Context: Evolving our Culture
Bridgewater’s culture has always been grounded in the values articulated by Ray in our Philosophy Statement from the 1990s — the overriding objective of which is pervasive excellence, meaning constant improvement. It is our constitution for creating a great idea meritocracy. At the same time, our culture and our underlying principles are a living, breathing thing, and the CEO (with our leadership team) holds the responsibility to evolve them through time.
We have talked a lot through time about frameworks for looking at problems and diagnosing them, but we have never really laid out a framework for what a functioning meritocracy looks like. Our goal in trying to do that now is (a) to reaffirm and clarify some concepts that have always existed in Ray’s principles, (b) to add new concepts we believe are required to be successful, while moving away from ways of being we don’t think help us succeed, and (c) to bring cohesion and common language to all of it. Doing this will allow us to align on expectations, have people wrestle with it for themselves, and then quickly move to implementation and further looping. This thinking is not comprehensive of all the aspects of our culture we want to stare at and evolve, but it is one loop on some of the most critical aspects. Specifically, this work represents our shared principles for meritocracy at Bridgewater.
Through that process, we have used some of Ray’s Principles to reground us:
- An idea meritocracy is the best system for making effective decisions.
- Truth — or, more precisely, an accurate understanding of reality — is the essential foundation for any good outcome.
- Trust in Radical Truth and Radical Transparency.
- 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.
- Create a Culture in Which It Is Okay to Make Mistakes and Unacceptable Not to Learn from them.
- Embracing radical truth and radical transparency will bring more meaningful work and more meaningful relationships.
- Don’t hire people just to fit the first job they will do; hire people you want to share your life with (i.e., people who share the above values and care deeply about one another).
The quality of a meritocracy is a product of (1) the team of people and (2) the way those people interact with each other. A meritocracy (and the business itself) is ultimately judged by its (3) outcomes (i.e., performance relative to goals). We spend time defining and measuring the effectiveness of our team and our interactions because we believe that they drive the outcomes on which the company depends directly and that they also drive our outcomes over the longer-term (e.g., meaningful work and relationships, the joy of trusting one another, the satisfaction of wrestling with a hard problem and growing as a result). At the same time, looking at our outcomes is the anchor point and the objective check on how good our meritocracy (our team and our interactions) really is.
Team
An idea meritocracy needs both (a) the best individuals, who possess the exceptional values, abilities, and skills required for the role today and to learn and grow through time, and (b) the best portfolio of people, which often means a diversified team of the best individuals. Even when you have the best performers, you also usually need diversity among them (across identity, background, and more) because those differences will expand the breadth of perspectives being considered and help us get to the best answer (while at the same time recognizing the degree of diversity needed may vary relative to the goal at hand). On teams, managers are responsible for hiring, developing, retaining, sorting, and getting the most out of people based on merit and outcomes, and by doing so, creating a team that is greater than the sum of its parts.
Interactions
The way we interact with one another. We are aiming for interactions that get the best out of individuals and the team, with truth and a deep desire to excel at their core. We think great leadership in this context is lots of “people in the arena”, meaning people who will relentlessly pursue truth wherever it takes them and who are totally unwilling to be on the sidelines. This means they are: (1) speaking up and exposing their honest thoughts and willing to be wrong, (2) unafraid to be transparent about their stumbles, imperfections, and decision-making and, (3) seeking to find the best ideas and get the most out of others through deliberate inclusion.
- Honesty/Directness: There are two types of truth — what people honestly believe and what is objectively true. Getting to the latter requires people who speak the former because they care more about Bridgewater getting to the best answer than having produced that answer themselves. We want people to share their honest thoughts (versus sugar coat or keep things inside) not because they are sure they are right, but to find out if they are right. So if you think it say it — but remember accuracy matters. The more unsure you are and the more assumptions you’re making, the more important it is to engage with curiosity rather than starting with assertions or certainty. In a meritocracy, greatness isn’t being the best debater, winning the most arguments, or personally having the right answer most often. It’s being honest about what you truly think while engaging with deep humility and the intent to learn, and in doing so increasing the probability of the team succeeding. Every member of the community has a responsibility to be honest and direct, and we expect a constant flow of feedback in all directions. It is most critical that feedback flow from those with less power to those with more, not because those with less power should bear the greatest burden, but because there are relatively more challenges to feedback moving in that direction — everything from power dynamics to frequency of interaction. In line with that everyone, but most especially leaders, has a responsibility not just to solicit honesty from others, but to assess whether that’s actually happening across all levels and if not, to diagnose why.
- Transparency: The goal of transparency is to hold everyone, but most importantly leaders, accountable to making good decisions, support constant improvement, and increase trust through exposing how people are thinking and operating. When we say transparency, we mean (a) putting the best reflection of the truth out there (versus drowning people in noise or overly curating one perspective) while also (b) creating as much surface area as possible for others to make sense of things and help us evolve. Transparency includes everything from exposing the logic of decisions, to putting light on mistakes, to giving feedback publicly, and more. By and large, you should start from the place that more light is better and push this transparency until you think you’re not building anymore — until you believe you’re about to destroy. If we don’t do these things problems go unresolved, people learn and develop at a slower rate, and there’s no role modeling for others. Because these decisions inevitably require judgement, you should be transparent about what you are/aren’t being transparent about in any given case. This will help you and others make good judgements. Those at the top have the greatest responsibility to be transparent because they make the biggest decisions, expose us to the biggest consequences, and have a responsibility to role model and create steep development for others.
- Deliberate Inclusion: The goal of inclusion is to surface more thoughts and ideas and therefore get to better answers — it is behavior that encourages people to speak up and increases trust in the meritocracy and those around them. It is NOT sugar-coating, walking on eggshells, or something to be traded off with transparency or honesty. Having the right players on your team but creating a dynamic where some of them cannot fully participate is damaging to the idea meritocracy. There are two ways in which that can happen: (1) people feeling as if they can’t speak up at all (or at a minimum cannot fully participate), and (2) people not fully sharing their thoughts because they’re worried about backlash if they do. Everyone holds responsibility for inclusion, but managers are accountable for actively fostering and perceiving the lack of it. It is not enough to have intent to be inclusive; managers must actively work to understand the barriers. If some people can’t bring themselves to the conversation, the meritocracy is failing.
Outcomes
Outcomes (i.e., performance relative to goals) are how all businesses and meritocracies will ultimately be judged. They can be short and long-term, direct and indirect. Some outcomes (e.g., our current investment performance) we can measure today — where that is possible, we want to do so rigorously. Other outcomes (e.g., the likelihood people will choose to spend their lives working here) can only be judged through time. To make sure we capture all the important outcomes, looking at the quality of our process (team and interactions) is the best indicator of what those future outcomes will be. Focusing on outcomes increases the probability of a good design because it forces you to evaluate whether the team and interactions are sufficient to achieve what you want. It also creates more entrepreneurialism, innovation, and pushes people out on the risk curve as incentives align and teams come together and interact around a shared destination and value creation. Operating this way allows us to win in the immediate, to diagnose and learn from our failures, and ultimately to create the steep learning curve required to win in the future (by achieving increasingly harder goals through time). The rest of the world is constantly improving, so we need to evolve better and faster than others to survive and thrive.