I spent nine years at Bridgewater Associates in an executive role working closely with Ray Dalio. As a result whenever I meet fellow entrepreneurs at conferences, business meetings, or social events, they are curious to know about Bridgewater Associates and Ray Dalio. I get very poignant questions that you see discussed all over social media and the press: What is it like to work at Bridgewater? Do you agree with Ray’s book “the Principles?” and on and on.
The best way to answer these questions is by sharing what I have learned from working with Ray. Nothing I write represents the official views of Bridgewater or of Ray Dalio. Other current and former Bridgewater employees probably have different views and interpretations. You can view Ray Dalio’s interview on Bloomberg to hear his thoughts directly or can read the principles on the company’s website.
What I can honestly say is that one of the most defining professional experiences I have had was working with Ray during the growth of Bridgewater. Having Mr. Dalio as your direct boss is incredibly demanding because of his unmatched high standards and is well worth it. He compares it to “a bootcamp” and I could not agree more. Ray wrote the principles, a lengthy overview of his life and management philosophy. Based on my experience and interpretations of Ray’s approach, I would like to share with you the top three lessons I find most relevant to my life as an entrepreneur.
Number Three: Think about Everything Systematically
I often speak with venture capitalists and founders, who believe that building a business is more of an art than a science. However, I have learned from the way Ray approaches problem solving that there is tremendous value in thinking about any problem in a systematic way. Systematic does not simply mean logical or analytical, but also includes creativity. It means defining clear goals and then designing an eco-system of principles, people and processes to accomplish these goals. The more randomness one can eliminate out of the design, the greater the understanding of what drives results both good and bad, and the better the chance for delivering repeatable success.
Systematic thinking is an enduring idea that many scientists and business leaders have embraced. Systems thinking has roots in the General System Theory that was advanced by Ludwig von Bertalanffy in the 1940s and furthered by Ross Ashby in the 1950s. (System Thinking Wikipedia). Jack Welch of General Electric (GE) famously spearheaded the six sigma approach for delivering predictable high performance of the GE holding companies.
Why is systematic thinking so impactful? It encourages both big picture thinking and detail orientation. Most people are good at one or the other, but quality system thinking requires doing both well. Thinking systematically helps steer clear of some mistakes that are common when entrepreneurs embark on a vision:
- Remember to consider multiple paths to get to a goal. Most successful start-ups change their business model repeatedly and fail rapidly until they birth a successful business. Rigid, inflexible approaches rarely succeed.
- Understand cause and effect. The old proverb, “It’s better to be lucky, than to be good,” only works once at best. However for repeatable and predictable success, entrepreneurs need to understand every part of the ecosystems that their startup operates in including customers, competitors, team, product and to learn how these interact. For example, the Harvard Business Review published an article “The Employee Customer Profit Chain at Sears” explaining how understanding cause and effect helped the Sears senior executives turn the company around.
- Do not short change yourself on the vision – any vision big or small can be accomplished with the right design. I often see business models that lack creativity and that try to carve out an increasingly smaller piece of a shrinking pie. Social networks is a space where multiple players compete for an increasingly smaller market niche. However, systematic thinking helps the entrepreneur identify a space that is ready for disruption. Clay Christensen teaches the theory of disruptive innovation and how thinking about problems systematically, helps drive innovation.
Some progressive thinkers in Venture Capital are bringing systematic thinking to assessing, selecting and building start up companies. For example, Merrick Furst founder of Flashpoint at Georgia Tech has developed a systematic methodology for increasing the probability of success of start-up. The model is still being tested with both start-up and corporate innovation programs.
Number Two: Choose Your Team Carefully
Systematic thinking answers the questions of “what” business to build and “how” to do it. But even more important than these questions is “who.” “The most important decision you make.” Ray writes is “who you choose to be your responsible party.” I could not agree more. I have learned that lesson the hard way. The most costly mistakes I have personally made have been around who to hire, select as a business partner, or befriend. Reversely, the most rewarding decision I have made have been selecting well the people in the most critical roles in my life – business partners, employees, mentors, nanny, friends, and husband. Who the people in our life are impacts not only our chances for success, but also our level of happiness and satisfaction. And this principle has never in the history of business been more relevant than today when talent is the currency of success.
