means for production is that can make an impact.

“the greets shortage in out society is an instinct to produce. To create solutions and hustle them out the door. To touch the humanity inside and connect to the humans in the marketplace.”

 Resistance and the Lizard Brain

The lizard brain only wants you to be safe and eat.  Fit in to the tribe for survival. It’s the reason your scared and not doing art right now. Why you’re not shipping.

Its the source of resistance. It wants you to shut up, sit down, and do your day job.

Your genius is where great insights, ideas, love, connection, and kindness come from.  Resistance keeps this part of us squandered.  It lives in the lizard brain.

You need to allow your genius from within to flourish.

Anguish will be in you if there is conflict between your ideas and the outside world.  The gap between the lizard brain wanting to be safe, and your genius wanting to speak out to the world.

Every time you take orders, and not create the manual yourself you are surrendering to resistance.

Resistance is really good at rationalization to keep you from doing things.  It is a constant daily battle.  Creating conflict on what needs to be done and what feels good. This is why people who know smoking is killing them continue to smoke.  The lizard brain is winning and they have no training to beat it.

The trick is to create an environment where the lizard brain sleeps.  Create new patterns and habits that controls the lizard brain.

This is likely why most people procrastinate.  They need the adrenaline, and sense of urgency of the deadline to push them to deal with the fear.  They can’t deal with the fear of completion until the fear of failure is greater.

Public speaking is the number one thing the lizard brain is scared of.  It will get you noticed and have massive eye contact. You could get criticized.

You can’t really reason with the lizard brain.  It is very difficult to change.  The best option is to invest in systems that help weaken resistance.

The voice in your head is often the lizard brain trying to teach your genius a lesson. It will often tell you that you are not good enough.  It’s afraid of being more productive so that you will actually have to ship. When you hear this in your head you have to not listen to it.  Stop doing the tasks to waste time and avoiding shipping.

Resistances main worry is that you might fail. In reality you will fail.  Probably a lot of times.  You need to embrace it as a learning experience.

You become a winner because you become good at losing.  You learn what doesn’t work each time and it brings you closer to what does work.

Don’t give up.

The people who seek out discomfort are the ones that make a difference.  Discomfort means something is changing and others are unlikely to do it.  Because they are busy hiding due to giving in to their lizard brain.

When you have a great backup plan.. you end up settling for the backup. When you say “I will try” instead of “I will” you let the lizard brain in and most likely he is going to win. The backup is a sabotage waiting to happen. You start to ask why you should take the risk when there is a comfortable backup plan.

People who succeed normally have nothing to lose, and no backup plan.

If you’re not willing to have bad ideas, you will never have good ones.  Every creative person will have a ton of bad ideas to every good one.  Keep creating bad ideas, and eventually some good ones will pop up.

You need to accept that you are a genius.  And recognize that voice in your head trying to squash it.  You are as capable as the next guy of inventing, great insights, and making a connection that makes a difference.

When you allow resistance to win and follow the rules your value goes down.  Because others are simply following the rules as well and you are easily replaceable.

“Well-paying employment requires that workers possess unique skills, abilities, and knowledge.  It also requires that the labor must be non-commoditized.  Most journalists share the same skill sets and the same approaches to stories, seek out the same sources, ask similar questions, and produce relatively similar stories.. The result is extraordinary sameness and minimal differentiation. ”

Doing more of the same things you were doing is not the answer.  You need to throw out the rule book and do things differently.  To do so requires facing resistance.

Temptation to kill the new things is because the new things might work.

Living without a map is scary.  The fear makes us follow someone else’s map, because if it was wrong it wasn’t our map.

Effort and planning are two tools to beat resistance before it beats you.

There are many books and classes that can help you reach your goals.  Although the failure rate of people that use them is very high.  Why? Resistance is stronger.

When resistance tells you not to do something, listen, read, attend, etc.  GO! Just do it.  Any route you take that doesn’t lead to success is the result of resistance.

Say what the lizard brain is doing out loud and it may help quiet it.

Whatever way the resistance is coming from is the way to go.  Head straight into it.  The closer you get to a break through the tougher resistance will fight you.  Do what your lizard brain is afraid of.  The thing you need to do is what the resistance wants to stop you from.

The goal is to quit the tasks you are doing because you are hiding.  Due to the lizard brain. Quit and push through what the lizard brain fears.

If art that you are going to create isn’t worth the effort you need to dream bigger.

People with great ideas are no good if you give in to resistance and don’t continue to fight it.  If you embrace the challenge you will have results and make a difference.

Refuse to do any sort of busywork like check email, and twitter. Don’t distract yourself with anything but your work.

It’s that race to completion after an idea is born that makes all the difference.

Get used to the feeling of resistance and don’t let it control you.  Don’t try and immediately get rid of it by eating that food, etc.  Just let it sit there and reality will show you that it wasn’t needed.  And you will stop worrying about things that cause anxiety.

Don’t scratch the itch. Don’t run from it or bargain with it.  Stay put. If the challenge is important enough you must overcome resistance.  Don’t keep going back for forth fleeing.  You must stay and sit with it. When the lizard knows you won’t back down it will back down.  You will then get control back.

Unchecked anxiety is the biggest barrier to your goals and yourself.

To launch a project successfully you want to sketch out the entire thing ahead of time.  Do all your changing ahead of time with a written deadline.  Then, you get the approvals you need and feedback. Start working and finish it.

Setup a system where you are playing the game you want to play.

Example – Grateful Dead didn’t want a gold record, their music on the radio, etc.  Their system was resistance proof because it allowed them to avoid having a judge and jury for their work.  They only played with people they liked, and enjoyed.  This didn’t alert the lizard brain.  This art can then be leveraged into more art.

Build a habit of writing things down, prioritizing the ideas, building them, and shipping it. Start now, today, and ship.

 Map Making

We must forge our own path and make our own map in this economy.

The first step is seeing the world as it is.  Keeping in mind our own world view and approaching reality with as little bias as possible.  You need to accept that people are difficult to change, and embrace their uniqueness that they bring to the table.  If you can do that you will go through the world with more bliss and effectiveness. While making better decisions.

It’s good to know that there are certain things that you are just not going to change. It maybe can’t be changed and may hurt your own goals in the process.

Accept the world as it is, and don’t be attached to any outcome, or how you want it to be.

Scarcity creates value. It is scarce to accept things the way they are, and then take action and work to change it for the better.

Successful people can take the past and future and put them together into something manageable.

The truth is that there can be no map.  If there was it wouldn’t be art.

Making the Choice

Sometime you don’t need to find a new job to get a new one.  Just stand up and start looking for more opportunities to lead, put yourself on the line, push through the dip and make things happen.

You have a choice to fit in, or stand out. You can’t do both.

If you give your boss the gift of art, initiative, insight, or connection they will be less likely to shop around and replace the commodity (you).

If your organization can’t live without a map, and you can’t change it, should you leave?

Find a boss that can’t live without a linchpin.  Who values your contribution, and will reward you with freedom and respect. Do the work and make a difference.

Every day is a new chance to choose.

You can choose to respect everyone, have dignity, and give the gift of art. Open yourself up to feedback on your art to help it spread. Focus on the constructive criticism.

If it doesn’t work and you are not changing anyone keep giving gifts.  Make more art and keep learning from it.  The only other option is becoming a cog again.

If you work for a company that insists that you be mediocre and conform, why stay there?  What are you building? It won’t be any challenge, or joy there.  Your skills are not increasing.  Your market value will actually be decreasing.

If you try to monetize your art and that thing you love to do most likely you will corrupt it.  Its important to do your art with no regard to money.

Doing what you love is important as ever.  If making a living at it needed.  The niche you choose should already have money flowing around and if you are successful will have money flowing to you. Loving what you do is almost equal to doing what you love.

The goal is to find a job, career, or business you can fall in love with.

If you choose wisely you can end up loving what you do to make money. If needed take a day job that allows you to do your art for free.  If you find your art is not paying the bills.  Just keep doing it, and you may find money starting to come in after that shift.

“What you’re doing might not be working, and you might not be able to do what you’re doing and get paid for it.  But I am certain that if you give enough, to the right people in the right way, your gifts will be treasured and your journey will be rewarded. Even if that’s not why you’re doing it.”

You can choose to change everything if you want to. You’re a genius and the world needs your contribution. Anyone that can overcome the voice in their head and has the insight to make the right map can become a successful linchpin.

Art will feed us, enrich, and gives us the security that we have lost.

Flaw in 80/20 Business

While reading Seth Godin’s book Linchpin.  He makes the case that Richard Branson only does about 5 minutes of highly valuable work a day.  The rest is spent doing work that just about anyone can do.

I found this to fly in the face of recent 80/20 teachers saying to keep whittling work down to where you are spending your whole day doing only highly valuable work. Outsource the low levels tasks.

While in theory this makes sense.

But, in reality I am coming to believe its not possible to do that highly valuable work constantly all day, everyday.  Time spend on regular tasks helps the mind and allows you not to rely so much on other people to get work done.

Meaningful Work

This article will be a living document that I will change/update as my philosophy develops more fully.

Meaningful work isn’t:

  • Depersonalized / faceless
  • Repetitive
  • Easily scaled
  • Minimal skills and effort
  • Someone else tells you exactly what to do through planning, controlling, and measuring
  • Outsourcing
  • Automated
  • Favors fast and cheap
  • Interchangeable work force
  • Lack of joy
  • Selling your time for money

Meaningful work is:

  • Having a close human connection (face to face) to the customer
  • Getting into a flow stay and achieving mindfulness when executing the work
  • A feeling of contributing to the greater good of a community
  • Can be found abundantly in building and fixing things
  • In service to an activity you feel is apart of a life well lived (these people have it figured out)
  • Striving for excellence
  • Working with great people and group culture
  • Ability to create – self directed
  • Remarkable
  • People deeply care about
  • Rare and valuable
  • Demands high skill level and experience
  • Transformation / development
  • Innovation/game changing
  • Art – Passionate, original, creative, and personal that challenges the status quo and changes the recipient
  • Joyful
  • Over-delivering

Principles by Ray Dalio

These notes are free from the following link:

http://www.bwater.com/Uploads/FileManager/Principles/Bridgewater-Associates-Ray-Dalio-Principles.pdf

I have always know that principles were an important framework for making choices.  Having done some work in this area in the past and forgetting about it.  I decided to revisit this topic as I found this article.

And am I glad I did.

Principles are concepts that can be applied over and over again in similar circumstances as distinct from narrow answers to specific questions. Every game has principles that successful players master to achieve winning results. So does life. Principles are ways of successfully dealing with the laws of nature or the laws of life. Those who understand more of them and understand them well know how to interact with the world more effectively than those who know fewer of them or know them less well. Different principles apply to different aspects of life—e.g., there are “skiing principles” for skiing, “parenting principles” for parenting, “management principles” for managing, “investment principles” for investing, etc—and there are over-arching “life principles” that influence our approaches to all things.

Further into the intro, “I am confident that whatever success Bridgewater and I have had has resulted from our operating by certain principles. Creating a great culture, finding the right people, managing them to do great things and solving problems creatively and systematically are challenges faced by all organizations. What differentiates them is how they approach these challenges.”

His companies success is the result of having very talented people operating by the principles he set forth.  The unique principles they follow lead to unique results if they are willing to adhere to them.  Like getting losing weight. It is as simple as calorie restriction.  If one can restrict calories they will lose weight.  Whether or not it is a health way method is a whole other topic.  But, if you are willing to do what it takes you can get the result you are after.

What is interesting to me at this point is if you follow Sam Carpenter and the work the system method, his results are generated by systems not principles.  But, his systems do include principles.  Which are apart of this three document system of a over arching mission, operating principles, and processes.  I am curious to see how Ray’s principles and way of doing things aligns with Sam’s.

If nothing else.  This may be a good exploration of principles and how to use them to create your operating principles document that is apart of Sam’s work the system framework.

Anyway.. lets continue.

Knowing what it takes is often half the battle.  Lets go back to our losing weight example.  If you follow the advice of a recent trend of eating a high fat diet, calories don’t matter, many small meals, etc.. your idea of what it takes could be flawed.  Even though you do what you think it takes you do not get the result you are after.  That is where you need to go back to the drawing board and research the what it takes part again and reevaluate.

Here we are going to discuss Ray’s idea of what it takes, and his life principles. His approach to getting what he wants, and how he manages.  When combined they show a picture of systematic pursuit of excellence and truth for the results that come along with this pursuit.

These principles are meant to use and think about as we adopt them into our own lives.  Don’t just blindly follow them. Reflect on them as you encounter your daily realities.  Use them to discover what works best for you.

Always ask yourself when evaluating a principle:

Is it true?

His management principles stem from his life principles.

I have a feeling that this is case for almost any aspect of principles.  You have your life principles which your systems are created by.  Then, you modify and build off them for a specific endeavor.  Whether its tennis, skiing, etc.. they all have their own principles for success.  BUT you also need a foundation of life principles to extend them from.

He breaks up the PDF in three parts:

  1. He explains principles and why they are necessary for getting what you want out of life.
  2. He breaks down his own life principles. How to use them in reality and how to avoid traps. Which if avoided can lead to a MUCH better life.
  3. Here is the part about his management principles and why he feels hiring the right people, and creating a great culture, managing them to excellence, and solving problems systematically to make good decisions is the key to success.

Another area he hints at here is that he also have investing principles.  Again… this shows how he is able to extend his life principles into other areas of his life and find success.

PART 1

Having principles is crucial to getting what we want out of life.  Understanding other peoples principles is also important to understand them better.  To do so requires talking about them.

  • What are principles
  • What makes them important
  • Where do they come from
  • Do you operate your life by them.  If so, what are they
  • How good do you think they will work, and why

Values are what you consider important.  To live a life according to what you think is important (values) you need principles. Principles are what connects your values to your actions that help you deal with reality.  Actions is what determines results. Turn to your principles when hard with a hard decision.

All successful people operate this way. Without a set of principles to operate from you will need to react to situations that pop up and  your choices may not align with your principles and instead by dictated by emotions.

While not following principles is not good for one person.  It is even worse for a company.  People will just bump into each other without understanding their own values, and how to align their actions accordingly.

Sometimes we create our own principles, and others we adopt from others.. such as religions, or legal systems. But adopting a pre-packed set of principles brings the conflict of aligning with your own true principles. Leading to a convict of actions versus values. Like a hypocrite that says he is apart of a religion but does not follow its principles.  Your principles need to be based on what you really value and believe in.

Your principles will set a standard of behavior.  An example is a relationship.  When formed yours, and their principles will determine how you interact.  If you and the other person have similar values and principles, then you will get along. If you don’t, you will constantly have conflict and misunderstandings.

Are the people who are closest to you similar on their values and principles? Are both of your values aligned?

What do you value most deeply?

Principles that are most valuable come from our own reflections from experiences we have had.

To be effective each principle must align with what you value. And you must always ask the question why?  For example if you have a principle of don’t steal. Why?  Empathy for the victim, fear of getting in trouble? This will help us understand and develop our principles to better align with our core values.

PART 2

Life is like a flowing river.  As you float through life you will encounter reality. You can’t stop the river, and you can’t prevent encounters. Your only source of control is how you approach these encounters.

Every person is a product of their environment, and our genes which give us a bias and different world view.

Ray comes from a middle class family where he didn’t do well in school. Mainly because he didn’t feel it was important to memorize what other people where telling him to memorize.  He had no internal motivation for doing so.  He began to work on things that he was interested in.  Such as making money.  Doing so he worked as a caddy and learned about stocks.  He then became interested in beating the market.

Some things he learned early on:

  • It isn’t easy for him to be confident that his opinions are right. In the market there is still a chance he is wrong.
  • Bad opinions can be very costly
  • To make money you need to be right when they are wrong.  Be an independent thinker and don’t follow along with the masses.
  • Work for what you want, not what others want you to work for.  All the work you need to do is to get you what you want.
  • Come up with the best independent opinions you can.  He started reading the annual company reports to get a feel for what companies were exciting
  • Get feedback on opinions by the smartest people you know to get feedback and see where you are wrong.  Their conclusions could be wrong, but look at their reasoning behind them. Their reasoning has to be correct. You can learn a lot by doing this.
  • Continue to be cautious and not over confident, and deal with the fact of not knowing.  To deal with not knowing Ray would continue to gather information, or try to eliminate his exposure to the risks he was unsure about. Try to hedge your bet for either way the coin flips.

By doing these things he learned how liberating and important it is to think for yourself.

In a nutshell, this is the whole approach that I believe will work best for you—the best summary of what I want the people who are working with me to do in order to accomplish great things. I want you to work for yourself, to come up with independent opinions, to stress-test them, to be wary about being overconfident, and to reflect on the consequences of your decisions and constantly improve.

Ray went to a local college after high school and loved it because he could study things he was interested in.  He enjoyed it and wasn’t forced to study.  He did well here.

I has a similar experience to Ray with schooling and can totally relate to this.

A good way to learn is to immerse yourself in something.  Ask questions.  Which once answered prompts more questions, which the cycle will continue until you reach a conclusion.

Another interesting thing he learned to do was meditate.  And he still continues to do it to this day.

Bridgewater was formed and he then learned more through his experience with the company:

  • Failure is in large part caused by not accepting and successfully dealing with realities of life. Achieving success is a matter of accepting and successfully dealing with realities.
  • Finding what is true is important even if it is a weakness or mistake.  Because you can then deal with it and move on, without it standing in your way
  • There is nothing to fear from the truth. This will expose your thoughts, and give you feedback that is critical to learning.
  • If being truthful is something you value, and you are not on the outside to please others.. you will have an inner conflict and lose touch with how you really feel and think. This goes both ways.  Its good for others to really say how they feel. Most problems are due from people having wrong theories in their heads. When you talk about someone behind their back you are not asking them for their perspective. Which is unethical and unproductive. Only say what you believe which is real integrity.
  • Everyone has weaknesses and makes mistakes.  What makes people different is their approach to them. Each mistake is a reflection of something you are doing wrong. So if you can figure out what you are doing wrong and learn from it you will be more effective. Working on your mistakes, problems and weaknesses will strengthen you. The pain of working through this process is what makes you appreciate your success as well as others appreciating it as well. Most people who become great go through this process and find ways around them faster and better than other people.

An interesting thing about Ray is that beyond the basics he is not too concerned with money.  He has found that it has not brought more joy into his life.

What he wanted was to have an interesting, diverse life filled with lots of learning.  Along with meaningful work and relationships. He feels he has done this through following his process as a young kid.

Fundamental Principles

We need to deeply understand, accept, and work with reality so we get what we want from life. It could be really knowing how and why people think and behave when dealing with them, on a material level how things work… such as if we do x we will get y. In other words we need to not wish for the world to be something we want, but become a realist and deal with it how it is.

There are a number of laws in the universe that all dreams or progress is achieved from when operating in a consistent way with them.  One can only hope to understand these laws and use them to get what you want. Flying and cell phones was just a matter of bending natural laws to what we wanted. A bad example is communism.  Their system sounded ok on paper, but was not congruent with human nature.

Truth – more precisely , an accurate understanding of reality- is the essential foundation for producing good outcomes.

Ray studies what moves the market, and people. Along with nature and is awe struck by the universes systems and making. Nature can help us understand the realities that affect us. Because man is subject to the same laws as nature in the universe.

Whether we get rewarded or punished is in large part whether we operate with natures laws or not.  Look at how the world work and try and operate in harmony with it. For example if you think of an animal hunting another animal in nature it is good because it improves the entire system, even though they are operating in self interest. It fosters evolution and improvement of the species, and if you changed anything about the process it would get worse.

“I believe that evolution, which is the natural movement toward better adaptation, is the greatest single force in the universe, and that it is good.  It affects the changes of everything from all species to the entire solar system. It is good because evolution is the process of adaptation that leads to improvement. So, based on how I observe both nature and humanity working, I believe that what is bad and most punished are those things that don’t work because they are at odds with the laws of the universe and they impede evolution.

I believe that the desire to evolve, i.e., to get better, is probably humanity’s most pervasive driving force. Enjoying your job, a craft, or your favorite sport comes from the innate satisfaction of getting better. Though most people typically think that they are striving to get things (e.g., toys, better houses, money, status, etc.) that will make them happy, that is not usually the case. Instead, when we get the things we are striving for, we rarely remain satisfied.

It is natural for us to seek other things or to seek to make the things we have better. In the process of this seeking, we continue to evolve and we contribute to the evolution of all that we have contact with. The things we are striving for are just the bait to get us to chase after them in order to make us evolve, and it is the evolution and not the reward itself that matters to us and those around us.

In other words, the sequence of 1) seeking new things (goals); 2) working and learning in the process of pursuing these goals; 3) obtaining these goals; and 4) then doing this over and over again is the personal evolutionary process that fulfills most of us and moves society forward.

I believe that pursuing self-interest in harmony with the laws of the universe and contributing to evolution is universally rewarded, and what I call “good.” Look at all species in action: they are constantly pursuing their own interests and helping evolution in a symbiotic way, with most of them not even knowing that their self-serving behaviors are contributing to evolution. Like the hyenas attacking the wildebeest, successful people might not even know if or how their pursuit of self-interest helps evolution, but it typically does.”

Society and self interest usually go hand in hand. Self interest pushes people to do difficult things that benefit them and benefit society. Then, society gives back to those people who provide it with what it wants.

How much money people make is dictated by how much they gave society what it wanted.  And doesn’t care how much that person wanted to make money. Although there are people who give society what it wants and are paid poorly.  But that is the law of supply and demand in effect.

