Principles: Life and Work

by Ray Dalio

Point out examples of jobs done well and the causes of their success.

celebrating how great we are, we focus on where we need to improve, which is how we got to be so great.

For performance reviews, start from specific cases, look for patterns, and get in sync with the person being reviewed by looking at the evidence

because you should continuously be striving to make sense of how the person is doing their job.

It’s difficult for people to identify their own weaknesses; they need the appropriate probing (not nit-picking) of specific cases by others to get at the truth of what they are like and how they are fitting into their jobs.

Make sure to make your assessment relative to the absolute bar, not just the progress over time.

Managees also have opinions about managers that they wouldn’t dare bring up in most companies, so misunderstandings and resentments fester.

It’s important for the party receiving feedback to be sympathetic to the person trying to give it, because it’s not easy—it takes character on the part of both participants to get to the truth.

Select which of their actions are critical enough to need preapproval and which can be examined later.

Speak in a calm, slow, and analytical manner to facilitate communication.

Since good and bad outcomes can arise from circumstances that might not have had anything to do with how the individual handled the situation, it is preferable to assess people based on both their reasoning and their outcomes.

Recognize that when you are really in sync with someone about their weaknesses, the weaknesses are probably true.

I find it puzzling that interviewers freely and confidently criticize job candidates without knowing them well but won’t criticize employees for similar weaknesses even though they have more evidence. That is because they view criticism as harmful and feel more protective of a fellow employee than they do of an outsider. If you believe that truth is best for everyone, then you should see why this is a mistake, and why frank and ongoing evaluations are so important.

Consider the enormous costs of not firing someone unsuited for a job: the costs of bad performance; the time and effort wasted trying to train them; and the greater pain of firing someone who’s been around awhile (say, five years or more) compared with letting someone go after just a year. Keeping people in jobs they are not suited for is terrible for them because it allows them to live in a false reality while holding back their personal evolution, and it is terrible for the community because it compromises the meritocracy and everyone pays the price.

Remember that the goal of a transfer is the best, highest use of the person in a way that benefits the community as a whole. Both affected managers should be in sync that the new role is the best, highest use or escalate up the chain to make a determination. The manager wanting to recruit the person is responsible for not causing a disruption. An informal conversation to see if someone is interested is fine, but there should be no active recruiting prior to getting in sync with the existing manager. The timing of the move should be decided by the existing manager in consultation with relevant parties.

Have people “complete their swings” before moving on to new roles.

As a guideline, a year in a job is sufficient before having conversations about a new role, although this isn’t black and white—the range could easily vary depending on the circumstances.

Before we had anything else at Bridgewater, we had this commitment to excellence.

I will walk you through a case in which our client service outcomes began to slip

Great managers are not philosophers, entertainers, doers, or artists. They are engineers.

assiduously

Don’t get distracted by shiny objects. No matter how complete any project or plan, there will always be things that come out of nowhere and look like the most important or urgent or attractive thing to focus on. These shiny objects may be traps that will distract you from thinking in a machinelike way, so be on your guard for them and don’t let yourself be seduced.

When a problem occurs, conduct the discussion at two levels: 1) the machine level (why that outcome was produced) and 2) the case-at-hand level (what to do about

When making rules, explain the principles behind them.

Even senior people in organizations sometimes act like young kids just learning to play soccer, running after the ball in an effort to help but forgetting what position they are supposed to play.

Probe to the level below the people who report to 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. f. Have the people who report to the people who report to you feel free to escalate their problems to you. This is a great and useful form of upward accountability.

listen for the anonymous “we” as a cue that someone is likely depersonalizing a mistake.

Imagine that all your little problems are small pieces

of trash you’re stepping over to get to the other side of a room. Sure, what’s on the other side of the room may be very important, but it won’t hurt you to pick up the trash as you come to it, and by reinforcing the culture of excellence it will have positive second- and third-order consequences that will reverberate across your whole organization.

Think like an owner, and expect the people you work with to do the same.

key-man risk.

Most people think a good leader is a strong person who engenders confidence in others and motivates them to follow him/her, with the emphasis on “follow.”

It is also more important to have good challengers than good followers.

Authoritarian managers don’t develop their subordinates, which means those who report to them stay dependent.

Put things in perspective by going back before going forward.

Avoid the anonymous “we” and “they,” because they mask personal responsibility.

Say your mental map of how the machine should have worked has two steps: that Harry should have either 1) done his assignment on time or 2) escalated that he couldn’t. All you have to do is pinpoint the two steps. 1) Did he do it on time? Yes or no. And if not, 2) did he escalate? Yes or no. It should be this simple. But this is when the conversation often gets dragged into gobbledygook, where someone goes into a detailed explanation of “what they did.”

Don’t focus too much on rare events or the trivial problems—

RP

If X attribute is done well next time, will the bad outcome still occur?

Confirm that the short-term resolution of the issue has been addressed, as needed. Determine the steps to be taken for long-term solutions and who is responsible for those steps.

“Who should do what differently?” will point you in the direction of the kind of understanding that you need to actually change outcomes in the future (versus just chirping about them).

Avoid Monday morning quarterbacking.

and you have to be as accurate in diagnosing a fault in a person as you would be if he or she were a piece of equipment.

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? Consider how personal the

Most problems happen for one of two reasons: 1) It isn’t clear who the Responsible Party is, or 2) The Responsible Party isn’t handling his/her responsibilities well.

Problem: The team is continually working late and is on the verge of burning out. Why? Because we don’t have enough capacity to meet the demand put on the team. Why? Because we inherited this new responsibility without additional staff. Why? Because the manager did not understand the volume of work before accepting the responsibility. Why?

Because the manager is bad at anticipating problems and creating plans. [Root Cause]

Use standing meetings to help your organization run like a Swiss clock.

“double-do” rather than “double-check” to make sure mission-critical tasks are done correctly. Double-checking has a much higher rate of errors than double-doing, which is having two different people do the same task so that they produce two independent answers.