In his book entitled Principles, asset manager and Bridgewater founder, Ray Dalio, mentions that life can be overwhelming and full of unexpected events. Having a set of principles should help one keep one’s feet on the ground and move forward in life. Accepting that life can be messy and uncomfortable is part of the game and the author recommends that anyone be guided by rational thinking not by emotions. He also says that the failure often provides a valuable chance to learn, adapt and evolve the author mentions that goal setting requires to prioritize and narrow things down. One can’t pursue too many goals all at once. He suggests that one should analyze a given situation and identify obstacles on one’s way.
The author also talks about how to build meaningful relationships in business. He mentions that it’s a function of relying on a radical truth and radical transparency.
Radical truth
Radical truth is different from radical kindness. For example, he mentions that he was looking at someone for promotion. So, he consulted the company’s annual reviews and the facts seem to tell a different story. Therefore, he decided not to promote the person. He had said radical truth. He had said radical truth starts with acknowledging that we tend to over estimate our capabilities. For example, one day he pulled Bridgewater Associates and asked him to estimate what percentage of the company’s achievements there were accountable for. The combined percentages added up to 301%! Basically radical truths stems from an environment where employees can speak their mind. It also involves saying things like they are. For example, if a company is considering selling one subsidiary being radical radically true would involve sharing the information with all employees rather than hiding it for them. Because in the end the information will get known by most and this will rapidly deteriorate the company’s culture. The author also talks about radical transparency. This is found in the targeted behavior expected from employees. He says that when employees make selfless decisions, that is decisions that may be in the overall interest of the company and may be detrimental to their own interest, then, we’ve achieved the kind of behavior we’re looking for.
Building an efficient company
The author also talks about how to build an efficient company. He says that one should see a company like a machine. And every machine should have a process flowchart that clearly shows how work travels from one employee to the next until it is finished. With this tool in hand, one will always be able to spot the exact place where the problems are occurring and what you, the mechanic, would need to do. The author also talks about metrics. There critical to see what employees are doing, to measure their output and provide overall supervision and ideas for improvement.
In building a company, the authors suggest that one should be well prepared and know that problems will arrive and come up anytime. That’s just the nature of business. The idea is to design the business so that problems get noticed rapidly and solutions are implemented as quickly as possible. That’s why he mentions that the company ought to be built from the top down unlike a building which is billed from the foundation to the top. He also says that great managers are critical. Poor managers tend to hire inadequate staff members and deteriorate overall efficiency. Finally, the ratio of manager to employee must be around 1 to 10 and ideally 1 to 5.
In short
In his book Principles, asset manager and Bridgewater founder, Ray Dalio, shows that life is messy and unpredictable. Referring to principles will help people get out of unpredictable circumstances. Ray Dalio mentions specifically the need for radical truth and radical transparency as being critical to building meaningful relationships, the ultimate goal in business. He adds that a manager is much like a mechanic is supervising a machine. A manager should look at his production chain like a flowchart where work travels from one employee to another. And then, managers should measure each and everybody’s performance based on metrics. Operating this way simplifies supervision and is instrumental in identifying productivity boost opportunities. The author mentions that any business ultimately runs into problems. So, the issue is not so much the avoidance of problems but rather the ability to spot problems as fast as possible and to come up with a solution quickly. In building a company, one must think in opposite terms of building a house. The foundation would not be the ground but rather the top. You want to build the company from the top down and start with the CEO and the leadership team. Then, you want to check the manager to employee ratio with ideally one manager for every five employees.
What I found particularly interesting in this book is several things. First of all, I like how he says that any business will generate problems and that identifying them fast is critical. In this respect, I believe that the Benveniste Test is relevant. Also, much like Douglas Hubbard, the author of The Failure of Risk Management, rate value mentions that people tend to overestimate themselves. For example, he talks about the fact that he pulled the employees of Bridgewater Associates and that’s and asked them to estimate what percentage of the company’s achievements they were accountable for. He mentioned that the combined percentages added up to 301% meaning that people tend to overestimate their responsibilities throughout the company.
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