This reminds me of Cal Newport’s work.  Basically saying something similar and that to have a great passionate career you need to offer the world rare and valuable skills to get the job characteristics that you want.

All of this is the productive adaptation which is seeking, obtaining, and pursuing new goals to help a person and society move forward.  It also applies in setbacks.  The person who learns and adapts to their new reality usually wins.  Just like in evolution. They see the changing landscape and figure out how to best adapt to it.

Because we are a unique species we have the ability to learn and evolve faster than others.

This ability to see the world as it changes and our own weaknesses through reflection is the greatest factor to success and eliminating pain from our lives.  We must be cautious in this process to not let our egos get in the way.

Life consists of an enormous amount of choices to make.  Each decision carries a consequence. So the quality of our lives depend on the choices we make. This is a learned skill and through introspection and experience we can get better.

Reality + Dreams + Determination = A Successful Life

Success is nothing more than getting what you want. What is key is figuring out exactly what you want and how to get it.

A couple key factors to feel successful he mentions again with having meaningful work and relationships.

 Your Most Important Choices

Again, the quality of our lives is the result of the choices we make. There are 5 big choices we must continually make that affect the outcome of our lives and how we move toward our goals.

  1. To evolve one must push their limits. Which is painful but required to get strength. It could be lifting weights, facing problems head on, etc. So you can either let pain stand in your way of progress, or understand how to manage pain to produce progress.Most people run when they feel pain. But, doing so you never learn to push through the barriers and you don’t grow and get progress. Work to develop a natural reaction to think deeply about pain, than to run from it and it will lead to rapid learning. Pain + Refection = Progress.  How big of an impediment is psychological pain to your progress?
  2. Ask yourself – Is it true? People who wish things were true compared to with what is really true create distorted pictures in their minds that make them make bad decisions.They avoid harsh realities. Knowing what is true is good. It is the first step towards making good decisions. How much do you let what you wish was true stand in the way of what is really true?
  3. People who are worried about looking good usually don’t know their weaknesses and don’t expose them. So they never learn how to deal with their weaknesses. People who are confident in making the best possible decisions are rarely confident that they have the best answers. What are your weaknesses? If you can figure them out you can accelerate your movement forward. Study them constantly. How much do you worry about looking good versus actually being good?
  4. Deal with first, second, and third order consequences instead of just the first. For example if getting fit is what you want.  You need to exercise which first order consequences are physical pain, and suck time.  But if you can get through those you will get healthier and better looking (second order). Most of the time not dealing with the first order stops us from getting what we really want. It is almost as the universe makes getting something difficult on purpose to weed out the strong… for better evolution. People who choose what they really want, and avoid temptations and get over their pains that drive them away from what they really want are much more probable to have successful lives. How much do you respond to first order consequences at the expense of the second and third?
  5. People who blame bad outcomes on anyone or anything other than themselves. Successful people know that bad things happen to everyone. It is their responsibility to deal with the challenges that come their way. Nature is testing them and will not offer sympathy. How much do you let yourself off the hook, and not hold yourself accountable for your success?

Ray sums it all up by saying;

I believe that you can probably get what you want out of life if you can suspend your ego and take a no-excuses approach to achieving your goals with open-mindedness, determination, and courage, especially if you rely on the help of people who are strong in areas that you are weak.

One trait that he thinks stands out above the rest that allow one to get the results they seek is character. Character is the ability to do difficult things when you don’t want to do, but will give you the results you are after.

So it is basically a  personal choice and making those decisions that lead to results is hard. But as the law of nature says that when you push your boundaries you grow, you will be stronger and get better results which will lead to more motivation.  The more you stay in this stretch zone the more character you will build and the less character that will be required to operate at a high level of performance. Which means if you don’t let up on yourself you will begin to be comfortable at a certain level of pain and evolve at an accelerated pace.

Whether or not you achieve your goals is a test of what you are made of. 

Those who are most successful are people who are able to step back and do higher level thinking. They can design a machine with the right people, doing the right things to get what they want.  They are able to see and adjust the results that their machine is producing with their goals in mind.

Goals  >  Machine (design and people) > Outcomes

It is a feedback loop.

Your goals will determine the machine that you create. The machine will create results which you then compare to your goals and make adjustments accordingly.

Your most important role is to do this type of higher level thinking to get the results you want.

This line of thinking is in line with Sam Carpenter’s work in that you need to look at the processes that lead to a result, and change the process if the results need changing.

In this higher level thinking there will be two of yourself.  There is the designer you that sets back and evaluates the machine.  And there is the you that is apart of the people of the machine.  But, you don’t have to be the only one in the machine, and it is most likely better if you can get others that fit the desired role better.

Sometimes you are not the best person to do a job.  Such as if you want a winning basketball team.  By putting yourself on the team in a position that you are no good at hurts the results that the machine will produce.  Nobody can do everything well and firing yourself to get you closer to you goal is a smart decision.

Most people do not see themselves and others in this objective way.  Which prevents them from living up to their potential.

How much time are you spending working on the machine than in the doing?

Ray’s 5 Step Process to Getting What You Want Out of Life

  1. Choose your goals with a written plan which will determine your direction
  2. Identify problems that stand in your way and do not tolerate them. Either you react to the pain, or like a master problem solver.
  3. Be calm and accurately diagnose these problems
  4. Design a plan to get around these problems with tasks that will help get you closer to your goals
  5. Implement these plans and take action

There are some tips to make this process work.

You must approach these things as separate steps and not blur them together. Example = when setting goals just set goals and don’t worry about how to achieve them. When you encounter problems just work on solving problems. The process is iterative and each step will change and improve the following steps. Blurring them together will hurt performance and cause confusion.

Each of these steps requires different talents and disciplines.  Recognize your weaknesses and design around them.

It is critical to approach this with a clear mind and rational than than emotional. If emotions are getting the best of you seek guidance from calm and thoughtful others.

Treat life like a game! Your mission is to figure out how to get around challenges and get you your goals. As you skill level grows you will get to higher levels of life.  But you must recognize that you wont have all the skills. You will need to figure out how to get them though.  Through leaning them, or finding others who already have them.

This game will cause you to be uncomfortable at times.  But if you work through the pain and reflect on it you will improve your chances at getting what you want out of life.

Its important to note that life will give you what you deserve not what you want. It is up to you to take responsibility to connect what you want with what you need to do to get it. And then do those things. Which are ofter difficult, but required to get the results.  But you will get what you deserve.

Thats how it is so you might as well accept it. Once you play the game for awhile you will get used to pain and it will become easier. It pays to push through things at a pace you can handle.

Doing things that will make you successful is a lot easier than being unsuccessful. Exscaping life’s challenges may give you some pleasure in the moment, but the second and third order consequences of this approach over time will lead to a painful life.

You will still make mistakes. But learning comes through these mistakes and you figure out how to play the game better. And there will be plenty of more chances.

 Digging Deeper in the Steps

Setting Goals – You can have pretty much whatever you want, but not everything.  This step forces you to think about what you really want out of life, and what you can possibly get.  You are forced to reject some thing in order to get more of what you do want.

If not followed this leads to pursuing too many goals and accomplishing none of them.

Just remember its not really important what is NOT available to you, but that the possibilities of what IS available is so great. Example.  People who lose a body function.  IF they accept and remain open to the possibilities that they still have they will be happy.  Where if they focus on the lose and what they cannot do anymore they will not be happy.

To achieve your goals you have to prioritize and reject some of the good alternatives. So that you have the time and resources to put in the right place on the most important goals.

Goals are things you want to achieve.  Desires are things you want that can prevent you from obtaining success. Desires are typically first order consequences. Your desire may be to eat an unhealthy food that is tasty.  But, if your goal is physical fitness then that second order consequence is not being met along with your goal of fitness.

So basically desires are bad and goals are good.   And you can pursue any goal you want.  Just make sure you know the consequences of doing so.

A common reason people fail is they get caught up in the day to day tasks and forget about the goal.  Submitting to desires and failing the goal.

Set goals without knowing if you can achieve them or not.  Invest in the journey and allow a long time and many revisions until you can accomplish the goal. It requires some faith, but as you go through this process you will gain confidence and faith in it.

You can achieve almost anything if you work hard, and think creatively.  In life you can also cheat in the fact that you do not need to know all the answers.  You can ask others, or have them do things for you, etc.  Wherever answers come from though it is your responsibility to find them.

Its important to point out that even if you set goals you don’t know how to accomplish you are going to think through them when you design the machine.  In that step if there needs to be some adjustment you can then circle back to the goals and tweak them.

The more creative I am the less hard I have to work

If I fail to reach a goal it is just because I have not been creative enough, or determined enough to do what it takes.  Then circle back and figure out what you need to do about the situation.

Goals don’t have to be just things you want but don’t have yet. They might be keeping what you do have, minimizing loss, etc.  Sometimes life will throw you setbacks and you just have to make the best of it.  Its like golf.  Sometimes you land in the fairway, and sometimes in the rough.  You have to learn the best way to play it where it lies and move forward toward your goal.

How well do you know what you want the most out of life?

What are your most important goals?

How confident that you assessment of setting the correct goals is correct?  Why?

Seeing and Not Tolerating problems –  After setting goals you must develop a plan or design with tasks and execute the tasks.  Along the way problems will creep up and you will need to adjust the plan to get around these obstacles. Thats why you need to see and get rid of these problems.

Most problems are potential improvements screaming at you.  The more painful the problem the louder it screams. You need to see this, and not tolerate them.

If you can’t see the problem you can’t fix it. Most people who can’t see their problems are most likely caused by a lack of will, or talent or skill;

  • They can be harsh realities that people don’t want to deal with
  • Thinking of problems can lead to anxiety and stand in the way of progress.
  • People worry more about appearing like they don’t have a problem rather than seeing their weaknesses and problems.
  • Sometimes people are not perceptive enough.
  • Some can’t see big problems from small ones.

You can get help from others if this is an area you struggle with. But you must push through the pain and deal with your problems. Knowing you will end up in a much better place.

Its important during this process to remain centered and logical. Its tempting to let your emotions get the best of you. Or, to blame something or someone else, but that will get you no where.

Try to look at problems as a detached observer would.

The pain you are feeling is growing pains.  And it is a test of character that will reward you if you push through it.

How good are you are perceiving problems?

How confident are you in this and that you are correct? Why?

It is important you really specify your problems to find the correct solutions. If you have a will issue you need to work on strengthening your will.  Start small and build up. If it is a lack of skill you can then solve this by additional training.

Dont confuse problems with causes.  I can’t get enough sleep is not a problem.  It is the cause of some sort of problem. What exactly is the problem?

Now that you know the problem.  Do not tolerate it.  Get the help needed or do the work needed to solve that problem.

Make a list of problems.  And don’t worry about solving them.  Just get a clear picture of your problems first.

Diagnosing Problems 

You will be much better off if you focus on diagnosis and design rather than jumping to solutions. Most people just jump to a solution. But you need to spend the time to properly figure out the problem and design the solution for a lasting solution.

You must get at the root causes and stay logical and calm when doing so. You must understand, accept, and successfully deal with reality in order to mover toward your goals.

More than anything the difference between those people that live up to their potential, and those that don’t is the willingness to look at themselves and others objectively.

If you can get pleasure out of pain, because you know its just growing pains you will make massive progress.

How willing are you to touch the nerves and discuss yours and other problems?

Are you willing to get to the root causes?  Like what people are like?

Are you good at seeing patterns and boiling them down to the root causes?

Why do you think this way about these things?

Designing the Plan

Design will occur when you crete your plan for your goals, and when you encounter problems along the way.

Creating the design is like creating a movie script.  You will visualize who will do what over time in order to achieve a goal.  Visualize a goal or problem, and then see the solution. The key is to design solutions so that you change the way you do things (system) so that problems do not occur again.

How will things come together and unfold over time. Visualize your past, present and future like a movie of how you would like it play out.

Then write out the plan so that you don’t lose sight of it and its detailed actions.

How good are you at visualizing.. and are you confident about it? Why?

Remember though – Design is before doing.  Your design will give you your to do list.

Doing the Tasks

It is critical to know each day what you need to do and to execute it. Make yourself do what needs to be done.

You need to know you and others are following the plan with clear benchmarks.

Ideally you want to have someone else measure whether progress is being made and not yourself.

How good are you at pushing through to the finish line? Why?

Always remember that tasks are meant to achieve goals. Don’t lose sight of this connection. Changing goals often is a sign of not wanting to put in the consistent work to achieve them.

Rays Best advice is;

Ask yourself what you want, then ask what is true, then what should be done about it. If you ask and honestly answer these questions you will move much faster towards what you want out of life.

Then ask yourself what is your biggest weakness that stands in your way of getting what you want?

You can get what you want out of life if you can open-mindedly reflect, with the help of others, on what is standing in your way and then deal with it.

What weakness do you repeatedly run into that stands in your way?

Find help from people who have strengths in your weak areas.

Qualities needed at each step

  1. Setting goals – higher level thinking, synthesis, visualization, prioritization
  2. See and don’t tolerate problems – perception, intolerance of badness, synthesis
  3. Diagnose the problems of root causes – Hyper logical, willing to touch the nerve, seeing multiple possibilities
  4. Design a plan for eliminating problems – Visualization, practicality, creativity
  5. Do what is set out in the plan – Self discipline, good work habits, results orientation, proactivity

At which step do you have the most problem?

Which qualities do you wish you had more of?

Values > Goals > Problems > Diagnoses > Designs > Tasks

And to sum up things to consider when designing and implementing;

  • Life is like a game where you are working around challenges to get to your goals
  • You get better at the game with practice
  • The game consists of a series of choices that have consequences
  • You cant stop the problems and choices from coming at you, so its better to learn how to deal with them
  • You have the freedom to make whatever choices you want, but its best to keep the consequences in mind
  • The pain of problems is a call to find solutions, instead of a reason for inaction and unhappiness, so its not smart to be upset at challenges and problems that come your way
  • We all evolve at different paces. It is up to you to decide how fast you want to evolve
  • The process gets better with the better you can honestly assess your strengths and weaknesses and adapting to them

 

 Part 3 Ray’s Management Principles

While the above shows why Ray feels it is critical to have goals to get what you want out of life.  It is also true for any group of people as well. Individuals can choose any values and principles that they want. But when working in a group people must agree on values and principles.

These values and principles must be clear (their culture), and there way of being will show in everything they do. It will drive the actions of people in the group.  The process:

Group goals > group problems > group diagnoses > group designs > group doing

Having a great culture is only half of the success equation.  The other half is having great people. These people must have the values, abilities, and skills that fit the companies culture.

Having a great culture and people will lead to a great company that can twist and turn to where it needs to go.   But, just like yourself.. you need to know where you want to go. And so does a company.

The company is a machine.  And the machine produces outcomes that are apart of the feedback loop and are used to monitor the machines performance. If outcomes are not in line with the companies goals then something must be wrong with the companies people, or culture.

Find out what is wrong, design a system to fix it, put fixes into action, and the machine will evolve.

Goals > Machine (culture & people included) > outcomes

The more you look at this process and make improvements the faster the machine will evolve.

If the mistakes and problems of the machine are not studied and fixed it will be a slow evolution process if at all.

How you manage your feedback loops could be the difference of a great company and a bad one.

Ray setup Bridgewater to follow some similar principles as himself.  First off it follows meaningful work, and relationships. That are gained by seeking the truth with excellence along with great people. Through this confident striving everyone will evolve together.

Bridgewater is a company which together

  • work for what they want and not what other want of them
  • come up with the best independent opinions they can muster to move toward their goals
  • stress test their opinions by having the smartest people they know challenge them so they can figure out where they are wrong
  • ok with not knowing and not over confident
  • wrestle with reality, experiencing the results of their decisions, and reflecting on what they did to produce them so that they can improve
  • understand how to manage pain to produce progress and not let it stand in the way
  • face harsh realities and don’t avoid them
  • worry about achieving their goal and not just looking good
  • make their decisions on 1, 2, and 3rd order consequences not just first
  • hold themselves accountable

This way of being is challenging, but it is the way to get the most out of life. This works by cause-effect and has been proven to work over many years.

How to Figure out this Way of Being

  1. Ask yourself what you want
  2. Ask what is true
  3. what should be done about it

If you do this you will evolve much faster and get what you want out of life.

 

To Get the Culture Right… 

1) Trust in Truth So…

 2) Realize that you have nothing to fear from truth. Understanding, accepting, and knowing how to effectively deal with reality are crucial for achieving success. Having truth on your side is extremely powerful. While the truth itself may be scary—you have a weakness, you have a deadly disease, etc.—knowing the truth will allow you to deal with your situation better. Being truthful, and letting others be truthful with you, allows you to explore your own thoughts and exposes you to the feedback that is essential for your learning. Being truthful is an extension of your freedom to be you; people who are one way on the inside and another on the outside become conflicted and often lose touch with their own values. It’s difficult for them to be happy, and almost impossible for them to be at their best. While the first-order effects of being radically truthful might not be desirable, the second- and third-order effects are great.

Do you agree with this? 

 3) 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. 

4) Be extremely open. Openness leads to truth and trust. Being open about what you dislike is especially important, because things you don’t like need to be changed or resolved. Discuss your issues until you are in synch or until you understand each other’s positions and can determine what should be done. As someone I worked with once explained, “It’s simple – just don’t filter.” The main reason Bridgewater performs well is that all people here have the power to speak openly and equally and because their views are judged on the merits of what they are saying. Through that extreme openness and a meritocracy of thought, we identify and solve problems better. Since we know we can rely on honesty, we succeed more and we ultimately become closer, and since we succeed and are close, we are more committed to this mission and to each other. It is a self-reinforcing, virtuous cycle.

Do you agree with this? 

5) Have integrity and demand it from others. Integrity comes from the Latin word integer, meaning “one.” People who are one way on the inside and another way outside lack integrity; they have duality. The second- and third-order effects of having integrity and avoiding duality are great. Thinking solely about what’s accurate instead of how it is perceived helps you to be more focused on important things. It helps you sort the people you are around and the environments you are in. It improves the organization’s efficiency and camaraderie because the secret things that people think and don’t say to each other drive resentment and key issues underground and don’t lead to improvement. Having nothing to hide relieves stress. It also builds trust. For these reasons:

5a) Never say anything about a person you wouldn’t say to them directly, and don’t try people without accusing them to their face. Badmouthing people behind their backs shows a serious lack of integrity and is counterproductive. It doesn’t yield any beneficial change, and it subverts both the people you are badmouthing and the environment as a whole. Next to being dishonest, it is the worst thing you can do at Bridgewater. Criticism is both welcomed and encouraged at Bridgewater, so there is no good reason to talk behind people’s backs. You need to follow this policy to an extreme degree. For example, managers should not talk about people who work for them without those people being in the room. If you talk behind people’s backs at Bridgewater you are called a slimy weasel.

5b) Don’t let “loyalty” stand in the way of truth and openness. In some companies, employees hide their employer’s mistakes, and employers do the same in return. In these places, openly expressing your concerns is considered disloyal, and discouraged. Because it prevents people from bringing their mistakes and weaknesses to the surface and because it encourages deception and eliminates the subordinates’ right of appeal, unhealthy loyalty stands in the way of improvement. I believe in a truer, healthier form of loyalty, which does the opposite. Healthy loyalty fosters improvement through openly addressing mistakes and weaknesses. The more people are open about their challenges, the more helpful others can be. In an environment in which mistakes and weaknesses are dealt with frankly, those who face their challenges have the most admirable character. By contrast, when mistakes and weaknesses are hidden, unhealthy character is legitimized.

6) Be radically transparent. Provide people with as much exposure as possible to what’s going on around them. Allowing people direct access lets them form their own views and greatly enhances accuracy and the pursuit of truth. Winston Churchill said, “There is no worse course in leadership than to hold out false hopes soon to be swept away.” The candid question-and-answer process allows people to probe your thinking. You can then modify your thinking to get at the best possible answer, reinforcing your confidence that you’re on the best possible path.

6a) Record almost all meetings and share them with all relevant people. Provide tapes of all meetings that don’t contain confidential information to enhance transparency. Of course, there are some times when privacy is required. If someone gives you confidential information, keep it confidential until you have permission to disclose it.

7) Don’t tolerate dishonesty. People typically aren’t totally honest, which stands in the way of progress, so don’t tolerate this. There’s an adjustment process at Bridgewater in which one learns to be completely honest and expect the same from others. Increasingly you engage in logical, unemotional discussions in pursuit of truth in which criticisms are not viewed as attacks, but as explorations of possible sources of problems.

7a) Don’t believe it when someone caught being dishonest says they have seen the light and will never do that sort of thing again. Chances are they will. The cost of keeping someone around who has been dishonest is likely to be higher than any benefits.

8) Create a Culture in Which It Is OK to Make Mistakes but Unacceptable Not to Identify, Analyze, and Learn From Them So…

9) Recognize that effective, innovative thinkers are going to make mistakes49 and learn from them because it is a natural part of the innovation process. For every mistake that you learn from you will save thousands of similar mistakes in the future, so if you treat mistakes as learning opportunities that yield rapid improvements you should be excited by them. But if you treat them as bad things, you will make yourself and others miserable, and you won’t grow. Your work environment will be marked by petty back-biting and malevolent barbs rather than by a healthy, honest search for truth that leads to evolution and improvement. Because of this, the more mistakes you make and the more quality, honest diagnoses you have, the more rapid your progress will be. That’s not B.S. or just talk. That’s the reality of learning.*50

*49 Thomas Edison said about failure: “I have not failed. I’ve just found 10,000 ways that don’t work.” “I am not discouraged, because every wrong attempt discarded is another step forward.” “Results! Why, man, I have gotten a lot of results. I know several thousand things that won’t work.” “When I have fully decided that a result is worth getting I go ahead of it and make trial after trial until it comes.” “Many of life’s failures are men who did not realize how close they were to success when they gave up.” *50 A good book about this is Einstein’s Mistakes by Hans Ohanian. 