Entrepreneurs spend a tremendous amount of energy thinking through the business model, the marketing strategy, the technology platform, the funding and a plethora of other critical questions. However, who to hire often comes as an afterthought. I say reverse it! Start with reading the book: “Who: The Method of Hiring” and think about the partners you would want to begin a business with. I often meet co-founders that were friends and colleague and came together around a business idea. Jeff Hunter from Talentism, strongly discourages such an approach. If co-founders are so similar there is little value to the partnership. What is worst, blind spots can be exaggerated and critical skills may be lacking on the team. Jeff advizes company founders looking to form a start up team: “Don’t assume chemistry equals success. Take a hard look at your goal and what you each bring to the table, and then design based on that. Think through who owns what responsibilities based on their strengths and passions, and then what you are going to do about the gaps based on your weaknesses.”
Instead, as early as when you start to think about the space you want to disrupt, design the team you would need to be effective in this space. Think about complementary capabilities and skills and similar values. Here are ways that help me identify the right people:
- Differentiate skills from capabilities from values (Described in Ray Dalio’s principles). Skills such as speaking a foreign language or building financial models are easiest to learn. Capabilities, such as creativity or logical reasoning are largely genetically embedded and can be enhanced to an extend with practice. Values comprise the fundamental universe of one’s beliefs and perception of the world. A person’s hierarchy of values are hardest to alter.
- An interview is not enough. Invest in knowing people before you make serious decisions. Structuring small consulting projects to test working with people can be eye-opening.
- Check their reputation in the industry. Talking to former bosses of potential candidates is valuable, but I find it even more valuable to speak to peers, customers, direct reports who have had different levels of interactions with the candidate.
- Try to test their values: Try to simulate situations to see how potential hires would behave when in a controversial situation. For example, once I was questioning whether a person truly would be a team player, I put them in a situation with another employee who was difficult to work with. Another time, I made a valuable introduction to a prospective partner to test how they would handle the opportunity and if they would try to capture all the benefit for themselves or share with the original team.
- Don’t compromise: If you find people that are not quite the right first employees for your start-up, move on. One bad hire early on can nearly kill the business because start ups have limited resources and high opportunity cost.
- Cultivate long term relationships at all levels: Early in my career I was highly analytical but did not account for relationships adequately. Eileen Murray, an impactful mentor, got me to shift my approach completely. When working for her, I was going through a business crisis that required immediate action. Engrossed in the issue, I focussed on gaining understanding of the problem, the causes, the risks and the various potential solutions. She stopped me and asked: “Have you taken time to talk to your team and ensure that they are OK?” Eileen wisely reminded me what mattered the most and endures the longest – relationships with the people on your team.
Number One: Be Open Minded
This is by far the most important lessons from Ray Dalio’s principles. It is also the hardest to learn. Being open minded and thus being able to evolve quickly is probably the highest predictor of success. However, becoming open minded is incredibly hard because most people think of themselves as open minded and because being open minded is most valuable when it refers to blind spots decision makers have. Both young professionals and incredibly successful people struggle with being open minded and are limited by what they are not seeing as their weaknesses. Novels are written about the lack of open mindedness. Both classical tragedies like Shakespeare’s Othello and children books warn about the dangers of not being adequately open minded.
I am not an expert on open mindedness but a student on a journey. Here are some techniques that I have helped me improve:
- Constantly ask for input and feedback from everyone especially people that are outside of your group of mentors. But apply logic and judgement to assessing the quality of the feedback.
- Spend 90% of your thinking capacity on what you do not know and only 10% justifying what you know.
- Try to argue the other side of the issue
- Read constantly and look for new ideas but form your views independently.
- Listen to people you disagree with for at least 10 minutes without interrupting
- Do not penalize but reward people who give you negative feedback. This is especially true for people who work for you and whose incentives are to tell you what you want to hear.
- Meditate in your own way. Ray practices transcendental meditation. Tom Adams, former CEO of the Rosetta Stone took a spiritual walk to find his next challenge. I prefer visualisation meditation or running outdoors to clear and focus my mind. An entrepreneur can find his own way of reflecting.
a) The author no longer works for Bridgewater Associates.
b) The author holds financial interest in Bridgewater Associates.
c) All views and interpretations expressed are those of the author and do not represent Bridgewater, Ray Dalio or any other employees, customers, or affiliates of the firm in anyway.