10) Do not feel bad about your mistakes or those of others. Love them! Remember that 1) they are to be expected, 2) they’re the first and most essential part of the learning process, and 3) feeling bad about them will prevent you from getting better. People typically feel bad about mistakes because they think in a short-sighted way that mistakes reflect their badness or because they’re worried about being punished (or not being rewarded). People also tend to get angry at those who make mistakes because in a short-sighted way they focus on the bad outcome rather than the educational, evolutionary process they’re a part of. That’s a real tragedy. I once had a ski instructor who had taught Michael Jordan, the greatest basketball player of all time, how to ski. He explained that Jordan enjoyed his mistakes and got the most out of them. At the start of high school, Jordan was an unimpressive basketball player; he became a champion because he loved using his mistakes to improve. Yet despite Jordan’s example and the example of countless other successful people, it is far more common for people to allow ego to stand in the way of learning. Perhaps it’s because school learning overemphasizes the value of having the right answers and punishes wrong answers. Good school learners are often bad mistake-based learners because they are bothered by their mistakes. I particularly see this problem in recent graduates from the best colleges, who frequently shy away from exploring their own weaknesses. Remember that intelligent people who are open to recognizing and learning from their weaknesses substantially outperform people with the same abilities who aren’t similarly open.

11) Observe the patterns of mistakes to see if they are a product of weaknesses. Connect the dots without ego barriers. If there is a pattern of mistakes, it probably signifies a weakness. Everyone has weaknesses. The fastest path to success is to know what they are and how to deal with them so that they don’t stand in your way. Weaknesses are due to deficiencies in learning or deficiencies in abilities. Deficiencies in learning can be rectified over time, though usually not quickly, while deficiencies in abilities are virtually impossible to change. Neither is a meaningful impediment to getting what you want if you accept it as a problem that can be designed around.

12) Do not feel bad about your weaknesses or those of others. They are opportunities to improve. If you can solve the puzzle of what is causing them, you will get a gem – i.e., the ability to stop making them in the future. Everyone has weaknesses and can benefit from knowing about them. Don’t view explorations of weaknesses as attacks. A person who receives criticism – particularly if he tries to objectively consider if it’s true – is someone to be admired.

13) Don’t worry about looking good – worry about achieving your goals. Put your insecurities away and get on with achieving your goals. To test if you are worrying too much about looking good, observe how you feel when you find out you’ve made a mistake or don’t know something. If you find yourself feeling bad, reflect – remind yourself that the most valuable comments are accurate criticisms. Imagine how silly and unproductive it would be if you thought your ski instructor was blaming you when he told you that you fell because you didn’t shift your weight properly. If a criticism is accurate, it is a good thing. You should appreciate it and try to learn from it.

14) Get over “blame” and “credit” and get on with “accurate” and “inaccurate.” When people hear, “You did XYZ wrong,” they have an instinctual reaction to figure out possible consequences or punishments rather than to try to understand how to improve. Remember that what has happened lies in the past and no longer matters, except as a method for learning how to be better in the future. 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 backwards and can cause major problems. Worrying about “blame” and “credit” or “positive” and “negative” feedback impedes the iterative process essential to learning.

15) Don’t depersonalize mistakes. Identifying who made mistakes is essential to learning. It is also a test of whether a person will put improvement ahead of ego and whether he will fit into the Bridgewater culture. A common error is to say, “We didn’t handle this well” rather than “Harry didn’t handle this well.” This occurs when people are uncomfortable connecting specific mistakes to specific people because of ego sensitivities. This creates dysfunctional and dishonest organizations. Since individuals are the most important building blocks of any organization and since individuals are responsible for the ways things are done, the diagnosis must connect the mistake to the specific individual by name. Someone created the procedure that went wrong, or decided we should act according to that procedure, and ignoring that fact will slow our progress toward successfully dealing with the problem.

16) Write down your weaknesses and the weaknesses of others to help remember and acknowledge them. It’s unhealthy to hide them because if you hide them, it will slow your progress towards successfully dealing with them. Conversely, if you don’t want them and you stare at them, you will inevitably evolve past them.

17) When you experience pain, remember to reflect. You can convert the “pain” of seeing your mistakes and weaknesses into pleasure. If there is only one piece of advice I can get you to remember it is this one. Calm yourself down and think about what is causing your psychological pain. Ask other objective, believable parties for their help to figure it out. Find out what is true. Don’t let ego barriers stand in your way. Remember that pains that come from seeing mistakes and weaknesses are “growing pains” that you learn from. *51 Don’t rush through them. Stay in them and explore them because that will help build the foundation for improvement. It is widely recognized that 1) changing your deep-seated, harmful behavior is very difficult yet necessary for improvement and 2) doing this generally requires a deeply felt recognition of the connection between your harmful behavior and the pain it causes. Psychologists call this “hitting bottom.” Embracing your failures is the first step toward genuine improvement; it is also why “confession” precedes forgiveness in many societies. *52 If you keep doing this you will learn to improve and feel the pleasures of it.

51 If you recognize short-term failure as a step toward long-term success, which it really is if you learn from it, you won’t be afraid of it or made uncomfortable by it and you will approach all of your experiences as learning experiences, even the most difficult ones. 52 Ego often stands in the way of acknowledging your weaknesses (which is the essential first step in overcoming them), like being afraid to ask a question because people might think you’re stupid because you don’t know something. Yet acknowledging those weaknesses (e.g., “I know I‘m a dumb shit, but I’d just like to know…”) helps you move beyond ego toward learning and improving. 

18) Be self-reflective and make sure your people are self-reflective. This quality differentiates those who evolve fast from those who don’t. When there is pain, the animal instinct is ‘fight or flight’ (i.e., to either strike back or run away) – reflect instead. When you can calm yourself down, thinking about the dilemma that is causing you pain will bring you to a higher level and enlighten you, leading to progress. That is because the pain you are feeling is due to something being at odds – maybe it’s you encountering reality, such as the death of a friend, and not being able to accept it. If when you are calm, you can think clearly about what things are at odds, you will learn more about what reality is like and how to better deal with it. It really will produce progress. If, on the other hand, the pain causes you to tense-up, not think, feel sorry for yourself, and blame others, it will be a very bad experience. So, when you are in pain, try to remember: Pain + Reflection = Progress. It’s pretty easy to determine whether a person is reflective or deflective: self-reflective people openly and objectively look at themselves while deflective people don’t.

19) Teach and reinforce the merits of mistake-based learning. We must bring mistakes into the open and analyze them objectively, so managers need to foster a culture that makes this normal and penalizes suppressing or covering up mistakes. Probably the worst mistake anyone can make at Bridgewater is not facing up to mistakes – i.e., hiding rather than highlighting them. Highlighting them, diagnosing them, thinking about what should be done differently in the future, and then adding that new knowledge to the procedures manual are all essential to our improvement.

19a) The most valuable tool we have for this is the issues log (explained fully later), which is aimed at identifying and learning from mistakes. Using this tool is mandatory because we believe that enforcing this behavior is far better than leaving it optional.

20) Constantly Get in Synch So…

21) Constantly get in synch about what is true and what to do about it. Getting in synch helps you achieve better answers through considering alternative viewpoints. It can take the forms of asking, debating, discussing, and teaching how things should be done. Sometimes it is to make our views on our strengths, weaknesses, and values transparent in order to reach the understanding that helps us move forward. Sometimes it is to be clear about who will do what and the game plan for handling responsibilities. So this process can be both a means of finding the best answers and pushing them ahead. Quality conversations about what is true and what should be done will produce better outcomes and many fewer misunderstandings in the future.

22) Talk about “Is it true?” and “Does it make sense?” In a culture that values both independent thinking and innovation, each individual has both the right and the obligation to ensure that what they do, and what we collectively do, in pursuit of excellence, makes sense to them. So, get in synch about these things.

23) Fight for right. Discuss or debate important issues with the right relevant parties in an open-minded way until the best answers are determined. This process will maximize learning and mutual understanding. Thrash it out to get to the best answer.

24) Be assertive and open-minded at the same time. Just try to find out what is true. Don’t try to ‘win’ the argument. Finding out that you are wrong is even more valuable than being right, because you are learning. 24a) Ask yourself whether you have earned the right to have an opinion. Opinions are easy to produce, so bad ones abound. Knowing that you don’t know something is nearly as valuable as knowing it. The worst situation is thinking you know something when you don’t.

24b) Recognize that you always have the right to have and ask questions. 

24c) Distinguish open-minded people from closed-minded people. Open-minded people seek to learn by asking questions; they realize that what they know is little in relation to what there is to know and recognize that they might be wrong. Closed-minded people always tell you what they know, even if they know hardly anything about the subject being discussed. They are typically made uncomfortable by being around those who know a lot more about a subject, unlike open-minded people who are thrilled by such company.

24d) Don’t have anything to do with closed-minded, inexperienced people. They won’t do you any good and there’s no helping them until they open their minds, so they will waste your time in the meantime. If you must deal with them, the first thing you have to do is open their minds. Being open-minded is far more important than being bright or smart.

24e) Be wary of the arrogant intellectual who comments from the stands without having played on the field. And avoid that trap yourself.

24f) Watch out for people who think it’s embarrassing not to know. They’re dangerous.

25) Make sure responsible parties are open-minded about the questions and comments of others. They are required to explain the thinking behind a decision openly and transparently so that all can understand and assess it. Further, in the event of disagreement, an appeal should be made to either the manager’s boss or an agreed-upon, knowledgeable group of others, generally including people more believable than and senior to the decision-maker. The person(s) resolving the dispute must do this objectively and fairly; otherwise our system will fail at maintaining its meritocracy of ideas.

26) Recognize that conflicts are essential for great relationships because they are the means by which people determine whether their principles are aligned and resolve their differences. I believe that in all relationships, including the most treasured ones, 1) there are principles and values each person has that must be in synch for the relationship to be successful and 2) there must be give and take. I believe there is always a kind of negotiation or debate between people based on principles and mutual consideration. What you learn about each other via that “negotiation” either draws you together or drives you apart. If your principles are aligned and you can work out your differences via a process of give and take, you will draw closer together. If not, you will move apart. It is through such open discussion, especially when it comes to contentious issues, that people can make sure there are no misunderstandings. If that open discussion of differences doesn’t happen on an ongoing basis, the gaps in perspectives will widen until inevitably there is a major clash. Ironically, people who suppress the mini-confrontations for fear of conflict tend to have huge conflicts later, which can lead to separation, precisely because they let minor problems fester. On the other hand, people who address the mini-conflicts head-on in order to straighten things out tend to have the great, long-lasting relationships. That’s why I believe people should feel free to say whatever they really think. 26a) Expect more open-minded disagreements at Bridgewater than at most other firms. They fuel the learning that helps us be at our best. Sometimes when there are disagreements, people get angry. But you should remind them that the management at most other companies doesn’t welcome disagreement or encourage open debate. As a result, there is less of both. So instead of getting angry, they should welcome the fact that disagreements and open debate are encouraged here.

26b) There is giant untapped potential in disagreement, especially if the disagreement is between two or more thoughtful people - yet most people either avoid it or they make it an unproductive fight. That’s tragic.*53

27) Know when to stop debating and move on to agreeing about what should be done. I have seen people who agree on the major issues waste hours arguing over details. It’s more important to do big things well than to do small things perfectly. Be wary of bogging down amid minor issues at the expense of time devoted to solidifying important agreements. 27a) However, when people disagree on the importance of debating something, it should be debated. Operating otherwise would essentially give someone (typically the boss) a de facto veto right.

27b) Recognize that “there are many good ways to skin a cat.” Your assessment of how responsible parties are doing their jobs should not be based on whether they’re doing it your way but whether they’re doing it in a good way.

*53 Most people have a tough time disagreeing about the most trivial things, like whether they like the same restaurant, yet are happy to confidently express their opinions, however badly they are formed, if they get them out first. As a result, there is an overabundance of confident bad opinions around and very few thoughtful conclusions arising from learning from each other. It is common for conversations to be exchanges of sentences that begin “I think…” followed by their conclusions, and both parties believing that they had a good conversation and feeling good about each other, even though nothing was accomplished. If most people did the opposite—i.e., if they sought out and open-mindedly explored their disagreements—it would produce a radical increase in learning, and the world would be a much better place. 

27c) For disagreements to have a positive effect, people evaluating an individual decision or decision-maker must view the issue within a broader context. For example, if the responsible party being challenged has a vision, and the decision under disagreement involves a small detail, evaluate the decision within the context of the broader vision. The ensuing discussion resulting from challenging someone’s decision will help people understand all the considerations behind it.

27d) Distinguish between 1) idle complaints and 2) complaints that are meant to lead to improvement. 

28) Appreciate that open debate is not meant to create rule by referendum. It is meant to provide the decision-maker with alternative perspectives in anticipation of a better answer. It can also be used to enhance understanding of others’ views and abilities and, over time, assess whether someone should be assigned a responsibility. It doesn’t mean there can’t be some designs in which a group oversees a person. But that’s designed and embedded in the organizational structure, specifying the people responsible for oversight who are chosen because of their knowledge and judgment.

29) Evaluate whether an issue calls for debate, discussion, or teaching. Debate, discussion, and teaching are all ways of getting in synch, but they work differently and the approach you choose should reflect your goal and the relative believability of the people involved. Debate is generally among approximate equals; discussion is open-minded exploration among people of various levels of understanding; and teaching is between people of different levels of understanding. 29a) To avoid confusion, make clear which kind of conversation (debate, discussion, or teaching) you are having and recognize that the purpose is ultimately to get at truth, not to prove that someone is right or wrong.

29b) Communication aimed at getting the best answer should involve the most relevant people. Not everyone should randomly probe everyone else, because that’s an unproductive waste of time. People should consider their own levels of believability and understanding to assess if the probing makes sense. As a guide, the most relevant people are your managers, direct reports, and/or agreed experts. They are the most impacted by and most informed about the issues under discussion, and so they are the most important parties to be in synch with. If you can’t get in synch, you should escalate the disagreement.

29c) Communication aimed at educating or boosting cohesion should involve a broader set of people than would be needed if the aim were just getting the best answer. Less experienced, less believable people will be included. They may not be necessary to decide an issue, but if you aren’t in synch with them, that lack of understanding will likely undermine morale and the organization’s efficiency. In cases where you have people who are both not believable and highly opinionated (the worst combination), you will drive their uninformed opinions underground if you don’t get in synch. Conversely, if you are willing to be challenged, and others behave the same way, you can demand that all critical communication be done openly. Imagine if a group of us were trying to learn how to play golf with Tiger Woods, and he and a new golfer were debating how to swing the club. Would it be helpful or harmful to our progress to ignore their different track records and experience? Of course it would be harmful and plain silly to treat their points of view equally, because they have different levels of believability. It is better to listen to what Tiger Woods has to say, without constant interruptions by some know-nothing arguing with him. While I believe this is true, it would be most productive if Tiger Woods gave his instructions and then answered questions. However, because I’m pretty extreme in believing that it is important to obtain understanding rather than accepting doctrine at face value, I also think the new golfer shouldn’t accept what Tiger Woods has to say as right only because he has won loads of tournaments and has years of experience playing golf. In other words, I believe the new golfer shouldn’t stop questioning Tiger until he is confident he has found truth. At the same time, I also think the new golfer would be pretty dumb and arrogant to believe he’s probably right and the champion golfer is wrong. So he should approach his questioning with that perspective rather than overblown confidence. It would be really bad for the group’s learning if all the people in the group treated what the new golfer and Tiger Woods had to say as equally valuable. I feel exactly the same way about getting at truth at Bridgewater. While it’s good to be open-minded and questioning, it’s dumb to treat the views of people with great track records and experience the same as those without track records and experience.

29d) Leverage your communication. While open communication is very important, the challenge is figuring out how to do it in a time-efficient way. It is helpful to use leveraging techniques like open e-mails posted on a FAQ board. If the reporting ratios are organized as described in the principles on organizational design, there should be ample time for this. The challenges become greater the higher you go in the reporting hierarchy because the number of people affected by your actions and who have opinions and/or questions grows larger than just two reporting levels down. In such cases, you will need even greater leverage and prioritization (e.g., having some of the questions answered by a well-equipped party who works for you, asking people to prioritize their questions by urgency or importance, etc).

30) Don’t treat all opinions as equally valuable. Almost everyone has an opinion, but many are worthless or harmful. The views of people without track records are not equal to the views of people with strong track records. Treating all people equally is more likely to lead away from truth than toward it. People without records of success who are nonetheless confident about how things should be done are either naïve or arrogant. In either case, they’re potentially dangerous to themselves and others. However, all views should be considered in an open-minded way, albeit placed in the proper context of experience and track record. Ultimately, the proof is in the pudding: can you handle your responsibilities well? As a general rule, if you can, then you can have an opinion of how to do it—if you can’t, you can’t. 30a) A hierarchy of merit is not only consistent with a meritocracy of ideas but essential for it. Not only is better decision-making enhanced, so is time management. It’s not possible for everyone to debate everything all the time and still get work done effectively.

31) Consider your own and others’ “believabilities.” By believability, I mean the probability that a person’s view will be right. While we can never know this precisely, we can roughly assess it according to the quality of a person’s reasoning and their track record. Of course, different people will have different views of their own and other’s believability, which is fine. Just recognize that this is a reality that is relevant in a number of ways. Ask, “Why should I believe you?” and “Why should I believe myself?” 31a) Ask yourself whether you have earned the right to have an opinion. As a general rule, if you have a demonstrated track record, then you can have an opinion of how to do it—if you don’t, you can’t, though you can have theories and questions.

31b) People who have repeatedly and successfully accomplished the thing in question and have great explanations when probed are most believable. Those with one of those two qualities are somewhat believable; people with neither are least believable. At the same time, people’s ideas should always be assessed on their merit in order to encourage them to always think in an open-minded way. I have seen that inexperienced people can have great ideas, sometimes far better than more experienced people, though often much worse. So we must be attuned to both the good and the bad and allow people to build their own track records and their own level of believability. Because of Bridgewater’s radical openness, you can see how we make our assessments of that. Someone new who doesn’t know much, has little believability, or isn’t confident in his views should ask questions. On the other hand, a highly believable person with experience and a good track record who is highly confident in his views should be assertive. Everyone should be upfront in expressing how confident they are in their thoughts. A suggestion should be called a suggestion; a firmly held conviction should be presented as such. Don’t make the mistake of being a dumb shit with a confident opinion.

31c) If someone asks you a question, think first whether you’re the responsible party/right person to be answering the question. 

32) Spend lavishly on the time and energy you devote to “getting in synch” because it’s the best investment you can make. You will inevitably need to prioritize because of time constraints, but beware of the tremendous price of skimping on quality communication.

33) If it is your meeting to run, manage the conversation. There are many reasons why meetings go poorly, but frequently it is because of a lack of clarity about the topic or the level at which things are being discussed (e.g., the principle/machine level, the case at hand level, or the specific fact level). To manage the meetings well: 33a) Make it clear who the meeting is meant to serve and who is directing the meeting. Every meeting is for the purpose of meeting someone’s goals; that person is the responsible party for the meeting and decides what s/he wants to get out of it and how s/he will do so. Meetings without a clear responsible party run a high risk of being directionless and unproductive.

33b) Make clear what type of communication you are going to have in light of the objectives and priorities. For example, if the goal of the meeting is to have people with different opinions work through their differences to try to get closer to what is true and what to do about it (i.e., open-minded debate), you will run it differently than if the meeting is meant to educate. Debating issues takes time. That time increases geometrically depending on the number of people participating in the discussion, so you have to carefully choose the right people in the right numbers to suit the decision that needs to be made. In any discussion try to limit the participation to those whom you value most in light of your objectives. The worst way to pick people is based on whether their conclusions align with yours.

33c) Lead the discussion by being assertive and open-minded. Group-think and solo-think are both dangerous.

33d) A small group (3 to 5) of smart, conceptual people seeking the right answers in an open-minded way will generally lead to the best answer. Next best is to have decisions made by a single smart, conceptual decision-maker, but this is a much worse choice than the former. The worst way to make decisions is via large groups without a smart, conceptual leader. Almost everyone thinks they’re smart and conceptual, but only a small percentage of any group really is. Even when there is a large number of smart, conceptual leaders, more than five trying to make a decision is very inefficient and difficult. This is especially the case when people think they need to satisfy everyone.

33e) 1+1=3. Two people who collaborate well will be about three times as effective as the two of them operating independently because they will see what the other might miss, they can leverage each other, and they can hold each other to higher standards. This symbiotic relationship of adding people to a group will have incremental benefits (2+1=4.25) up to a point at which there are no incremental gains and beyond which adding people produces incremental losses in effectiveness. That is because 1) the marginal benefits diminish as the group gets larger—e.g. two or three people might be able to cover most of the important perspectives so adding more people doesn’t bring much more, and 2) larger group interactions are less efficient than smaller group interactions. Of course, what’s best in practice is a function of 1) the quality of the people and the differences of the perspectives that they bring and 2) how well the group is managed. As noted before, each group should have someone who is responsible for managing the flow to get out of the meeting the most possible.

33f) Navigate the levels of the conversation clearly. When considering an issue or situation, there should be two levels of discussion: the case at hand and the relevant principles that help you decide how the machine should work. Since the case at hand is a manifestation of one or more relevant principles, you need to clearly navigate between these levels in order to 1) handle the case well, 2) improve the machine so that future cases like this will be handled better in the future, and 3) test the effectiveness of your principles.

33g) Watch out for “topic slip.” Topic slip is the random and inconclusive drifting from topic to topic without achieving completion. Tip: Avoid topic slip by tracking the conversation on a whiteboard so everyone can see where you are.

33h) Enforce the logic of conversations. There is a tendency for people’s emotions to heat up when there is a disagreement, so focusing on the logic of your exchange will facilitate communication. If you are calm and analytical in listening to others’ points of view, it is more difficult for them to shut down a logical exchange than if you get emotional or allow them to get emotional.

33i) Worry about substance more than style. This is not to say that some styles aren’t more effective than others with different people and in different circumstances, but don’t let style or tone prevent you from getting in synch. I often see people complain about the delivery of a criticism in order to deflect from its substance. If you think someone’s style is an issue, box it as a separate issue to get in synch about (start by asking whether it’s true and whether it’s important).

33j) Achieve completion in conversations. The main purpose of discussion is to achieve completion and get in synch, which leads to decisions and or actions. Conversations often fail to reach completion. This amounts to a waste of time because they don’t result in conclusions or productive actions. When there is an exchange of ideas, especially if there is a disagreement, it is important to end it by stating the conclusions. If there is agreement, say it; if not, say that. Where further action has been decided, get those tasks on a to-do list, assign people to do them, and specify due dates. Write down your conclusions, working theories, and to-do’s in places that will lead to their being used as foundations for continued progress.

33k) Have someone assigned to maintain notes in meetings and make sure follow-through happens. Generally speaking, to avoid distraction during the discussion itself, prioritizing follow-ups and assignments should be done afterwards.

33l) Be careful not to lose personal responsibility via group decision-making. Too often groups will make a decision to do something without assigning personal responsibilities so it is not clear who is supposed to do what. Be clear in assigning personal responsibilities.

34) Make sure people don’t confuse their right to complain, give advice, and debate with the right to make decisions. Discussion does not mean rule by referendum. While our culture is marked by extreme openness, some people mistakenly assume we have group decision-making in which all views are treated equally and consensus rules. Since not all views are equally valuable, I don’t believe in consensus decision-making or referendums. We operate not only by open debate but also by clearly assigning personal responsibility to specific people. While these two values might seem at odds, personal responsibility and open debate work together to synthesize effective decision-making at Bridgewater. Everyone does not report to everyone here. Instead, responsibility and authority are assigned to individuals based on our assessment of their ability to handle them. I want the most capable individuals assigned to each job. We hold them accountable for their outcomes, but we also give them the authority to achieve those outcomes. It is perfectly okay for a responsible party to carry through a decision he thinks is best even when others who are knowledgeable disagree, although this disagreement should be considered and weighed seriously. We have, and should have, an explicit decision-making hierarchy, ideally based on merit.54

35) Recognize that getting in synch is a two-way responsibility. In any conversation there is a responsibility to transmit and a responsibility to receive. Misinterpretations are going to take place. Often, difficulty in communication is due to people having different ways of thinking (e.g., left-brained thinkers talking to right-brained thinkers). The parties involved should 1) realize that what they might be transmitting or receiving might not be what was meant, 2) consider multiple possibilities, and 3) do a back and forth so that they can get in synch. People do the opposite — confidently thinking that they’ve communicated their intent clearly, not considering multiple possibilities and then blaming the other parties for the misunderstanding. Learn lessons from your problems in communications to improve.

36) Escalate if you can’t get in synch. If you can’t understand or reconcile points of view with someone else, agree on a third party to provide guidance. This person could be your manager or another agreed-upon, believable person or group who can resolve the conflict objectively, fairly, and sensibly. This mechanism is a key element of our culture and crucial for maintaining a meritocracy of ideas.

*54 In fact, I once toyed with the possibility of developing a voting system based on a believability matrix. Though that might not be possible for practical reasons, it suggests the merit-based decision-making we aspire toward with our current process. The challenging and probing we encourage are not meant to second-guess every decision but to help us assess the quality of our work over time. 

To Get the People Right… 

37) Recognize the Most Important Decisions You Make Are Who You Choose to Be Your Responsible Party So…

38) Remember that almost everything good comes from having great people operating in a great culture. I cannot emphasize strongly enough how important the selection, training, testing, evaluation, and sorting out of people is. If you put the goals and the tasks in the hands of people who can do them well, and if you make crystal clear that they are personally responsible for achieving the goals and doing the tasks, they should produce excellent results. This section is about the people part of the feedback loop process, diagramed below.

 Goals > Machine (design & people) > Outcomes

39) First, match the person to the design. Understand what attributes matter most for a job, and then ascertain whether an individual has them. This matching process requires 1) visualizing the job and the qualities needed to do it well and then 2) ascertaining if the individual has those qualities.

Look for believable responsible parties who love producing great results.55 Remember that values are most important—e.g., if “work” is what people have to do to make money, I don’t want people to “work” here. I only want people at Bridgewater who are joining us on an important, shared mission to do great things.

*55 The thing that I like least (or dislike most) about my job is fighting to maintain standards, but it must be done. I know that the only way for me to succeed and to be happy is to have good people do it for me, which means that I have to hire, train, and sort out people. It is futile to give responsibilities to people who do not have the qualities required to succeed. It frustrates, and inevitably angers, all parties, which is subversive to the environment. So, hiring, training, and sorting out people so that responsibilities are placed in the hands of people who can be trusted to do an excellent job is the only viable path, and is extremely satisfying. 

39a) Most importantly, find people who share your values. At Bridgewater, those key values are a drive for excellence, truth at all costs, a high sense of ownership, and strong character (by character, I mean the willingness to do the good but difficult things).

39b) Look for people who are willing to look at themselves objectively and have character. These are not natural talents—they are qualities that anyone can acquire. They are also the qualities that have the biggest influence on whether or not I respect someone. They are essential for success.

39c) Conceptual thinking and common sense are required in order to assign someone the responsibility for achieving goals (as distinct from tasks). 

40) Recognize that the inevitable responsible party is the person who bears the consequences of what is done. Because of this, the RP must choose wisely when delegating responsibilities to others, and he must incentivize and manage them appropriately. There is no escaping that. For example, you are the inevitable RP for taking care of your health because you’re the one who inevitably bears the consequences. If you’re sick, you might choose to delegate the responsibility of figuring out what do to about it to a doctor. However, it is your responsibility to pick the right doctor because you will bear the consequences of that decision. While it is, of course, also the doctor’s responsibility to handle the responsibilities that you delegate to him, you still need to make sure that his incentives are aligned with his responsibilities and that he is doing his job well. The inevitable responsible party can’t delegate all his responsibilities away and expect good outcomes, even in cases in which he has no expertise. So you can’t escape hiring and managing properly.

41) By and large, you will get what you deserve over time. The results that you end up with will reflect how you and your people learn to handle things. So take control of your situation and hold yourself and others accountable for producing great results. People who wish for a great result but are unwilling to do what it takes to get there will fail.

42) The most important responsible parties are those who are most responsible for the goals, outcomes, and machines (they are those higher in the pyramid). Give me someone who can effectively be responsible for an area—i.e., who can design, hire, and sort to achieve the goal, and I can be comfortable about all that is in that area. Therefore, they are the most important people to choose and manage well.

43) Choose those who understand the difference between goals and tasks to run things. Otherwise you will have to do their jobs for them. The ability to see and value goals is largely innate, though it improves with experience. It can be tested for, though no tests are perfect.

44) Recognize that People Are Built Very Differently So…

45) Think about their very different values, abilities, and skills. Values are the deep-seated beliefs that motivate behaviors; people will fight for their values, and values determine people’s compatibility with others. Abilities are ways of thinking and behaving. Some people are great learners and fast processors; others possess common sense; still others think creatively or logically or with supreme organization, etc. Skills are learned tools, such as being able to speak a foreign language or write computer code. While values and abilities are unlikely to change much, most skills can be acquired in a limited amount of time (e.g., most master’s degrees can be acquired in two years) and often change in worth (e.g., today’s best programming language can be obsolete in a few years). It is important for you to know what mix of qualities is important to fit each role and, more broadly, with whom you can have successful relationships. In picking people for long-term relationships, values are most important, abilities come next, and skills are the least important.

46) Understand what each person who works for you is like so that you know what to expect from them. 

47) Recognize that the type of person you fit in the job must match the requirements for that job. 

How People’s Thinking Abilities Differ 

In my many years of running Bridgewater I have learned that people’s thinking abilities differ and that it is important to understand these differences so that they are appropriately considered when assigning people to roles. I have tried to find experts who understood these differences to help me better understand and test for them. I have found a few truly insightful people amid a mass of mediocrity.56 I have also found that there are all sorts of theories from all sorts of people about how people think and why, so very little should be treated as fact. It seems that “political correctness” and the reluctance to objectively discuss differences in innate abilities have stood in the way of forthright and thoughtful research on this important subject. While the search for good advice and tests has been challenging, it has also been invaluable. What follows is a mix of my theories based on my personal observations and a collection of valuable things I have learned from others.57I know I have only scratched the surface of learning about how people think, why they think differently, and how to test for these different thinking abilities, so I am excited about the potential of learning more. I believe, but am not certain about, the following:

There are two big differences in how people think that are due to the brain’s coming in two big halves and different people relying differently on them. 58This was explained by Caltech Professor Roger Sperry, who won a Nobel Prize in medicine for attributing these two ways of thinking to different reliances on the two hemispheres. As a result of this discovery, these two ways of thinking are called “left-brained” and “right-brained.” Professor Sperry helped us understand that: The left hemisphere reasons sequentially, analyzes details, and excels at linear analysis. Left-brained thinkers do these things well. They are also called linear thinkers. When they excel at this type of thinking they are called “bright.” 59

The right hemisphere reasons holistically, recognizes themes, and synthesizes the big picture. Right-brained thinkers do these things well. People who think this way are also called lateral thinkers. Those who excel at this kind of thinking are called “smart.” 60

Long before I knew that there was a Professor Sperry I saw these differences. I bet you’ve seen them too.

On a scale of -5 to +5 – left-brained to right-brained – where do you think you fall?

How confident are you that your self-assessment is right?

Some people see details (trees), and others see big pictures (forests). Those who “see trees” see the parts most vividly and don’t readily relate the parts to each other in order to see the big picture—e.g., they might prefer more literal, precise paintings. They are typically left-brained. Others connect the dots to pictures. In fact, they typically don’t even see the dots; they just see the pictures. They are typically right-brained. You can detect which type people are by observing what they focus on. Detailed thinkers can lose sight of the big picture and are more likely to focus in on a part than to go to the higher level and see the relationship between parts. For example, a person who focuses on details can be thrown off by word mistakes like “there“ instead of “their,” while big-picture thinkers won’t even notice the mistake. Similarly, big-picture thinkers can often understand the meaning of sentences even when key words are reversed—e.g., when “up” is mistakenly used instead of “down,” they understand that the person speaking couldn’t have meant “up” in that context. That is because their attention is focused on the context first and the details second. When describing the same meeting, these two different types will frequently focus on completely different things and disagree on their interpretations. In discussions, they can frustrate each other and discount what the other is saying. Similarly, a person of one type interviewing another type will usually yield an unsatisfactory result.

On a scale of -5 to +5 – “detailed” to “big picture – where do you think you fall?

How confident are you that your self-assessment is right? 

Some people rely more on remembering what they were taught when making decisions, and others rely more on their independent reasoning. Let’s call the first group memory-based learners and the second group reasoning-based thinkers. When using the word “learning” I intend to convey “acquiring knowledge by being taught,” and when using the word “thinking” I mean “figuring it out for oneself.” Memory-based learners approach decision-making by remembering what they were taught. They draw on their memory banks and follow the instructions stored there. They are typically left-brained. Reasoning-based thinkers pay more attention to the principles behind what happens. They are typically right-brained. You can tell the difference when what is learned (e.g., CAPM) conflicts with what is logical (e.g., All Weather). People who rely on memory-based learning will typically be more skeptical of unconventional ideas because their process is to more readily accept what they have been told and because they are less able to assess it for themselves. Those who rely on more on reasoning won’t care much about convention and will assess ideas on their merits. Those who rely on memory-based learning also tend to align themselves with the consensus more than people who rely on reasoning. Memory-based learners are more willing to accept the status quo, while reasoning-based thinkers are less biased by it. They are more likely to be innovative, while those who rely on learning are likelier to be cautious. Performance in school will correlate well with the quality of one’s learning-based thinking, but will not reliably correlate with one’s reasoning-based thinking. The most able learners are easily found, since they are, or were, the best students from the best schools. The best thinkers are tougher to find, as there are no obvious funnels through which they pass, especially before they develop track records in the “real world.”

On a scale of -5 to +5—“learning” to “thinking”—where do you think you fall? 

How confident are you that your self-assessment is right?

Some people are focused on daily tasks, and others are focused on their goals and how to achieve them. Those who “visualize” best can see the pictures (rather than the dots) over time. They have a strong capacity to visualize and will be more likely to make meaningful changes and anticipate future events. They are the most suitable for creating new things (organizations, projects, etc.) and managing organizations that have lots of change. We call them “creators.” They are typically right-brained thinkers. By contrast, those who are focused on the daily tasks are better at managing things that don’t change much or require repetitive processes done reliably, and are typically best at doing clearly specified tasks. They see things much more literally and tend to make incremental changes that reference what already exists. They are slower to depart from the status quo and more likely to be blindsided by sudden events. They are typically left-brained thinkers.

On a scale of -5 to +5—“tasks” to “goals”—where do you think you fall? How confident are you that your self-assessment is right? 

Some people are “planners,” and others are “perceivers.” Planners like to focus on a plan and stick with it, while perceivers are prone to focus on what’s happening around them and more readily adapt to it. Perceivers see things happening and work backward to understand the cause and how to respond; they work from the outside in; they also see many more possibilities that they compare and choose from; often they see so many that they are confused by them. In contrast, planners work from the inside out, figuring out first what they want to achieve and then how things should unfold. Planners and perceivers have trouble appreciating each other. While a perceiver likes to see new things and change directions often, this is discomforting to planners, who prefer to stick to a plan. Planners weigh precedent much more heavily in their decision-making, and assume that if it was done before in a certain way, it should be done again in the same way, while perceivers tend to optimize on the spot. Planners are typically left-brained, and perceivers are typically right-brained.

On a scale of -5 to +5—“planner” to “perceiver”—where do you think you fall?

How confident are you that your self-assessment is right? 

Some people are driven more by their emotions, and others are driven more by their intellect. We all have emotions and intellect. When they conflict, some people will give in to their emotions, while others maintain control of their emotions and are driven by their intellect. I am told this is more due to relative reliance on the amygdala and the prefrontal cortex, but I’m not sure. Once again, these two different types typically can’t understand and typically frustrate each other.

On a scale of -5 to +5—“driven by emotion” to “driven by intellect”—where do you think you fall?

How confident are you that your self-assessment is right? 

Some people are risk-takers, and others are risk-averse. 

On a scale of -5 to +5—“risk-averse” to “risk-taker”—where do you think you fall? How confident are you that your self-assessment is right? 

Some people are introverts, and others are extroverts. The most important difference between them is their willingness to fight for truth. Introverts tend to find the necessary conflicts more difficult.

On a scale of -5 to +5—“introvert” to “extrovert”—where do you think you fall? How confident are you that your self-assessment is right? 

There are lots of important ways in which people think differently that I won’t continue on about.

48) Use personality assessment tests and quality reflections on experiences to help you identify these differences. These should be done openly so that these important differences are embraced and considered in our interactions.

49) Understand that different ways of seeing and thinking make people suitable for different jobs. Since nature created different ways of thinking and since nature never creates anything without a purpose,61 each way of thinking has purposes. Often, thinking well for some purposes necessitates thinking poorly for others. It is highly desirable to understand one’s own ways, and others’ ways, of thinking, and their best applications. While there is no best quality, there are certainly some qualities that are more suitable for some jobs (e.g., being a math wiz is important for a job that requires a math wiz). So don’t treat everyone the same.

Sometimes I see people dealing with each other, especially in groups, without regard for these differences. This is nonsensical. Both people expressing their own views and those considering others’ views need to take into account their differences. These differences are real, so it’s dumb to pretend they don’t exist.

49a) People are best at the jobs that require what they do well. 

49b) If you’re not naturally good at one type of thinking, it doesn’t mean you’re precluded from paths that require that type of thinking, but it does require that you either work with someone who has that required way of thinking (which works best) or learn to think differently (which is very difficult and sometimes impossible).

50) Don’t hide these differences. Explore them openly with the goal of figuring out how you and your people are built so you can put the right people in the right jobs and clearly assign responsibilities. This is good for both your team and for Bridgewater as a whole.

51) Remember that people who see things and think one way often have difficulty communicating and relating to people who see things and think another way. Keep in mind how difficult it is to convey what it means to think in an alternative way for the same reason it would be difficult to convey what the sense of smell is to someone who doesn’t have the ability to smell.

52) Hire Right, Because the Penalties of Hiring Wrong Are Huge So…

53) Think through what values, abilities, and skills you are looking for. A lot of time and effort is put into hiring a person, and substantial time and resources are invested in new employees’ development before finding out whether they are succeeding. Getting rid of employees who aren’t succeeding is also difficult, so it pays to be as sure as possible in hiring. Refer to our diagram that shows how to achieve your goals by comparing them with the outcomes you’re getting, and think of the people part as shown below. By constantly comparing the picture of what the people are like with the qualities needed, you will hire better and evolve faster.

54) Weigh values and abilities more heavily than skills in deciding whom to hire. Avoid the temptation to think narrowly about filling a job with a specific skill.62While having that skill might be important, what’s most important is determining whether you and they are working toward the same goals and can work in the same ways and share the same values.

55) Write the profile of the person you are looking for into the job description. 

56) Select the appropriate people and tests for assessing each of these qualities and compare the results of those assessments to what you’ve decided is needed for the job. Synthesize the results of those tests to see if there is a “click.”

56a) Remember that people tend to pick people like themselves, so pick interviewers who can identify what you are looking for. For example, if you’re looking for a visionary, pick a visionary to do the interview where you test for vision. If there is a mix of qualities you’re looking for, put together a group of interviewers who embody all of these qualities collectively. Don’t choose interviewers whose judgment you don’t trust (in other words, choose believable interviewers).

56b) Understand how to use and interpret personality assessments. These can be a fantastic tool in your arsenal for quickly getting a picture of what people are like—abilities, preferences, and style.

They are often much more objective and reliable than interviews.

56c) Pay attention to people’s track records. 

56d) 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” behind people’s actions will tell you about their qualities and as a result, what you can probably expect from them.

56e) Recognize that performance in school, while of some value in making assessments, doesn’t tell you much about whether the person has the values and abilities you are looking for. Memory and processing speed tend to be the abilities that determine success in school (largely because they’re easier to measure and grade) and are most valued, so school performance is an excellent gauge of these. School performance is also a good gauge for measuring willingness and ability to follow directions as well as determination. However, school is of limited value for teaching and testing common sense, vision, creativity, or decision-making.63Since those traits all outweigh memory, processing speed, and the ability to follow directions in most jobs, you must look beyond school to ascertain whether the applicant has the qualities you’re looking for.

56f) Ask for past reviews. Don’t rely exclusively on the candidate for information about their track record; instead, talk to people who know them (believable people are best), and look for documented evidence.

56g) Check references. 

57) Look for people who have lots of great questions. These are even more important than great answers.

58) Make sure candidates interview you and Bridgewater. Show them the real picture. For example, share these principles with them to show how we operate and why. Have them listen to the tapes to see the reality.

59) Don’t hire people just to fit the first job they will do at Bridgewater; hire people you want to share your life with. The best relationships are long term and based on shared missions and values. Also, turnover is generally inefficient because of the long time it requires for people to get to know each other and Bridgewater. Both the people you work with and the company itself will evolve in ways you can’t anticipate. So hire the kind of people you want to be with on this long-term mission.

60) Look for people who sparkle, not just “another one of those.” I have too often seen people hired who don’t sparkle, just because they have clearly demonstrated they were “one of those.” If you’re looking for a plumber you might be inclined to fill the job with someone who has years of experience, without confirming whether he has demonstrated the qualities of an outstanding plumber. Yet the difference between hiring an ordinary versus an extraordinary plumber (or any other expert) is huge. So when reviewing a candidate’s background, you must identify how this person has demonstrated himself to be outstanding. The most obvious demonstration is outstanding performance within an outstanding peer group. If you’re less than excited to hire someone for a particular job, don’t do it. The two of you will probably make each other miserable.

61) Hear the click: Find the right fit between the role and the person. Remember that your goal is to put the right people in the right design. First understand the responsibilities of the role, then what qualities are needed to fulfill them excellently, and then ascertain whether an individual has them. This matching process requires 1) visualizing the job and the qualities needed to do it well and 2) ascertaining if the individual has those qualities. I describe this process as “hearing the click,” because that’s the sound of finding the right fit between the role and the individual.

62) Pay for the person, not for the job. Look at what they were paid before and what people with comparable credentials get paid and pay some premium to that, but don’t pay based on the job title.

63) Recognize that no matter how good you are at hiring, there is a high probability that the person you hire will not be the great person you need for the job. Continue the “interviewing” process as intensely after they are on the job as before, and don’t settle.

64) Manage as Someone Who Is Designing and Operating a Machine to Achieve the Goal So…

65) Understand the differences between managing, micromanaging, and not managing. 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. 65a) Managing the people who report to you should feel like “skiing together.” Like a ski instructor, you need to have close contact with your people on the slopes so that you can assess their strengths and weaknesses as they are doing their jobs. There should be a good back and forth with trial and error. With time you will be able to decide what they can and can’t effectively handle on their own.

65b) An excellent skier is probably going to be more critical and a better critic of another skier than a novice skier. A student probably thinks his ski instructor is fabulous, while an Olympic skier looking at the same ski instructor would assess him to be at a much lower level.

66) Constantly compare your outcomes to your goals. Identify problems and diagnose whether the problems are with the way the organization is designed or with the way the people are handling their responsibilities. So remember how the following feedback loop to rapid improvement works.

Goals > machine > outcomes

Two parts of the machine, design > people ( the responsible parties)

Under people you have what people are like > qualities needed

And remember to do this constantly so you have a large sample size. You want to have a large sample size because 1) any one problem can either be a one-off imperfection or symptomatic of root causes that will show up as problems repeatedly; and 2) looking at a large sample size of problems will make clear which it is. Also, the larger your sample size, the clearer the root causes of your problems, and the more obvious your solutions, will be.

67) Look down on your machine and yourself within it from the higher level. Higher-level thinking doesn’t mean the thinking done by higher-level beings. It means seeing things from a top-down perspective—like looking at a photo of Earth from outer space, which shows you the relationships between the continents, counties, 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.

68) Connect the case at hand to your principles for handling cases of that type. Remember that every problem and task is just another “one of those”—i.e., another one of a certain type. Figuring out what type it is and reflecting on principles for handling that type of issue will help you do a better job. Whether or not you use the principles written here, you still must decide on a course of action and what guiding principles will be effective. Through this process you will improve your principles as well as handle your issues better.

69) Conduct the discussion at two levels when a problem occurs: 1) the “machine” level discussion of why the machine produced that outcome and 2) the “case at hand” discussion of what to do now about the problem. Don’t make the mistake of just having the task-level discussion, because then you are micromanaging—i.e., you are doing your managee’s thinking for him and your managee will mistake your doing this as being OK, when that’s not OK (because you will be micromanaging). When having the machine-level discussion, think clearly how things should have gone and explore why they didn’t go that way. If you are in a rush to determine what to do and you have to tell the person who works for you what to do, point out that you are having to do this, make clear that you are having to do this and that is what you are doing, and make it a training experience—i.e., explain what you are doing and why.

70) Don’t try to be followed; try to be understood and to understand others. Your goal is to understand what is true and improve together. If you want to be followed, either for an egotistical reason or because you believe it more expedient to operate that way, you will pay a heavy price in the long run. If you are the only one thinking, the results will suffer.

70a) Don’t try to control people by giving them orders. They will likely resent the orders, and when you aren’t looking, defy them. An authoritarian approach also means you aren’t developing your employees, and over time they will become increasingly dependent on you, which damages all parties. Instead, the greatest power you have over intelligent people—and the greatest influence they will have on you—comes from constantly getting in synch about what is true and what is best so that they and you want the same things. People must desire to do the right things, and this desire must come from them. You can, however, show them the connection between fulfilling their responsibilities and their own well-being. Reaching agreement will come only from radically open discussions in which you are fair, reasonable, and open-minded.

70b) Communicate the logic and welcome feedback. When making rules or changes, explain the principles behind the decision. We want reasonable thinkers to operate sensibly. We achieve this through principles that are sound and well understood, applied and tested through open discussion. It is each person’s job to 1) evaluate whether he agrees with a decision, and if not, explain why; and 2) hold each other accountable for operating consistently within the organization’s principles. We want people who understand the principles that allow our community to succeed and possess strong ethics that motivate them to work by our rules, rather than to sneak around them. We want people who know that if the community works well, it will be good for them. We don’t want people who need to be ordered and threatened. We don’t want people who just follow orders.

71) Clearly assign responsibilities. Eliminate any confusion about expectations and ensure that people view the failure to achieve their goals and do their tasks as personal failures.64The most important person is the one who is given the overall responsibility for accomplishing the mission and has both the vision to see what should be done and the discipline to make sure it’s accomplished by the people who do the tasks.

72) Hold people accountable and appreciate them holding you accountable. It’s better for them, for you, and for the community. Slacker standards don’t do anyone any good. People can resent being held accountable, however, and you don’t want to have to tell them what to do all the time. Instead, reason with them, so that they understand the value and importance of being held accountable. Hold them accountable on a daily basis. Constant examination of problems builds a sample size that helps point the way to a resolution and is a good way to detect problems early on before they become critical. Avoiding these daily conflicts produces huge costs in the end. 72a) Distinguish between failures where someone broke their “contract” from ones where there was no contract to begin with. If you didn’t make the expectation clear, you generally can’t hold people accountable for it being fulfilled (with the exception of common sense—which isn’t all that common). If you find that a responsibility fell through the cracks because there was no contract, think about whether you need to edit the design of your machine.

73) Avoid the “sucked down” phenomenon. This occurs when a manager is pulled down to do the tasks of a subordinate without acknowledging the problem. The sucked down phenomenon bears some resemblance to job slip, since it involves the manager’s responsibilities slipping into areas that should be left to others. Both situations represent the reality of a job diverging from the ideal of that job. However, the sucked down phenomenon is typically the manager’s response to subordinates’ inabilities to do certain tasks or the manager’s failure to properly redesign how the responsibilities should be handled in light of changed circumstances. You can tell this problem exists when the manager focuses more on getting tasks done than on operating his machine. 73a) Watch out for people who confuse goals and tasks, because you can’t trust people with responsibilities if they don’t understand the goals. One way to test this: if you ask a high-level question like, “How is goal XYZ going?” a good answer will provide a synthesis upfront (of how XYZ is in fact going overall), and then support that assessment with the tasks done to achieve the goal. People who see the tasks and lose sight of the goals will just explain the tasks that were done and not make the connection to how those tasks relate to the machine that produces outcomes and achieves goals.

Question > good or bad > Synthesized answer >what we did 1.), 2), 3)

74) Think like an owner, and expect the people you work with to do the same. You must act in the interest of our community and recognize that your well-being is directly connected to the well-being of Bridgewater. For example, spend money like it’s your own.

75) Force yourself and the people who work for you to do difficult things. It’s usually easy to make things go well if you’re willing to do difficult things. We must act as trainers in gyms act in order to keep each other fit. That’s what’s required to produce the excellence that benefits everyone. It is a law of nature that you must do difficult things to gain strength and power. As with working out, after a while you make the connection between doing difficult things and the benefits you get from doing them, and you come to look forward to doing these difficult things.

75a) Hold yourself and others accountable. It is unacceptable for you to say you won’t fight for quality and truth because it makes you or other people uncomfortable. Character is the ability to get yourself to do the difficult but right things. Get over the discomfort, and force yourself to hold people accountable. The choice is between doing that properly or letting our community down by behaving in a way that isn’t good for you or the people you are “probing” and coaching.

76) Don’t worry if your people like you; worry about whether you are helping your people and Bridgewater to be great. One of the most essential and difficult things you have to do is make sure the people who work for you do their jobs excellently. That requires constantly challenging them and doing things they don’t like you to do, such as probing them. Even your best people, whom you regularly praise and reward, must be challenged and probed. You shouldn’t be a manager if you have problems confronting people or if you put being liked above ensuring your people succeed.

77) Know what you want and stick to it if you believe it’s right, even if others want to take you in another direction. 

78) Communicate the plan clearly. People should know the plans and designs within their departments. When you decide to divert from an agreed-upon path, be sure to communicate your thoughts to the relevant parties and get their views so that you are all clear about taking the new path. 78a) Have agreed-upon goals and tasks that everyone knows (from the people in the departments to the people outside the departments who oversee them). This is important to ensure clarity on what the goals are, what the plan is, and who is responsible to do what in order to achieve the goals. It allows people to buy into the plan or to express their lack of confidence and suggest changes. It also makes clear who is keeping up his end of the bargain and who is falling short. These stated goals, tasks, and assigned responsibilities should be shown at department meetings at least once a quarter, perhaps as often as once a month.

78b) Watch out for the unfocused and unproductive “we should … (do something).” Remember that to really accomplish things we need believable responsible parties who should determine, in an open-minded way, what should be done; so it is important to identify who these people are by their names rather than with a vague “we,” and to recognize that it is their responsibility to determine what should be done. So it is silly for a group of people who are not responsible to say things like “we should…” to each other. On the other hand, it can be desirable to speak to the responsible party about what should be done.

79) Constantly get in synch with your people. Being out of synch leads to confused and inefficient decision-making. It can also lead you in conflicting directions either because 1) you are not clear with each other, which often generates wildly differing assumptions, or 2) you have unresolved differences in your views of how things should proceed and why. Getting in synch by discussing who will do what and why is essential for mutual progress. It doesn’t necessarily entail reaching a consensus. Often there will be irreconcilable differences about what should be done, but a decision still needs to be made, which is fine. The process of getting in synch will make it clear what is to be done and why, even if it cannot eliminate difference. One of the most difficult and most important things you must do, and have others do, is bring forth disagreement and work through it together to achieve a resolution. Recognize that this process takes time. It can happen any way people prefer: discussion, e-mail, etc. You must have a workable process for making decisions even when disagreements remain. I discuss such a process in the earlier section on getting in synch.

80) Get a “threshold level of understanding”—i.e., a rich enough understanding of the people, processes and problems around you to make well-informed decisions.

81) Avoid staying too distant. You need to know your people extremely well, provide and receive regular feedback, and have quality discussions. Your job design needs to build in the time to do these things.

81a) Tool: Use daily updates as a tool for staying on top of what your people are doing and thinking. Daily updates are brief descriptions of what the person did that day, what they are planning to do the next day, their problems, their questions, and their observations. They typically take about five minutes to write and do wonders for staying in touch.

82) Learn confidence in your people—don’t presume it. It takes time to learn about people and what confidences can be placed in them. Sometimes new people are offended we don’t yet have confidence in how they are handling their responsibilities. They think it’s a criticism of their abilities when in fact it’s a realistic recognition that we simply haven’t had enough time or direct experience with them to form a point of view. No manager (including myself) should delegate responsibilities to people we don’t yet know well enough to have confidence in. And new people shouldn’t be offended if we haven’t yet formed that confidence.

83) Vary your involvement based on your confidence. Management largely consists of scanning and probing everything for which you are responsible to identify suspicious signs. Based on what you see, you should vary your degree of digging, doing more of it for people and areas that look more suspicious, and less of it where probing instills you with confidence. With the right tools in place and performing well, your scanning will include both reviewing the output of these tools (e.g., “issues log,” “metrics,” “daily updates,” and “checklists”) and spot-checking.

84) Avoid the “theoretical should.” The theoretical should occurs when a manager theorizes that people should be able to do something when they can’t or without actually knowing whether they can do it.

85) Care about the people who work for you. If you are not working with people you care about and respect, this whole thing ain’t worth it. If you don’t believe that, you probably shouldn’t work at Bridgewater. While it’s desirable to convey these feelings, having them is more important. It is good to share your lives together, but not required. Be there for weddings, births, and funerals. This is something that I try to do but fail to do enough because of the numbers, so I convey that I will be there for anyone who really needs me. Personal contact at the time of personal difficulty is a must.

86) Logic, reason, and common sense must trump everything else in decision-making. 

87) While logic drives our decisions, feelings are very relevant. A feeling is a reality—and a good reality—and it’s up to management to deal with all realities sensibly. Good emotions are important. In fact, they are probably most important since they are the reasons behind the good things we do, e.g., satisfaction with a job wonderfully done and love of others. Emotions are bad only if they cloud judgment and take us away from what we want.

88) Escalate when you can’t adequately handle your responsibilities, and make sure that the people who work for you do the same. Escalating means saying that you don’t believe that you can successfully handle a situation and that you are passing the “responsible party” (RP) job to someone else. The person you are escalating to—the person to whom you report—can then decide whether to coach you through it, take control, have someone else handle it, or do something else. However, the boss should avoid being drawn into doing the job of the person who is failing without exploring why the job has not been done successfully without help. It’s very important to get an accurate assessment of what each person can and can’t do and why. If the boss just does the job for the person, even if it produces good results, we will lack the right attribution of success and failure. Remember that an important goal is to learn about what a person is like from testing, and that we want to get that information without crashing the car. So, the RP must either say that he can handle his job or that he cannot. And it is the responsibility of the boss to make the assessment of whether to remove the RP from the driver’s seat because he might crash. We learn from mistakes by seeing our failures, feeling the pain of them, and reflecting and gaining insight. If the boss and the RP don’t recognize the RP’s failures to fix things, and the RP lacks the ability to do the job, trouble will result. Remember that life is the best teacher—“the proof is in the pudding.” So going through this process is essential to real learning.

88a) Make sure your people know to be proactive. Demand that they speak up when they won’t meet agreed-upon deliverables or deadlines. This communication is essential to getting in synch on both a project level and on a personal level.

88b) Tool: An escalation button. Because there is confusion at times about whether responsible parties are conveying to their managers their problems or whether they are escalating, use an escalation button. This is a tool that makes clear to the manager that the managee is escalating.

89) Involve the person who is the point of the pyramid when encountering material cross-departmental or cross sub-departmental issues. Imagine an organizational chart as a pyramid that consists of numerous pyramids,

90) Probe Deep and Hard to Learn What to Expect from Your “Machine” So…

91) Know what your people are like, and make sure they do their jobs excellently. This requires constantly challenging them and probing them. That’s true even if your people are doing their jobs well, even though those people can be given more leeway.

92) Constantly probe the people who report to you, and encourage them to probe you. Managers are much less able to discover the right things to do than most people assume. I know that’s true for me. The people who work for you should constantly challenge you, in order for you to become as good as you can be. Also, inviting criticism brings to the surface any subterranean discontent and makes the people working for you responsible for helping to find solutions. It’s much easier for people to remain spectators offering unchallenged comments from the stands than to become players on the field. Forcing people onto the field strengthens the whole team. Communication is a two-way responsibility.

92a) Remind the people you are probing that problems and mistakes are fuel for improvement. They ought to understand that probing is good for them and everyone else. 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. This approach has given us an unlimited supply of practical ways to improve.

93) Probe to the level below the people who work for you. You can’t understand how the person who reports to you manages others unless you know their direct reports and can observe how they behave with them. Also encourage the people who work two levels below you to bring their disagreements with their bosses to you.

94) Remember that few people see themselves objectively, so it’s important to welcome probing and to probe others. 

95) Probe so that you have a good enough understanding of whether problems are likely to occur before they actually do. If problems take you by surprise, it is probably because you are either too far removed from your people and processes or you haven’t adequately thought through how the people and processes might lead to various outcomes.

95a) When a crisis appears to be brewing, contact should be so close that it’s extremely unlikely that there will be any surprises. 

95b) Investigate and let people know you are going to investigate so there are no surprises and they don’t take it personally. 

96) Don’t “pick your battles.” Fight them all. If you see something wrong, even something small, deal with it. Because 1) small badnesses can be symptomatic of serious underlying problems; 2) resolving small differences of perception may prevent more serious divergences of views; and 3) in trying to help to train people, constant reinforcement of desired behavior is helpful. The more battles you fight, the more opportunities you will have to get to know each other and the faster the evolutionary process will occur.

97) Don’t let people off the hook. Ask the important, difficult questions, and independently audit.

98) Don’t assume that people’s answers are correct. They could be erroneous theories or “spin,” so you need to occasionally double check them, especially when they sound questionable. Some managers are reluctant to do this, feeling as though it is the equivalent of saying they don’t trust them. These managers need to understand and convey that trust in the accuracy of people’s statements is gained or lost through this process. People will learn to be much more accurate in what they say to you if they understand this—and increasingly, you will learn who and what you can rely on.

99) Make the probing transparent rather than private. That will help to assure the quality of the probing (because others can make their own assessments), and it will reinforce the culture of transparency and freedom to find truth.

100) Evaluate People Accurately, Not “Kindly” So…

101) Make accurate assessments. Since truth is the foundation of excellence and people are your most important resource, make the most precise personnel evaluations possible. This accuracy takes time and considerable back-and-forth. Your assessment of how responsible parties are performing should be based not on whether they’re doing it your way but on whether they’re doing it in a good way. Speak frankly, listen with an open mind, consider the views of other believable and honest people, and try to get in synch about what’s going on with the person and why. Remember not to be overconfident in your assessments as it’s possible you are wrong.

101a) Use evaluation tools such as performance surveys, metrics, and formal reviews to document all aspects of a person’s performance. These will help clarify assessments and communication surrounding them. 

101b) Maintain “baseball cards” and/or “believability matrixes” for your people. Imagine if you had baseball cards that showed all the performance stats for your people: batting averages, home runs, errors, ERAs, win/loss records. You could see what they did well and poorly and call on the right people to play the right positions in a very transparent way. These would also simplify discussions about compensation, incentives, moving players up to first string, or cutting them from the team. You can and should keep such records of your people. Create your baseball cards to achieve your goals of conveying what the person is like. I use ratings, forced rankings, metrics, results, and credentials. Baseball cards can be passed to potential new managers as they consider candidates for assignments.

102) Evaluate employees with the same rigor as you evaluate job candidates. Ask yourself: “Would I hire this person knowing what I now know about them?” I find it odd and silly that interviewers often freely and confidently criticize job candidates despite not knowing them well, yet they won’t criticize employees for similar weaknesses even though they have more evidence. That is because some people view criticism as harmful and feel less protective of an outsider than they do of a fellow employee. If you believe accuracy is best for everyone, then you should see why this is a mistake and why frank evaluations must be ongoing.

103) Know what makes your people tick, because people are your most important resource. Develop a full profile of each person’s values, abilities, and skills. These qualities are the real drivers of behavior, and knowing them in detail will tell you which jobs a person can and cannot do well, which ones they should avoid, and how the person should be trained. I have often seen people struggling in a job and their manager trying for months to find the right response because the manager overlooked the person’s “package.”These profiles should change as the people change.

104) Recognize that while most people prefer compliments over criticisms, there is nothing more valuable than accurate criticisms. While it is important to be clear about what people are doing well, there should not be a reluctance to profile people in a way that describes their weaknesses. It is vital that you be accurate.

105) Make this discovery process open, evolutionary, and iterative. Articulate your theory of a person’s values, abilities, and skills upfront and share this with him; listen to his and others’ response to your description; organize a plan for training and testing; and reassess your theory based on the performance you observe. Do this on an ongoing basis. After several months of discussions and real-world tests, you and he should have a pretty good idea of what he is like. Over time this exercise will crystallize suitable roles and appropriate training, or it will reveal that it’s time for the person to leave Bridgewater.

106) Provide constant, clear, and honest feedback, and encourage discussion of this feedback. Don’t hesitate to be both critical and complimentary—and be sure to be open-minded. Training and assessing will be better if you frequently explain your observations. Providing this feedback constantly is the most effective way to train.66

106a) Put your compliments and criticisms into perspective. I find that many people tend to blow evaluations out of proportion, so it helps to clarify that the weakness or mistake under discussion is not indicative of your total evaluation. Example: One day I told one of the new research people what a good job I thought he was doing and how strong his thinking was. It was a very positive initial evaluation. A few days later I heard him chatting away for hours about stuff that wasn’t related to work, so I spoke to him about the cost to his and our development if he regularly wasted time. Afterward I learned he took away from that encounter the idea that I thought he was doing a horrible job and that he was on the brink of being fired. But my comment about his need for focus had nothing to do with my overall evaluation of him. If I had explained myself when we sat down that second time, he could have better put my comments in perspective.

106b) Remember that convincing people of their strengths is generally much easier than convincing them of their weaknesses. People don’t like to face their weaknesses. At Bridgewater, because we always seek excellence, more time is spent discussing weaknesses. Similarly, problems require more time than things that are going well. Problems must be figured out and worked on, while things that are running smoothly require less attention. So we spend a lot of time focusing on people’s weaknesses and problems. This is great because we focus on improving, not celebrating how great we are, which is in fact how we get to be great. For people who don’t understand this fact, the environment can be difficult. It’s therefore important to 1) clarify and draw attention to people’s strengths and what’s being done well; and2) constantly remind them of the healthy motive behind this process of exploring weaknesses. Aim for complete accuracy in your assessments. Don’t feel you have to find an equal number of “good and bad” qualities in a person. Just describe the person or the circumstances as accurately as possible, celebrating what is good and noting what is bad.

106c) Encourage objective reflection—lots and lots of it.

106d) Employee reviews: While feedback should be constant, reviews are periodic. The purpose of a review is to review the employee’s performance and to state what the person is like as it pertains to their doing their job.

A job review should have little surprises in it—this is because throughout the year, if you can’t make sense of how the person is doing their job or if you think it’s being done badly, you should probe them to seek understanding of root causes of their performance. Because it is very difficult for people to identify their own weaknesses, they need the appropriate probing (not nitpicking) of specific cases by others to get at the truth of what they are like and how they are fitting into their jobs.

From examining these specific cases and getting in synch about them, agreed-upon patterns will emerge. As successes and failures will occur in everyone (every batter strikes out a lot), in reviewing someone the goal is see the patterns and to understand the whole picture rather than to assume that one or a few failures or successes is representative of the person. You have to understand the person’s modus operandi and that to be successful, they can’t be successful in all ways—e.g., to be meticulous they might not be able to be fast (and vice versa). Steve Jobs has been criticized as being autocratic and impersonal, but his modus operandi might require him being that way, so the real choice in assessing his fit for his job is to have him the way he is or not at all: that assessment must be made in the review, not just a theoretical assessment that he should do what he is doing and be less autocratic.

In some cases it won’t take long to see what a person is like—e.g., it doesn’t take long to hear if a person can sing. In other cases it takes a significant number of samples and time to reflect on them. Over time and with a large sample size you should be able to see what people are like, and their track records (i.e., the level and the steepness up or down in the trajectories that they are responsible for, rather than the wiggles in these) paint a very clear picture of what you can expect from them.

If there are performance problems, it is either because of design problems (e.g., the person has too many responsibilities) or fit/abilities problems. If the problems are due to the person’s inabilities, these inabilities are either because of the person’s innate weaknesses in doing that job (e.g., with a height of 5-foot-2, the person probably shouldn’t be a center on the basketball team) or because of inadequate training to do the job. A good review, and getting in synch throughout the year, should get at these things.

The goal of a review is to be clear about what the person can and can’t be trusted to do based on what the person is like. From there, “what to do about it” (i.e., how these qualities fit into the job requirement) can be determined.

107) Understand that you and the people you manage will go through a process of personal evolution. Personal evolution occurs first by identifying your strengths and weaknesses, and then by changing your weaknesses (e.g., through training) or changing jobs to play to strengths and preferences. This process, while generally difficult for both managers and their subordinates, has made people happier and Bridgewater more successful. Remember that most people are happiest when they are improving and doing things that help them advance most rapidly, so learning your people’s weaknesses is just as valuable for them and for you as learning their strengths.

108) Recognize that your evolution at Bridgewater should be relatively rapid and a natural consequence of discovering your strengths and weaknesses; as a result, your career path is not planned at the outset. Your career path isn’t planned because the evolutionary process is about discovering your likes and dislikes as well as your strengths and weaknesses. The best career path for anyone is based on this information. In other words, each person’s career direction will evolve differently based on what we all learn. This process occurs by putting people into jobs that they are likely to succeed at, but that they have to stretch themselves to do well. They should be given enough freedom to learn and think for themselves while being coached so they can be taught and prevented from making unacceptable mistakes. During this process they should receive constant feedback. They should reflect on whether their problems can be resolved by additional learning or stem from innate qualities that can’t be changed. Typically it takes six to 12 months to get to know a person in a by-and-large sort of way and about 18 months to change behavior (depending on the job and the person). During this time there should be periodic mini-reviews and several major ones. Following each of these assessments, new assignments should be made to continue to train and test them. They should be tailored to what was learned about the person’s likes and dislikes and strengths and weaknesses. This is an iterative process in which these cumulative experiences of training, testing, and adjusting direct the person to ever more suitable roles and responsibilities. It benefits the individual by providing better self-understanding and greater familiarity with various jobs at Bridgewater. This is typically both a challenging and rewarding process. When it results in a parting of ways, it’s usually because people find they cannot be excellent and happy in any job at Bridgewater or they refuse to go through this process.

109) Remember that the only purpose of looking at what people did is to learn what they are like. Knowing what they are like will tell you how you can expect them to handle their responsibilities in the future. Intent matters, and the same actions can stem from different causes.

109a) Look at patterns of behaviors and don’t read too much into any one event. Since there is no such thing as perfection, even excellent managers, companies, and decisions will have problems. It’s easy, though often not worth much, to identify and dwell on tiny mistakes. In fact, this can be a problem if you get bogged down pinpointing and analyzing an infinite number of imperfections. At the same time, minor mistakes can sometimes be manifestations of serious root causes that could cause major mistakes down the road, so they can be quite valuable to diagnose. When assessing mistakes it is important to 1) ask whether these mistakes are manifestations of something serious or unimportant and 2) reflect on the frequency of them. An excellent decision-maker and a bad decision-maker will both make mistakes. The difference is what causes them to make mistakes and the frequency of their mistakes.

There is also a difference between “I believe you made a bad decision” and “I believe you are a bad decision-maker,” which can be ascertained only by seeing the pattern. Any one event has many different possible explanations, whereas a pattern of behavior can tell you a lot about root causes. There are many qualities that make up a person. To understand each requires 1) a reliable sample size and 2) getting in synch (i.e., asking the person why and giving feedback). Some qualities don’t require a large sample size—e.g., it takes only one data point to know if a person can sing—and others take multiple observations (five to 10). The number of observations needed to detect a pattern largely depends on how well you get in synch after each observation. A quality discussion of how and why a person behaved a certain way should help you quickly understand the larger picture.

109b) Don’t believe that being good or bad at some things means that the person is good or bad at everything. Realize that all people have strengths and weaknesses.

110) If someone is doing their job poorly, consider whether this is due to inadequate learning (i.e., training/experience) or inadequate ability. A weakness due to a lack of experience or training or due to inadequate time can be fixed. A lack of inherent ability cannot. Failing to distinguish between these causes is a common mistake among managers, because managers are often reluctant to appear unkind or judgmental by saying someone lacks ability. They also know people assessed this way tend to push back hard against accepting a permanent weakness. Managers need to get beyond this reluctance. In our diagram of thinking through the machine that will produce outcomes, think about…

Under people in the goals, design, people, outcomes flow chart should be learning and ability.

111) Remember that when it comes to assessing people, the two biggest mistakes are being overconfident in your assessment and failing to get in synch on that assessment. Don’t make those mistakes. 

111a) Get in synch in a non-hierarchical way regarding assessments. The greatest single discrepancy between a manager and a managee is how well each performs his job. In most organizations, evaluations run in only one direction, with the manager assessing the managee. The managee typically disagrees with the assessment, especially if it is worse than the employee’s self-assessment, because most people believe themselves to be better than they really are. Managees also have opinions of managers that in most companies they wouldn’t dare bring up, so misunderstandings and resentments fester. This perverse behavior undermines the effectiveness of the environment and the relationships between people. It can be avoided by getting in synch in a high-quality way.

111b) Learn about your people and have them learn about you with very frank conversations about mistakes and their root causes. You need to be clear in conveying your assessments and be open-minded in listening to people’s replies. This is so they can understand your thinking and you can open-mindedly consider their perspectives. So together you can work on setting their training and career paths. Recognizing and communicating people’s weakness is one of the most difficult things managers have to do. Good managers recognize that while it is difficult in the short term, it actually makes things easier in the long term, because the costs of having people in jobs where they can’t excel are huge. Most managers at other companies dodge being as open with assessments as we insist on; more typically, managers elsewhere tend to be less frank in conveying their views, which is neither fair nor effective.

112) Help people through the pain that comes with exploring their weaknesses. Emotions tend to heat up during most disagreements, especially about someone’s possible weaknesses. Speak in a calm, slow, and analytical manner to facilitate communication. If you are calm and open to others’ views, they are less likely to shut down logical exchanges than if you behave emotionally. Put things in perspective by reminding them that their pain is the pain that comes with learning and personal evolution—they’re going to be in a much better place by getting to truth. Consider asking them to go away and reflect when they are calm, and have a follow-up conversation in a few days.

113) Recognize that when you are really in synch with people about weaknesses, whether yours or theirs, they are probably true. Getting to this point is a great achievement. When you reach an agreement, it’s a good sign you’re there. This is one of the main reasons why the person being evaluated needs to be an equal participant in the process of finding truth. So when you do agree, write it down on the relevant baseball card. This information will be a critical building block for future success.

114) Remember that you don’t need to get to the point of “beyond a shadow of a doubt” when judging people. Instead, work toward developing a mutually agreed “by-and-large” understanding of someone that has a high level of confidence behind it. When necessary, take the time to enrich this understanding. That said, you should not aim for perfect understanding. Perfect understanding isn’t possible, and trying to get it will waste time and stall progress.

115) Understand that you should be able to learn the most about what a person is like and whether they are a “click” for the job in their first year. You should be able to roughly assess someone’s abilities after six to 12 months of close contact and numerous tests and getting in synch about them. A more confident assessment so that you can make a more confident role assignment will probably take about 18 months. This timeline will of course depend on the job, the person, the amount of contact with that person, and how well you do it. As I explain in the section on design, the ratio of senior managers to junior managers as well as the ratio of managers to the number of people who work two levels below them should be small enough to ensure quality communication and mutual understanding. Generally, that ratio should not be more than 1:10, preferably more like 1:5.

116) Continue assessing people throughout their time at Bridgewater. You will get to know them better, it will help you train and direct them, and you won’t be stuck with an obsolete picture. Most importantly, assess what your people’s core values and abilities are and make sure they complement Bridgewater’s. Since core values and abilities are more permanent than skills, they are more important to ascertain, especially at Bridgewater. As mentioned, you should be able to roughly assess people’s abilities after six to 12 months of close contact and confidently assess them after 18 months.

Don’t rest with that evaluation, however. Always ask yourself if you would have hired them for that job knowing what you now know. If not, get them out of the job.

117) Train and Test People Through Experiences So…

118) Understand that training is really guiding the process of personal evolution. It requires the trainee to be open-minded, to suspend ego in order to find out what he is doing well and poorly, and to decide what to do about it. It also requires the trainer to be open-minded (and to do the other things previously mentioned). It would be best if at least two believable trainers work with each trainee in order to triangulate views about what the trainee is like. As previously explained, the training should be through shared experiences like that of a ski instructor skiing with his student—i.e., it should be an apprentice relationship.

119) Know that experience creates internalization. A huge difference exists between memory-based “book” learning and hands-on, internalized learning. A medical student who has “learned” to perform an operation in his medical school class has not learned it in the same way as a doctor who has already conducted several operations. In the first case, the learning is stored in the conscious mind, and the medical student draws on his memory bank to remember what he has learned. In the second case, what the doctor has learned through hands-on experience is stored in the subconscious mind and pops up without his consciously recalling it from the memory bank. People who excel at book learning tend to call up from memory what they have learned in order to follow stored instructions. Others who are better at internalized learning use the thoughts that flow from their subconscious. The experienced skier doesn’t recite instructions on how to ski and then execute them; rather, he does it well “without thinking,” in the same way he breathes without thinking. Understanding these differences is essential.67 Remember that experience creates internalization. Doing things repeatedly leads to internalization, which produces a quality of understanding that is generally vastly superior to intellectualized learning.

120) Provide constant feedback to put the learning in perspective. Most training comes from doing and getting in synch about performance. Feedback should include reviews of what is succeeding and what is not in proportion to the actual situation rather than in an attempt to balance compliments and criticisms. You are a manager, and you want your machine to function as intended. For it do so, employees must meet expectations, and only you can help them to understand where they are in relation to expectations. As strengths and weaknesses become clearer, responsibilities can be more appropriately tailored to make the machine work better and to facilitate personal evolution. The more intensely this is done, the more rapid the evolutionary process will be. So you must constantly get in synch about employee performance.

121) Remember that everything is a case study. Think about what it is a case of and what principles apply.

122) Teach your people to fish rather than give them fish. It is a bad sign when you tell people what they should do because that behavior typically reflects micromanagement or inability on the part of the person being managed. Instead, you should be training and testing. 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 synch about how they are doing things and exploring why.

123) Recognize that sometimes it is better to let people make mistakes so that they can learn from them rather than tell them the better decision. However, since the connections between cause and effect can be misunderstood, providing feedback for these people is essential to the learning process.

123a) When criticizing, try to make helpful suggestions. Your goal is to help your people understand and improve, so your suggestions are important. Offering suggestions also helps those being criticized to understand that your goal is to help them and Bridgewater, not to hurt them.

123b) 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.

124) Know what types of mistakes are acceptable and unacceptable, and don’t allow the people who work for you to make the unacceptable ones. When considering what failures you are willing to allow in order to promote learning through trial-and-error, weigh the potential damage of a mistake against the benefit of incremental learning. In defining what latitude I’m willing to give people, I say, “I’m willing to let you scratch or dent the car, but I won’t put you in a position where I think there’s a significant risk you could total it.”

125) Recognize that behavior modification typically takes about 18 months of constant reinforcement. The first step is intellectualizing the best way of doing things. If you’re out of shape you must understand that you are out of shape, you must want to get in shape, and you must understand the way to get in shape: “I want to be fit by eating well and exercising.” Then the intellect will fight with desires and emotions. With determination, the intellect will overcome the impediments to doing what’s necessary to achieve the goal, and the desired behavior will occur. After doing that consistently for 18 months, the new behavior will be internalized.

126) Train people; don’t rehabilitate them. Training is part of the plan to develop people’s skills and to help them evolve. Rehabilitation is the process of trying to create significant change in people’s values and/or abilities. Since values and abilities are difficult to change, rehabilitation typically takes too long and is too improbable to do at Bridgewater. If attempted, it is generally best directed by professionals over extended periods of time. People with inappropriate values and inadequate abilities to meet their job requirements have devastating impacts on the organization. They should be properly sorted (see the principles section on sorting).

126a) A common mistake: training and testing a poor performer to see if he or she can acquire the required skills without simultaneously trying to assess their abilities. Skills are readily testable, so they should be easy to determine. Knowing them is less important than knowing people’s abilities. That makes picking people with the right skills relatively easy. Abilities, especially right-brained abilities, are more difficult to assess. When thinking about why someone is a poor performer, openly consider whether it is a problem with their abilities. Values are the toughest and take the longest to assess.

127) After you decide “what’s true” (i.e., after you figure out what your people are like), think carefully about “what to do about it.”As mentioned before, it’s important to separate thinking about “what’s true” and thinking about “what to do about it.” Figuring out what’s true takes time—often several months filled with a large sample size. Figuring out what to do about it (i.e., designing) is much faster—typically hours or days—but it isn’t instantaneous. Too often people either jump to decisions or don’t make them.

128) Sort People into Other Jobs at Bridgewater, or Remove Them from Bridgewater So…

129) When you find that someone is not a good “click” for a job, get them out of it ASAP. If you are expecting/wishing people to be much better in the near future than they have been in the past, you are making a serious mistake—instead, sort the people. People who repeatedly operated in a certain way probably will continue to operate that way because that behavior reflects what they’re like. Since people generally change slowly (at best), you should expect slow improvement (at best), so instead of hoping for improvement, you need to sort the people or change the design to supplement them. Since changing the design to accommodate people’s weaknesses is generally a bad idea, it is generally better to sort the people.

Sometimes good people “lose their boxes” because they can’t evolve into responsible parties soon enough. Either there is a problem with their qualities or it will take too long to train them well. Some of these people might be good at another position within Bridgewater. Remember that identifying failure and learning from it are part of the evolutionary process. Make sure you record the reasons on the relevant “baseball card” and think about what a good next step would be for that individual.

130) Know that it is much worse to keep someone in a job who is not suited for it than it is to fire someone. Don’t collect people. Firing people is not a big deal—certainly nowhere near as big a deal as keeping badly performing people, because keeping a person in a job they are not suited for is terrible both for the person (because it prevents personal evolution) and our community (because we all bear the consequences and it erodes meritocracy). Consider the enormous costs of not firing someone unsuited for a job: the costs of bad performance over a long time; the negative effect on the environment; the time and effort wasted trying to train the person; and the greater pain of separation involved with someone who’s been here awhile (say, five years or more) compared with someone let go after just a year.

131) When people are “without a box,” consider whether there is an open box at Bridgewater that would be a better fit. If not, fire them. Remember that we hire people not to fill their first job at Bridgewater nor primarily for their skills. We are trying to select people with whom we’d like to share our lives. We expect everyone to evolve here. Because managers have a better idea of people’s strengths and weaknesses and their fit within our culture than what emerges from the interview process, you have invaluable information for assessing them for another role at Bridgewater.

132) Do not lower the bar. If a person can’t operate consistently with our requirements of excellence and radical truth and can’t get to the bar in an acceptable time frame, they have to leave. We want to neither lower the bar nor enter into a long-term rehabilitation program.

To Perceive, Diagnose, and Solve Problems… 

133) Know How to Perceive Problems Effectively So…

134) Keep in mind the 5-Step Process explained in Part 2. 

135) Recognize that perceiving problems is the first essential step toward great management. As in nature, if you can’t see what’s happening around you, you will deteriorate and eventually die off. People who can 1) perceive problems; 2) decide what to do about them; and 3) get these things done can be great managers.

136) Understand that problems are the fuel for improvement. Problems are like wood thrown into a locomotive engine, because burning them up—i.e., inventing and implementing solutions—propels us forward. Problems are typically manifestations of root causes, so they provide clues for getting better. Most of the movement toward excellence comes from eliminating problems by getting at their root causes and making the changes that pay off repeatedly in the future. So finding problems should get you excited because you have found an opportunity to get better.

137) You need to be able to perceive if things are above the bar (i.e., good enough) or below the bar (i.e., not good enough), and you need to make sure your people can as well. That requires the ability to synthesize.

138) Don’t tolerate badness. Too often I observe people who observe badness and tolerate it. Sometimes it is because they don’t have the courage to make the needed changes, and sometimes it is because they don’t know how to fix it. Both are very bad. If they’re stuck, they need to seek the advice of believable people to make the needed changes, and if that doesn’t work, they need to escalate.

139) “Taste the soup.” A good restaurateur constantly tastes the food that is coming out of his kitchen and judges it against his vision of what is excellent. A good manager needs to do the same.

140) Have as many eyes looking for problems as possible. Encourage people to bring problems to you and look into them carefully. If everyone in your area feels responsible for the well-being of that area and feels comfortable speaking up about problems, your risks of overlooking them will be much less than if you are the only one doing this. This will help you perceive problems, gain the best ideas, and keep you and your people in synch.

140a) “Pop the cork.” It’s your responsibility to make sure that communications from your people are flowing freely.

140b) Hold people accountable for raising their complaints. Ask yourself: 1) does someone think there’s something wrong; 2) did this lead to a proper discussion; and 3) if they felt raising the issue didn’t lead to the proper response, did they escalate it? That’s how it should be.

140c) The leader must encourage disagreement and be either impartial or open-minded. 

140d) The people closest to certain jobs probably know them best, or at least have perspectives you need to understand, so those people are essential for creating improvement. 

141) 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.

Screen Shot 2014-03-18 at 4.23.00 PM

 

142) Don’t use the anonymous “we” and “they,” because that masks personal responsibility—use specific names. For example, don’t say “we” or “they” handled it badly. Also avoid: “We should…” or “We are…”Who is “we”? Exactly who should, who made a mistake, or who did a great job? Use specific names. Don’t undermine personal accountability with vagueness. When naming names, it’s also good to remind people of related principles like “mistakes are good if they result in learning.”

143) Be very specific about problems; don’t start with generalizations. For example, don’t say, “Client advisors aren’t communicating well with the analysts.”Be specific: name which client advisors aren’t doing this well and in which ways. Start with the specifics and then observe patterns.

144) Tool: Use the following tools to catch problems: issues logs, metrics, surveys, checklists, outside consultants, and internal auditors. 

1) Issues log: A problem or “issue” that should be logged is easy to identify: anything that went wrong. The issues log acts like a water filter that catches garbage. By examining the garbage and determining where it came from, you can determine how to eliminate it at the source. You diagnose root causes for the issues log the same way as for a drilldown (explained below) in that the log must include a frank assessment of individual contributions to the problems alongside their strengths and weaknesses. As you come up with the changes that will reduce or eliminate the garbage, the water will become cleaner. In addition to using issues logs to catch problems, you can use them to measure the numbers and types of problems, and they can therefore be effective metrics of performance. A common challenge to getting people to use issues logs is that they are sometimes viewed as vehicles for blaming people. You have to encourage use by making clear how necessary they are, rewarding active usage, and punishing non-use. If, for example, something goes wrong and it’s not in the issues log, the relevant people should be in big trouble. But if something goes wrong and it’s there (and, ideally, properly diagnosed), the relevant people will probably be rewarded or praised. But there must be personal accountability.

2) Metrics: Detailed metrics measure individual, group, and system performance. Make sure these metrics aren’t being “gamed” so that they cease to convey a real picture. If your metrics are good enough, you can gain such a complete and accurate view of what your people are doing and how well they are doing it that you can nearly manage via the metrics. However, don’t even think of taking the use of metrics that far! Instead, use the metrics to ask questions and explore. Remember that any single metric can mislead. You need enough evidence to establish patterns. Metrics and 360 reviews reveal patterns that make it easier to achieve agreement on employees’ strengths and weaknesses. Of course, the people providing the information for metrics must deliver accurate assessments. There are various ways to facilitate this accuracy. A reluctance to be critical can be detected by looking at the average grade each grader gives; those giving much higher average grades might be the easy graders. Similarly helpful are “forced rankings,” in which people must rank coworker performance from best to worst. Forced rankings are essentially the same thing as “grading on a curve.” Metrics that allow for independent grading across departments and/or groups are especially valuable.

3) Surveys (of workers and of customers).

145) The most common reason problems aren’t perceived is what I call the “frog in the boiling water” problem. Supposedly, if you throw a frog in a pot of boiling water it will immediately jump out. But if you put a frog in room-temperature water and gradually bring the water to a boil, the frog will stay in place and boil to death. There is a strong tendency to get used to and accept very bad things that would be shocking if seen with fresh eyes.

146) In some cases, people accept unacceptable problems because they are perceived as being too difficult to fix. Yet fixing unacceptable problems is actually a lot easier than not fixing them, because not fixing them will make you miserable. They will lead to chronic unacceptable results, stress, more work, and possibly get you fired. So remember one of the first principles of management: you either have to fix problems or escalate them (if need be, over and over again) if you can’t fix them. There is no other, or easier, alternative.

146a) Problems that have good, planned solutions are completely different from those that don’t. The spectrum of badness versus goodness with problems looks like this:

a) They’re unidentified (worst); b) Identified but without a planned solution (better); c) Identified with a good, planned solution (good); and d) Solved (best). However, the worst situation for morale is the second case: identified but without a planned solution. So it’s really important to identify which of these categories the problem belongs to.

147) Diagnose to Understand What the Problems Are Symptomatic Of So…

148) Recognize that all problems are just manifestations of their root causes, so diagnose to understand what the problems are symptomatic of. Don’t deal with your problems as one-offs. They are outcomes produced by your machine, which consists of design and people. If the design is excellent and the people are excellent, the outcomes will be excellent (though not perfect). So when you have problems, your diagnosis should look at the design and the people to determine what failed you and why.

149) Understand that diagnosis is foundational both to progress and quality relationships. An honest and collaborative exploration of problems with the people around you will give you a better understanding of why these problems occur so that they can be fixed. You will also get to know each other better, be yourself, and see whether the people around you are reasonable and/or enforce their reasonableness. Further, you will help your people grow and vice versa. So, this process is not only what good management is; it is also the basis for personal and organizational evolution and the way to establish deep and meaningful relationships. Because it starts and ends with how you approach mistakes, I hope that I have conveyed why I believe this attitude about and approach to dealing with mistakes is so important.

150) Ask the following questions when diagnosing. These questions are intended to look at the problem (i.e., the outcome that was inconsistent with the goal) as a manifestation of your “machine.” It does this first by examining how the responsible parties imagined that the machine would have worked, then examining how it did work, and then examining the inconsistencies. If you get adept at the process, it should take 10 to 20 minutes. As previously mentioned, it should be done constantly so that you have a large sample size and no one case is a big deal.

1) Ask the person who experienced the problem: What suboptimality did you experience? 

2) Ask the manager of the area: Is there a clear responsible party for the machine as a whole who can describe the machine to you and answer your questions about how the machine performed compared with expectations? Who owns this responsibility? 

Do not mask personal responsibility—use specific names. 

3) Ask the responsible party: What is the “mental map” of how it was supposed to work? 

A “mental map” is essentially the visualization of what should have happened 

To be practical, “mental maps” (i.e., the designs that you would have expected would have worked well) should account for the fact that people are imperfect. They should lead to success anyway. 

4) Ask the owner of the responsibility: What, if anything, broke in this situation? Were there problems with the design (i.e., who is supposed to do what) or with how the people in the design behaved? 

Compare the mental map of “what should have happened” to “what did happen” in order to identify the gap. 

If the machine steps were followed, ask, “Is the machine designed well?” If not, what’s wrong with the machine? 

5) Ask the people involved why they handled the issue the way they did. What are the proximate causes of the problem (e.g., “Did not do XYZ”)? They will be described using verbs—for example, “Harry did XYZ.” What are the root causes? They will be descriptions. For example: inadequate training/experience, lack of vision, lack of ability, lack of judgment, etc. In other words, root cause is not an action or a reaction—it is a reason. 

Be willing to touch the nerve. 

6) Ask the people involved: Is this broadly consistent with prior patterns (yes/no/unsure)? What is the systematic solution? How should the people / machines / responsibilities evolve as a result of this issue? 

Confirm that the short-term resolution of the issue has been addressed. 

Determine the steps to be taken for long-term solutions and who is responsible for those steps. Specifically: a. Are there responsibilities that need either assigning or greater clarification? 

b. Are there machine designs that need to be reworked? 

c. Are there people whose fit for their roles needs to be evaluated? 

151) Remember that a root cause is not an action but a reason. It is described by using adjectives rather than verbs. Keep asking “why” to get at root causes, and don’t forget to examine problems with people. In fact, since most things are done or not done because someone decided to do them or not do them a certain way, most root causes can be traced to specific people, especially “the responsible party.” When the problem is attributable to a person, you have to ask why the person made the mistake to get at the real root cause, and you need to be as accurate in diagnosing a fault in a person as you are in diagnosing a fault in a piece of equipment.

For example, a root cause discovery process might proceed like this: – “The problem was due to bad programming.” – “Why was there bad programming?” – “Because Harry programmed it badly.” – “Why did Harry program it badly?” – “Because he wasn’t well trained and because he was in a rush.” – “Why wasn’t he well trained? Did his manager know that he wasn’t well trained and let him do the job anyway, or did he not know?” Ultimately it will come down to what the people or the design is like.

152) Identify at which step failure occurred in the 5-Step Process. If a person is chronically failing it is due to either lack of training or lack of ability. Which was it? At which of the five steps did the person fail? Different steps require different abilities

2. Perceiving problems: This requires perception, the ability to synthesize, and an intolerance of badness (i.e., some people see badness but aren’t sufficiently bothered by it to push themselves to eliminate it). Of course, having perspective (typically gained via experience) helps at all steps. 3. Diagnosis: This requires logic, assertiveness, and open-mindedness. You must be willing to have open and/or difficult discussions to get at the truth. 4. Design: This requires creativity and practical visualization. 5. Doing the tasks: This requires determination and self-discipline. If you 1) identify at which of these steps the chronic failures are occurring and 2) see which, if any, of these abilities the person is short of, you will go a long way toward diagnosing the problem.

153) Remember that a proper diagnosis requires a quality, collaborative, and honest discussion to get at the truth. Don’t just give your verdict without exploring the mistake, because there’s a reasonably high probability that you don’t know the answer. Do not be arrogant. You might have a theory about what happened, and that theory should be explored with relevant others. If you and others are open-minded, you will almost certainly have a quality analysis that will give everyone working theories to explore or you will reach conclusions that can be used for the design phase. And if you do this whenever problems recur, you and others involved will eventually uncover the root causes.

154) Keep in mind that diagnoses should produce outcomes. Otherwise there’s no purpose in them. The outcome might not take the form of an agreement, but at a minimum it should take the form of theories about root causes (which should be written down so you have a collection of synthesized dots to use for identifying patterns) and clarity about what should be done in the future to protect against them, or to gather information to find out.

155) Don’t make too much out of one “dot”—synthesize a richer picture by squeezing lots of “dots” quickly and triangulating with others. A dot is a particular outcome. When you diagnose to understand the reason it occurred, you are “squeezing” the dot. Don’t try to squeeze too much out of a single dot—it can only tell you so much. Rather, try to collect and squeeze a bunch of dots in an 80/20 way, triangulating with the dots of others, so that you can synthesize a pointillist painting of what the person is like.

156) Maintain an emerging synthesis by diagnosing continuously—You must be able to categorize, understand, and observe the evolution of the different parts of your machine/system through time, and synthesize this understanding into a picture of how your machine is working and how it should be modified to improve. But if you don’t look into the significant bad outcomes as they occur, you won’t really understand what they are symptomatic of, nor will you be able to understand how things are changing through time (e.g., if they are improving or worsening).

157) To distinguish between a capacity issue and a capability issue, imagine how the person would perform at that particular function if they had ample capacity. Think back on how they performed in similar functions when they had ample capacity.

158) The most common reasons managers fail to produce excellent results or escalate are:

a. They are too removed.

b. They have problems discerning quality differences.

c. They have lost sight of how bad things have become because they have gradually gotten used to their badness (the “frog in the boiling water problem”).

d. They have such high pride in their work that they can’t bear to admit they are unable to solve their own problems.

e. They fear adverse consequences from admitting failure.

159) Avoid “Monday morning quarterbacking.” That is, evaluate the merits of a past decision based on what you know now versus what you could have reasonably known at the time of the decision. Do this by asking yourself, “What should a quality person have known and done in that situation?” Also, have a deep understanding of the person who made the decision (how do they think, what type of person are they, did they learn from the situation, etc).

160) Identify the principles that were violated. Identify which of these principles apply to the case at hand, review them, and see if they would have helped. Think for yourself what principles are best for handling cases like this. This will help solve not only this problem but it will also help you solve other problems like it.

161) Remember that if you have the same people doing the same things, you should expect the same results. 

162) Use the following “drilldown” technique to gain an 80/20 understanding of a department or sub-department that is having problems. A drilldown is the process by which someone who wants to do so can gain a deep enough understanding of the problems in an area as well as the root causes, so that they can then go on to design a plan to make the department or sub-department excellent. It is not a “diagnosis,” which is done for each problem. A manager doing ongoing diagnosis will naturally understand his areas well and won’t have to do a drilldown. Drilling down is a form of probing, though it is broader and deeper. Done well, it should get you almost all the information needed to turn a department around in about five hours of effort.

A drilldown takes place in two distinct steps: 1) listing problems and 2) listing causes/diagnosing. It is followed by 3) designing a plan. If done well, getting informed via the first two steps typically takes about four hours (give or take an hour), with the first step of listing the problems typically taking one to two hours and the second step of diagnosing them typically taking two to four hours, if done efficiently. It’s very important that these steps are done separately and independently. That’s because going into two or three directions at the same time causes confusion and doesn’t allow adequate discussion of each of the possible causes and solutions. Having the people from the area under scrutiny actively participate in all three steps is critical. You need to hear their descriptions and allow them to argue with you when they think you are wrong. This way you are much more likely to come up with an accurate diagnosis and a good plan. After the drilldown, you will create the plan or design, which typically takes two to three hours. So the whole process, from asking the first question to coming up with the detailed plan, typically takes about five to eight hours spread over three or four meetings. Then there is step four—the executing, monitoring, and modifying of the plan—which typically takes six to 12 months. Here is more detail on each of the steps:

Step 1—List the problems. Don’t confuse problems with possible solutions. Sometimes problems occur for rare or insignificant reasons because nothing is perfect. Don’t pay much attention to those. But more often than not, they are symptomatic of something malfunctioning in your machine, so it pays to investigate what that is. For example, not having enough capacity is not a “problem”; it might cause problems, but it’s not a problem. Having people work so late that they might quit, getting out reports too late, etc., might be problems that are caused by a lack of capacity. But the lack of capacity itself is not a problem. To fix problems, you need to start with the specific problems and address them one by one and come up with very specific solutions. That’s because there are lots of ways to solve problems. The problem of people working late at night might be solved by gaining capacity, or it might be solved by shifting work to another department, or by doing less, etc. To assume that lack of capacity is the problem could lead to inferior problem-solving. So unless you keep in mind the very specific problems, you will not be effective at solving them. In the process of solving problems, you will often see that several problems are due to the same cause (e.g., lack of capacity, a shortage of tech resources, bad management, etc.), but that is not the same thing as starting at the more general level (like saying that bad management or lack of capacity, etc., are problems), which is why I am saying you must start with very specific problems before making generalizations. For example, when you have a “people problem,” be specific. Specify which people you are having what problems with and avoid the tendency of saying things like, “People in operations aren’t…” Avoid the tendency not to name names for fear of offending. Step 2—Identify root causes. Root causes are the deep-seated reasons behind the actions that caused the problems. It is important to distinguish between proximate causes, which are superficial reasons for what happened (e.g., “I missed the train because I didn’t check the train schedule”), and root causes (e.g., “I didn’t check the schedule because I am forgetful”). Typically a proximate cause is the action that led to the problem while a root cause is the fundamental reason that action occurred. So, when diagnosing, if you are describing what happened or didn’t happen to cause the problem, you are probably describing proximate causes. When you start describing the qualities that were behind these actions, you are probably getting at the root causes. To get at the root cause, keep asking why. For example, if the problem is that people are working late and the direct cause was that there wasn’t enough capacity, then ask why there wasn’t enough capacity. Then you will get closer to the root cause.

If your machine is producing outcomes that you don’t want, either the design is flawed or the parts/people that you dropped into the design are malfunctioning. Most, but not all, problems happen because 1) it isn’t clear who the “responsible party” is for making sure things go well68or 2) the responsible party isn’t handling his or her responsibilities well (in other words, isn’t operating according to the principles to eliminate the problem). So first ask, “Is it clear who the responsible party is?” If not, specify that. If it is clear, then ask, “Why isn’t he or she doing a good job?” There are two possible reasons for someone doing a poor job: insufficient training or insufficient ability.

Though it is essential to connect problems to the responsible parties, this can be difficult if the responsible parties don’t acknowledge their mistakes and fail to diagnose why they made the mistakes. Still, clarity about responsibility and the problems’ root causes must be achieved because otherwise there is no hope for improvement. If the responsible parties do not explicitly take responsibility for ensuring that their areas operate smoothly, their areas will not operate smoothly. An important first step toward achieving clarity is to remove the mentality of blame and credit, because it stands in the way of accurately understanding problems, and that’s a prerequisite for producing improvements. Also, it is important not to judge too quickly what the root causes are. Instead, you should observe the patterns of problems using the issues log as a tool and discuss with the responsible parties what the root causes might be each time a problem arises. You probably won’t initially be able to come to conclusions with a high degree of confidence, because there are many possible reasons for any one problem. But over time, the problems’ patterns and causes will become clear to everyone.

As mentioned, there are two possible reasons why the responsible party handled something badly: 1) the responsible party didn’t encounter this problem enough times previously to learn from it and prevent it in the future (by using the principles) or 2) the responsible party is unsuited for that job. And there are also two possible reasons the person is not suited for that job: 1) not enough experience or training and 2) lack of values and/or abilities required to do the job well. So getting at the root causes is largely a matter of figuring out:

1. Who is the responsible party for what went wrong?

2. Did that person encounter the problem enough times that he or she should have either learned how not to repeat it or elevated it to someone who could have helped learn how to solve it? The conclusions could be the following: 1) If the person did encounter the problem enough times to have resolved or elevated it, then the person is not suitable for the job69 ;2) if the person did not encounter the problems enough times to resolve or elevate it, what are the probable root causes? The most common root causes are: 1) the person is not suitable for the job in some way (doesn’t learn from mistakes, doesn’t have a high sense of responsibility, is lazy, etc.); 2) the design of the process is flawed (e.g., the person is doing things in a way that can be improved); or 3) there is no possible solution. If it’s the first root cause, the person should have their job changed; if it’s the second, you and the person need to properly diagnose the problem and come up with a different process that will work; and if it’s the third, you won’t know that until you have thoroughly explored whether the process can be remediated. That second alternative of trying to find a better process takes time and patience (involving you and the person properly diagnosing the problem and finding a different approach that works). Normally, this is the point at which most companies and people fail. That is because people often take the identification of a “mistake” as the equivalent of an accusation that they are flawed (dumb, lazy, etc.), so they become defensive. If instead they view the exercise as an investigation into how the process might be flawed, it’s easier to make progress. So when criticizing, it’s sometimes helpful to convey explicitly the point of the exercise: mutually diagnosing the problem and exploring the pros and cons of alternative approaches. You both need to be mindful that doing this well typically takes time and patience. One of the purposes of the brainstorming session is to do this, ideally with an agreed diagnosis resulting from it.

Step 3—Create a plan (brief notes): -

Look at each root cause and ask yourself what should be done about it. -Creating a plan is like writing a movie script in that you visualize who will do what through time in order to achieve the goal. -Step away from the group to reflect and work on the plan, then bring it back to the group to discuss and modify. -When developing the plan, iterate through multiple possibilities and play them out in time to help determine the best choice. -Make sure to assign who is supposed to do what with rough target dates for achieving individual tasks of the plan. Once the plan design is complete, make sure the tasks, responsible parties, and timelines are reasonable and doable. -While everyone does not need to agree with the plan, it is important that the key people agree that it will work.

Step 4—Implement the plan (brief notes): -

Give each person a monthly to-do list to provide clarity and transparency around responsibilities and expectations for that month. Then plot the progress in open, monthly meetings with all the relevant parties. Explicitly assess how the plan is working and deal with problems that aren’t being resolved. -Make sure to hold responsible parties accountable for target dates and develop metrics around how they are meeting their commitments.

-Regularly look at that list of assigned tasks to track progress and determine if any adjustments are needed. -Create transparency around the plan by posting it publicly and reviewing it regularly with the group. This helps people see the ways in which all of the problems are being addressed and reinforces accountability. Do not exclude any relevant people from the drilldown: besides losing the benefit of their ideas, you disenfranchise these people from the game plan and reduce their sense of ownership. Remember that people tell you things they want and tend not to be self-critical. It is your job as a manager to get at truth and excellence, not to make people happy. For example, the correct path might be to fire some people and replace them with better people, or to put people in jobs they might not want, etc. The brainstorming session must include a discussion of people’s weaknesses and failings to get at truth and excellence. Everyone’s objective must be to get at the best answer, not the answer that will make people happy. This is especially true for managers. In the long run, the best answers will be the ones that make the people we want to be at Bridgewater happiest.

163) Put Things in Perspective So…

164) Go back before going forward. Before moving forward, take the time to reflect on how the machine worked. By diagnosing what went right and what went wrong (especially what went wrong), you can see how the machine is operating and how it should be improved. People who are just focused on what they should do next are overly focused on the tasks at hand and not on how the machine is working; so they don’t make sustainable progress.

Go back by “telling the story” to help put things in perspective. Sometimes people have problems putting current conditions into perspective or projecting into the future. Sometimes they disagree on cause-effect relationships, or focus on details rather than addressing the big picture. Sometimes they forget who or what caused things to go well or poorly. By asking them to “tell the story” of how we got here, or by “telling the story” yourself, you put where you are in perspective. Doing this highlights important items that were done well or poorly in relation to their consequences, draws attention to the overarching goals, and helps achieve agreement. By telling the story from the past to the present, it will help you continue it into the future (i.e., design a plan). Making a good plan involves sketching out the important events through time and thinking through the specifics in sequence so that when you are done, the final story is vivid and easy to visualize. Then other people can understand the plan, comment on it, and eventually believe in it. It’s also required for specifying who should do what and when.

164a) Tool: Have all new employees listen to tapes of “the story” to bring them up to date. Listen to some of the associated tapes about Bridgewater’s story. Imagine how much better informed you would be than a person who just joined Bridgewater and hadn’t listened to these stories.

165) Understand “above the line” and “below the line” thinking and how to navigate between the two. There are different levels and themes going on in any one conversation. It is important to know how to navigate them. If you imagine main points and subordinate points organized in outline form, an above-the-line discussion addresses the main points. That doesn’t mean you shouldn’t reference details, because some details might be necessary to the discussion. But reference details solely for the purpose of understanding major points rather than dissecting minor points.

For example, suppose your major point is: “Sally can do that job well.” In an above-the-line conversation, the discussion of her qualities would target the question of Sally’s capacity to do her job. As soon as agreement was reached on whether she could perform competently, you would pass to the next major point—such as what qualities are required for that job. In contrast, a below-the-line discussion would focus on Sally’s qualities for their own sake, without relating them to whether she can do her job well. The discussion might cover qualities that are irrelevant to the job. While both levels of discussion touch on minor points, “above the line” discourse will always move coherently from one major point to the next in much the same way as you can read an outline in order to fully understand the whole concept and reach a conclusion. You go “below the line” to the minor points only to illustrate something important about the major points and progress in an orderly and accurate way to the conclusion. Your ability to do this is partially innate but can be improved with practice.

Screen Shot 2014-03-18 at 4.34.41 PM

166) Design Your Machine to Achieve Your Goals So…

167) Remember: You are designing a “machine” or system that will produce outcomes. This machine will consist of distinct parts (i.e., people and other resources as well as the way they interact with each other).

Screen Shot 2014-03-18 at 4.35.31 PM

 

167a) A short-term goal probably won’t require you to build a machine. But for an ongoing mission, you will need a well-designed and efficient machine.

167b) Beware of paying too much attention to what is coming at you and not enough attention to what your responsibilities are or how your machine should work to achieve your goals. Constantly compare your machine’s outcomes to your goals in order to reflect on how well the machine is operating. Examine both the design and how the individual parts are functioning.

168) Don’t act before thinking. Take the time to come up with a game plan. 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.

169) The organizational design you draw up should minimize problems and maximize capitalization on opportunities. Make the design an extension of your understanding of your problems and opportunities.

170) Put yourself in the “position of pain” for a while so that you gain a richer understanding of what you’re designing for. Temporarily insert yourself into the flow to gain a real understanding of what you are dealing with (the process flow, the type of people needed, the potential problems, etc.) and to visualize a clear picture of what will work. You can accomplish this in a number of ways (reviewing work, doing work at different stages in the process, etc.).

171) Recognize that design is an iterative process; between a bad “now” and a good “then” is a “working through it” period. That “working through it” period involves trying processes and people out, seeing what goes well or poorly, learning from the iterations, and moving toward having the right people in the ideal systematic design. Even with a good future design picture in mind, it will naturally take time, testing, mistakes, and learning to get to a good “then” state.

172) Visualize alternative machines and their outcomes, and then choose. A good designer is able to visualize the machine and its outcomes accurately, though imperfectly. First visualize the parts and their interactions, and then find the parts to fit the design. Look at all the system’s pieces and their interactions. Imagine how goals 1, 2, and 3 can be achieved. Imagine how Harry, Larry, and Sally can operate in various ways with various tools and different incentives and penalties in place to achieve those goals. Then imagine how the system would work differently if you replaced Harry with George, or if it was configured in an entirely different way. Do this iteratively. Think through what the products and people and finances will look like month by month (or quarter by quarter) over the next year given one system; then change the system and visualize the outcomes again. At the end of this process, your plan should look like a realistic movie script, which describes the parties and their interactions through time. Remember that everything takes longer and costs more than you plan for. Recognize that some people are relatively better or worse at visualization. Accurately assess your own abilities and those of others so you can use the most capable people to create the visualization.

173) Think about second- and third-order consequences as well as first-order consequences. The outcome you get as a first-order consequence might be desirable (or undesirable), while the second- or third-order consequences could be the opposite, so focusing solely on first-order consequences, which people tend to do, could lead to bad decision-making. Though I might not like the first-order consequences of a rainy day, I might love the second-order consequences. So if I were in a position to choose whether or not there should be rainy days, I would need to look at the second- and third-order consequences to make the right decision. For example, for every person you plan to hire, you will have to hire more to support them. I call this “The 1.6 Effect.”

174) Most importantly, build the organization around goals rather than tasks. As an example of building the organization around goals rather than tasks, we have traditionally had a marketing department (goal: to market) that is separate from our client service department (goal: to service clients), even though they do similar things and there would be advantages to having them work together. But because marketing and servicing clients are two distinct goals, we have a separate department for each. If they were merged, the department head, salespeople, client advisors, analysts, and others would be giving and receiving conflicting feedback. If asked why clients were receiving relatively poor attention, the answer might be: “We have incentives to raise sales.” Asked why they weren’t making sales, the merged department might explain that they need to take care of their clients. Keeping the two areas separate gives each department a clear focus and the appropriate resources to achieve its goals, makes the diagnosis of resource allocations more straightforward, and reduces “job slip.” Of course, when building departments around goals, your goals have to be the right size to warrant these resources. An organization might not be big enough to warrant having a few salesmen and its own analytical group. Bridgewater has successfully evolved from a one-cell organization, in which most people were involved in everything, to the current multi-cell organization because we retained our ability to efficiently focus as the organization grew. Also, I want to make clear that temporarily sharing or rotating resources is OK, and is not the same thing as a merging of responsibilities. I will discuss merging later in this document, as well the coordination required to maintain focus in large organizations.

174a) First come up with the best workflow design, sketch it out in an organizational chart, visualize how the parts interact, specify what qualities are required for each job, and, only after that is done, choose the right people to fill the jobs (based on how their capabilities and desires match up with the requirements).

174b) Organize departments and sub-departments around the most logical groupings. Some groups naturally gravitate toward one another. Trying to impose your own structure without acknowledging these magnetic pulls is ineffective and likely will result in a bad outcome.

174c) Make departments as self-sufficient as possible so that they have control over the resources they need to achieve the goals. We do this because we don’t want to create a bureaucracy that forces departments to requisition resources from a pool that lacks the focus to do the job. People sometimes argue that we should have a technology department, but I am against that because building technology is a task, not a goal in and of itself. You build technology to perform valuable tasks. If we kept the tech resources outside the department, we would have people from various departments arguing about whose project is most important in order to garner resources, which isn’t good for efficiency. The tech people would be evaluated and managed by bureaucrats rather than the people they do the work for.

174d) The efficiency of an organization decreases and the bureaucracy of an organization increases in direct relation to the increase in the number of people and/or the complexity of the organization. 

175) Build your organization from the top down. An organization is the opposite of a building—the foundation is at the top. The head of the organization is responsible for designing the organization and for choosing people to fill its boxes. Therefore, make sure you hire managers before their direct reports. Managers can then help design the machine and choose people who complement the machine.

175a) Everyone must be overseen by a believable person who has high standards. Without this strong oversight, there is potential for inadequate quality control, inadequate training, and inadequate appreciation of excellent work. Do not “just trust” people to do their jobs well.

175b) The people at the top of each pyramid should have the skills and focus to manage their direct reports and a deep understanding of their jobs. Here’s an example of the confusion that can arise when that understanding is absent: It was proposed that the head of technology have the facilities group (the people who take care of facilities like the building, lunches, office supplies, etc.) report to him because both are, in a sense, “facilities” and because they have some things in common, such as the electrical supply. But the head of technology didn’t understand what the facilities people do. Having people who are responsible for the janitorial services and meals reporting to a technology manager is as inappropriate as having the technology people report to the person who is taking care of facilities. These functions, even if they’re considered “facilities” in the broadest sense, are very different, as are the respective skill sets. Similarly, at another time, we talked about combining folks who work on client agreements with those who do counterparty agreements under one manager. That would have been a mistake because the skills required to reach agreements with clients are very different from the ones required to reach agreements with counterparties. It was wrong to conflate both departments under the general heading of “agreements,” because each kind called for specific knowledge and skills.

175c) The ratio of senior managers to junior managers and to the number of people who work two levels below should be limited, to preserve quality communication and mutual understanding. Generally, the ratio should not be more than 1:10, and preferably closer to 1:5. Of course, the appropriate ratio will vary depending on how many people your direct reports have reporting to them, the complexity of the jobs they’re doing, and the manager’s ability to handle several people or projects at once.

175d) The number of layers from top to bottom and the ratio of managers to their direct reports will limit the size of an effective organization. 

175e) The larger the organization, the more important are 1) information technology expertise in management and 2) cross-department communication (more on these later). 

175f) Do not build the organization to fit the people. Jobs are created based on the work that needs to be done, not what people want to do or what people are available. You can always search outside Bridgewater to find the people who “click” best for a particular role.

176) Have the clearest possible delineation of responsibilities and reporting lines. It’s required both within and between departments. Make sure reporting lines and designated responsibilities are clear. To avoid confusion, people should not report to two different departments. Dual reporting (reporting across department lines) causes confusion, complicates prioritization, diminishes focus on clear goals, and muddies the lines of supervision and accountability, especially when a person reports to two people in two different departments. When situations require dual reporting, managers need to be informed. Asking someone from another department to do a task without consulting with his or her manager is strictly prohibited (unless the request will take less than an hour or so). However, appointing co-heads of a department or a sub-department can work well if the managers are in synch and combine complementary and essential strengths to this area; dual reporting in that case can work fine if properly coordinated by the co-heads.

176a) Create an organizational chart to look like a pyramid, with straight lines down that don’t cross. A series of descending pyramids make up the whole pyramid, but the number of layers should be limited to minimize hierarchy.

177) Constantly think about how to produce leverage. For example, to make training as easy to leverage as possible, document the most common questions and answers through audio, video, or written guidelines and then assign someone to regularly organize them into a manual. Technology can do most tasks, so think creatively about how to design tools that will provide leverage for you and the people who work for you.

177a) You should be able to delegate the details away. If you can’t, you either have problems with managing or training or you have the wrong people doing the job. The real sign of a master manager is that he doesn’t have to “do” practically anything. Of course, a great manager has to hire and oversee the people who do things; but a “supreme master” manager can even hire a person or two to do this and has achieved such leverage that things are effortlessly running superbly. Of course, there is a continuum related to this. The main message I’m trying to convey is that managers should strive to hire, train, and oversee in a way in which others can superbly handle as much as possible on their own. Managers should view the need to get involved in the nitty-gritty themselves as a bad sign.

177b) It is far better to find a few smart people and give them the best technology than to have a greater number of ordinary and less well-equipped people. First of all, great people and great technology are almost always a great value because their effectiveness in enhancing the organization’s productivity can be enormous. Second, it is desirable to have smart people have the widest possible span of understanding and control because fragmented understanding and control create inefficiencies and undermine organizational cohesion. Usually it is the person’s capacity that limits the scope of his understanding and control. So the mix of really smart people operating with really great technology in a streamlined organization is optimal for organizational efficiency.

177c) Use “leveragers.” Leveragers are capable of doing a lot to get your concepts implemented. Conceptualizing and managing are most important and take only about 10% of the time needed for implementing; so if you have good leveragers, you can accomplish a lot more with relative ease.

178) Understand the clover-leaf design. Find two or three responsible parties who have overlapping believabilities and responsibilities and who are willing to challenge and check each other. If you do this, and those people are willing to fight for what they believe is best by being open-minded and assertive at the same time, and if they escalate their disagreements and failures to you, this process will have a high probability of sorting issues that they can probably handle well from issues that you should examine and resolve with them.

179) Don’t do work for people in another department or grab people from another department to do work for you unless you speak to the boss. 

180) Watch out for “department slip.” This happens when a support department, such as HR or Facilities, mistakes its responsibilities to provide support with a responsibility to determine how the thing they are supporting should be done. An example of this sort of mistake is if those in the Recruiting department think they should determine whom we should hire or if people in HR think they should determine what our employment policies should be. Another example would be if the Facilities group determined what facilities we should have. While support departments should know the goals of the people they’re supporting and provide feedback regarding possible choices, they are not the ones to determine the vision.

181) Assign responsibilities based on workflow design and people’s abilities, not job titles. What people do should primarily be a function of the job they have, and it should be pretty obvious who should do what (if they’re suited for the job). For example, just because someone is responsible for “human resources,” “recruiting,” “legal,” “programming,” etc., doesn’t necessarily mean they are the appropriate person to do everything associated with those functions. For example, though “Human Resources” people help with hiring, firing, and providing benefits, it would be a mistake to give them the responsibility of determining who gets hired and fired and what benefits are provided to employees. When assigning responsibilities, think about both the workflow design and a person’s abilities, not the job title.

182) Watch out for consultant addiction. Beware of the chronic use of consultants to do work that should be done by employees.

183) Tool: Maintain a procedures manual. This is the document in which you describe how all of the pieces of your machine work. There needs to be enough specificity so that operators of the different pieces of the machine can refer to the manual to help them do their job. The manual should be a living document that includes output from the issues log so that mistakes already identified and diagnosed aren’t repeated. It prevents forgetting previous learning and facilitates communication.

184) Tool: Use checklists. When people are assigned tasks, it is generally desirable to have these captured on checklists so they can check off each item as it is done. If not, there is a risk that people will gradually not do the agreed tasks or there will be lack of clarity. Crossing items off a checklist will serve as a task reminder and confirmation of what has been done.

184a) Don’t confuse checklists with personal responsibility. People should be expected to do their job well, not just what is on their checklists.

184b) Remember that “systematic” doesn’t necessarily mean computerized. It might mean having people do specified tasks and indicate that they have done them with checklists.

184c) Use “double-do” rather than “double-check” to make sure mission-critical tasks are done correctly. When people double-check someone else’s work, there is a much lower rate of catching errors than when two parties independently do the work and the results are compared. Double-doing is having two different people doing the same task on the same job so that two independent answers are derived. By comparing them you will not only assure better answers but you will see the differences in people’s performances and make much more rapid improvement. I use double-dos in critical areas such as finance, where large amounts of money are involved.

185) Watch out for “job slip.”Job slip is when a job changes without being explicitly thought through and agreed to, generally because of changing circumstances or a temporary necessity. Job slip will generally cause bad job design. It often leads to the wrong people handling the wrong responsibilities and confusion over who is supposed to do what.

186) Think clearly how things should go, and when they aren’t going that way, acknowledge it and investigate. First decide which issue to address first: finding the reason the machine isn’t working well or executing the tasks required to get past the problem (in which case you need to come back to the reasons later). Either way, don’t pass the problem by without discussing the reasons. Otherwise, you will end up with job slip.

187) Have good controls so that you are not exposed to the dishonesty of others and trust is never an issue. A higher percentage of the population than you might imagine will cheat if given an opportunity, and most people who are given the choice of being “fair” with you and taking more for themselves will choose taking more for themselves. Even a tiny amount of cheating is intolerable, so your happiness and success will depend on your controls. Security controls should be viewed as a necessary tool of our profession, not as a personal affront to an individual’s integrity. Just as a bank teller doesn’t view a check on the money in his drawer as an indication that the bank thinks he is dishonest, everyone here should understand the need for our security controls. Explain this to your people so they see it in the proper context. Even the best controls will never be foolproof, and trustworthiness is a quality that should be appreciated.

187a) People doing auditing should report to people outside the department being audited, and auditing procedures should not be made known to those being audited. 

187b) Remember: There is no sense in having laws unless you have policemen (auditors). 

188) Do What You Set Out to Do So…

189) Push through! 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.

To Make Decisions Effectively… 

190) Recognize the Power of Knowing How to Deal with Not Knowing So…

191) Recognize that your goal is to come up with the best answer, that the probability of your having it is small, and that even if you have it, you can’t be confident that you do have it unless you have other believable people test you. 

192) Understand that the ability to deal with not knowing is far more powerful than knowing. That is because there’s way more that we don’t know than what we could possibly ever know.

192a) Embrace the power of asking: “What don’t I know, and what should I do about it?” Generally you should find believable people and ask their advice, remembering that you are looking to understand their reasoning rather than get their conclusions.

192b) Finding the path to success is at least as dependent on coming up with the right questions as coming up with answers. 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.

193) Remember that your goal is to find the best answer, not to give the best one you have. The answer doesn’t have to be in your head; you can look outside of you. In life the goal is for you to do the right thing, considering the probability that you might be wrong. So it is invaluable to know what you don’t know so that you can figure out a way to find out and/or to get help from others.

194) While everyone has the right to have questions and theories, only believable people have the right to have opinions. If you can’t successfully ski down a difficult slope, you shouldn’t tell others how to do it, though you can ask questions about it and even express your views about possible ways if you make clear that you are unsure.

195) Constantly worry about what you are missing. Even if you acknowledge you are a “dumb shit” and are following the principles and are designing around your weaknesses, understand that you still might be missing things. You will get better and be safer this way.

195a) Successful people ask for the criticism of others and consider its merit. 

195b) Triangulate your view. Never make any important decisions without asking at least three believable people. Don’t ask them for their conclusions or just do what they tell you to do. Understand, visualize, and assess their reasoning to see if it makes sense to you. Ask them to probe your own reasoning. That’s critical to your learning as well as to your successful handling of your responsibilities.

196) Make All Decisions Logically, as Expected Value Calculations So…

197) Considering both the probabilities and the payoffs of the consequences, make sure that the probability of the unacceptable (i.e., the risk of ruin) is nil. 

197a) The cost of a bad decision is equal to or greater than the reward of a good decision, so knowing what you don’t know is at least as valuable as knowing. 

197b) Recognize opportunities where there isn’t much to lose and a lot to gain, even if the probability of the gain happening is low. It is a reality that there are always multiple possibilities and nothing is certain. All decisions are therefore risk/reward bets. Know how to pursue fabulous risk/reward ratios that have a huge upside and very little downside, albeit a small probability of happening. My life has been filled with these.

197c) Understand how valuable it is to raise the probability that your decision will be right by accurately assessing the probability of your being right. I often observe people giving opinions as soon as they have them, which seems at about the point that they think there’s more than a 50% chance of them being right. Often they don’t pay any attention to the value of raising the probability of being right (e.g., from 51% to 85%) by reflecting harder on whether the answer is right and doing the investigations and double-checking with others to make sure that the answer is right. Remember that, in an expected value sense, raising the probability of being right (e.g., from 51% to 85%) can be worth more than just going from probably wrong (e.g., 45%) to probably being right (e.g., 51%) because we are all playing probabilities. Think about the effects of altering the probabilities of achieving must-dos: if you have a 51% probability of handling a “must-do” correctly, it means that only a bit more than half of your must-dos will be done appropriately, whereas an 85% probability of handling a decision well means that only 15% of the must-dos will be handled badly.

197d) Don’t bet too much on anything. Make 15 or more good, uncorrelated bets. 

198) Remember the 80/20 Rule, and Know What the Key 20% Is So…

199) Distinguish the important things from the unimportant things and deal with the important things first. 

199a) Don’t be a perfectionist, because perfectionists often spend too much time on little differences at the margins at the expense of other big, important things. Be an effective imperfectionist. 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. Complicated procedures are tough to remember, and it takes a lot of time to make such detailed plans (so they might not even be ready when needed).

199b) Since 80% of the juice can be gotten with the first 20% of the squeezing, there are relatively few (typically less than five) important things to consider in making a decision. For each of them, the marginal gains of studying them past a certain point are limited.

199c) Watch out for “detail anxiety,” i.e., worrying inappropriately about unimportant, small things.

199d) Don’t mistake small things for unimportant things, because some small things can be very important (e.g., hugging a loved one).

200) Think about the appropriate time to make a decision in light of the marginal gains made by acquiring additional information versus the marginal costs of postponing the decision. There are some decisions that are best made after acquiring more information, and some that are best made sooner rather than later. The later a decision is made, the more informed it can be; however, making it later can also have adverse consequences (e.g., postponing progress). Understanding the trade-off between the marginal gains of acquiring the extra information against the marginal costs of postponing a decision is an important factor in the timing and preparation of decision-making.

201) Make sure all the “must do’s” are above the bar before you do anything else. First, distinguish between your “must do’s” and your “like to do’s”. Don’t overlook any “must do’s,” and don’t mistakenly slip the “like to do’s” onto the list. Then, get all the “must do’s” above the bar. Then get all the “must do’s” excellent. If you have time, turn to the “like to do’s” and try to get them above the bar. Only if you have time (though you certainly will not if you are thinking broadly), turn toward making things perfect. Chances are, you won’t have to deal with the unimportant things, which is better than not having time to deal with the important things. I often hear people say, “Wouldn’t it be good to do this or that,” referring to nice-to-do’s rather than must-do’s that have to be above the bar. Chances are, they are being distracted from far more important things that need to be done well.

202) Remember that the best choices are the ones with more pros than cons, not those that don’t have any cons. Watch out for people who tend to argue against something because they can find something wrong with it without properly weighing all the pros against the cons. Such people tend to be poor decision-makers.

203) Watch out for unproductively identifying possibilities without assigning them probabilities, because it screws up prioritization. You can recognize this with phrases like “It’s possible that…” then going on to say something that’s improbable and/or unimportant, rather than something like, “I think there’s a good chance that…” followed by something that’s important or probable. Almost anything is possible. All possibilities must be looked at in terms of their likelihoods and prioritized.

204) Understand the concept and use the phrase “by and large.” Too often I hear discussions fail to progress when a statement is made and the person to whom it is made replies, “Not always,” leading to a discussion of the exceptions rather than the rule. For example, a statement like “The people in the XYZ Department are working too many hours” might lead to a response like “Not all of them are; Sally and Bill are working normal hours,” which could lead to a discussion of whether Sally and Bill are working too long, which derails the discussion. Because nothing is 100% true, conversations can get off track if they turn to whether exceptions exist, which is especially foolish if both parties agree that the statement is by and large true. To avoid this problem, the person making such statements might use the term “by and large,” like “By and large, the people in the XYZ Department are working too many hours.” People hearing that should consider whether it is a “by and large” statement and treat it accordingly.

204a) When you ask someone whether something is true and they tell you that “It’s not totally true,” it’s probably true enough. 

205) Synthesize So…

206) Understand and connect the dots. To do this well, you have to synthesize what is going on. Usually it takes diagnosing a few (e.g., five or so) dots of the same type to get at the true root cause so that you can see how the machine should be modified to produce better outcomes. For example, one type of outcome involves someone, let’s call him Harry, handling a type of responsibility (entering an order). You will need at least a few experiences to learn about Harry doing this. It will pay for you to understand Harry and his handling of orders and have him understand you by looking objectively at the outcomes and by getting in synch, especially about the bad outcomes. The quality of your understanding of your machine and its constituent parts will depend on how well you diagnose and process the important outcomes. If you don’t do this continuously and you don’t synthesize well, you will fail. This isn’t easy.

See how the dots connect through time. This requires collecting, analyzing, and sorting lots of different types, and it ain’t easy for most folks. Imagine a day in which eight outcomes occur. Some are good, some bad. Let’s represent this day as follows, with each type of event represented by a letter and the quality of the outcome represented by its height.

Screen Shot 2014-03-18 at 4.45.11 PM

In order to see the day this way, you must categorize outcomes by type and quality, which will require synthesizing a “by and large” assessment of each. If you didn’t examine the bad outcomes as they occurred, you couldn’t understand what they are symptomatic of. Keep in mind our example is a relatively simple one: only eight occurrences over one day. Now let’s look at what a month looks like.

Screen Shot 2014-03-18 at 4.46.42 PM

Confusing, HUH? Some people are much better at this than others. In order to understand how your machine is working to achieve your goals, you have to perceive change over time, charting improvement vs. deterioration. The chart below plots just the type X dots, which you can see improving. As mentioned in the section on diagnosis, you must categorize, understand, and observe the evolution of the different parts of your machine through time, and synthesize this understanding into a picture of how your machine is working and how it should be improved. People who do this well are rare and essential. As with most abilities, synthesizing well is partially innate and partially learned through practice.

Screen Shot 2014-03-18 at 4.47.19 PM

 

207) Understand what an acceptable rate of improvement is, and that it is the level and not the rate of change that matters most. 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. For example, in the chart below, the trajectory of A might be acceptable, but B’s trajectory is not. A gets us above the bar in an acceptable amount of time.

Screen Shot 2014-03-18 at 4.48.31 PM

 

208) If your best solution isn’t good enough, think harder or escalate that you can’t produce a solution that is good enough. A common mistake is accepting your own best solution when it isn’t good enough.

209) Avoid the temptation to compromise on that which is uncompromisable. You must have and achieve high standards. This is particularly difficult when two uncompromisable things are at odds. At such times, there is a tendency to let one of them go. However, at such times you have to allocate more time to figure out how to best handle this, be more creative, and ask for more input. But don’t compromise on one of the things that shouldn’t be compromised. For example, one of the uncompromisable things I regularly get pressure from people to compromise on is letting great people avoid exploring their mistakes and weaknesses because they find it painful. For reasons articulated throughout these principles, I believe we can’t compromise on this because that process of exploration is healthy for Bridgewater, healthy for them, and key to our culture. I also believe that to allow opt-outs would legitimatize two sets of rules and put our radically honest way of being in jeopardy. But I want great people.72

210) Don’t try to please everyone. Not everyone is going to be happy about every decision you make, especially the decisions that say they can’t do something