Above all else, my wishes for you are that: 1) You can make your work and your passion one and the same; 2) You can struggle well with others on your common mission to produce the previously mentioned rewards; 3) You can savor both your struggles and your rewards; and 4) You will evolve quickly and contribute to evolution in significant ways.
An idea meritocracy requires people to do three things: 1) Put their honest thoughts on the table for everyone to see, 2) Have thoughtful disagreements where there are quality back-and-forths in which people evolve their thinking to come up with the best collective answers possible, and 3) Abide by idea-meritocratic ways of getting past the remaining disagreements (such as believability-weighted decision making).
It is that of all approaches to decision making, an idea meritocracy is the best. It’s almost too obvious to warrant saying, but I will anyway: Knowing what you can and cannot expect from each person and knowing what to do to make sure the best ideas win out are the best way to make decisions. Idea-meritocratic decision making is better than traditional autocratic or democratic decision making in almost all cases.
We work with others to get three things:
1) Leverage to accomplish our chosen missions in bigger and better ways than we could alone.
2) Quality relationships that together make for a great community.
3) Money that allows us to buy what we need and want for ourselves and others.
Dependence on one person produces too much key-man risk, limits the range of expertise (because nobody is good at everything), and fails to establish adequate checks and balances. It also creates a burden because there’s generally too much to do. That’s why we have a co-CEO model at Bridgewater that is essentially a partnership of two or three people who lead the firm.
Some people have the ability and the courage to hold people accountable, while most don’t; having such ability and courage is essential.
Make sure that no one is more powerful than the system or so important that they are irreplaceable.
Governance is the oversight system that removes the people and the processes if they aren’t working well. It is the process that checks and balances power to assure that the principles and interests of the community as a whole are always placed above the interests and power of any individual or faction. Because power will rule, power must be put in the hands of capable people in key roles who have the right values, do their jobs well, and will check and balance the power of others.
Don’t get frustrated. If nothing bad is happening to you now, wait a bit and it will. That is just reality. My approach to life is that it is what it is and the important thing is for me to figure out what to do about it and not spend time moaning about how I wish it were different. Winston Churchill hit the nail on the head when he said, “Success consists of going from failure to failure without loss of enthusiasm.” You will come to enjoy this process of careening between success and failure because it will determine your trajectory.”
How to do more than we think we can is a puzzle we all struggle with. Other than working harder for longer hours, there are three ways to fix the problem: 1) having fewer things to do by prioritizing and saying no, 2) finding the right people to delegate to, and 3) improving your productivity.
Look for creative, cut-through solutions. When people are facing thorny problems or have too much to do, they often think that they need to work harder. But if something seems hard, time-consuming, and frustrating, take some time to step back and triangulate with others on whether there might be a better way to handle it. Of course, many things that need getting done are just a slog, but it’s often the case that there are better solutions out there that you’re not seeing.
Don’t act before thinking. Take the time to come up with a game plan. The time you spend on thinking through your plan will be virtually nothing in relation to the amount of time that will be spent doing, and it will make the doing radically more effective.
If you’re focused on the goal, excited about achieving it, and recognize that doing some undesirable tasks to achieve the goal is required, you will have the right perspective and will be appropriately motivated. If you’re not excited about the goal that you’re working for, stop working for it.
Remember that almost everything will take more time and cost more money than you expect.
Virtually nothing goes according to plan because one doesn’t plan for the things that go wrong. I personally assume things will take about one and a half times as long and cost about one and a half times as much because that’s what I’ve typically experienced. How well you and the people working with you manage will determine your expectations.
Use leveragers. Leveragers are people who can go from conceptual to practical effectively and do the most to get your concepts implemented. Conceptualizing and managing takes only about 10 percent of the time needed for implementing, so if you have good leveragers, you can devote a lot more of your time to what’s most important to you.
Recognize that it is far better to find a few smart people and give them the best technology than to have a greater number of ordinary people who are less well equipped. Great people and great technology both enhance productivity. Put them together in a well-designed machine and they improve it exponentially.
Constantly think about how to produce leverage. Leverage in an organization is not unlike leverage in the markets; you’re looking for ways to achieve more with less. At Bridgewater, I typically work at about 50:1 leverage, meaning that for every hour I spend with each person who works for me, they spend about fifty hours working to move the project along. At our sessions, we go over the vision and the deliverables, then they work on them, and then we review the work, and they move forward based on my feedback—and we do that over and over again. The people who work for me typically have similar relationships with those who work for them, though their ratios are typically between 10:1 and 20:1. I am always eager to find people who can do things nearly as well as (and ideally better than) I can so that I can maximize my output per hour.
Remember that there is no sense in having laws unless you have policemen (auditors).
When evaluating whether to use a consultant, consider the following factors:
1. Quality Control. When someone doing work for you is an employee, you are responsible for the quality of their work. But when the person working for you works for another company, you’re operating by their standards, so it’s important to know whether their standards are as high or higher than yours.
2. Economics. If a full-time person is required, it is almost certainly more cost-effective to create a position. Consultants’ daily rates add up to considerably more than the annualized cost of a full-time person.
3. Institutionalization of Knowledge. Someone who is around your environment on an ongoing basis will gain knowledge and an appreciation of your culture that no outsider can.
4. Security. Having outsiders do the job substantially increases your security risks, especially if you can’t see them at work (and monitor whether they follow proper precautions, like not leaving sensitive documents on their desks).
You have to consider whether you should be outsourcing or developing capabilities in-house. Though temps and consultants are good for a quick fix, they won’t augment your capacities in the long term.
Use “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. This not only ensures better answers but will allow you to see the differences in people’s performance and abilities. I use double-do’s in critical areas such as finance, where large amounts of money are at risk.
Remember that a ninja manager is somebody who can sit back and watch beauty happen—i.e., an orchestrator. If you are always trying to hire somebody who is as good as or better than you at your job, that will both free you up to go on to other things and build your succession pipeline.
Don’t just pay attention to your job; pay attention to how your job will be done if you are no longer around.
Don’t build the organization to fit the people. Managers will often take the people who work in their organization as a given and try to make the organization work well with them. That’s backward. Instead, they should imagine the best organization and then make sure the right people are chosen for it. Jobs should be created based on the work that needs to be done, not what people want to do or which people are available.
People frequently complain about this kind of iterative process because it tends to be true that people are happier with nothing at all than with something imperfect, even though it would be more logical to have the imperfect thing. That kind of thinking doesn’t make sense, so don’t let it distract you.
The more vividly you can visualize how the scenario you create will play out, the more likely it is to happen as you plan. Visualize who will do what when and the result they’ll produce. This is your mental map of your machine.
The more vividly you can visualize how the scenario you create will play out, the more likely it is to happen as you plan. Visualize who will do what when and the result they’ll produce. This is your mental map of your machine.
The more vividly you can visualize how the scenario you create will play out, the more likely it is to happen as you plan. Visualize who will do what when and the result they’ll produce. This is your mental map of your machine.
Human managers process information spontaneously using poorly thought-out criteria and are unproductively affected by their emotional biases. These all lead to suboptimal decisions.
It’s essential to build your most important principles into habits and help others do so as well.
Focus on each task or case at hand and you will be stuck dealing with them one by one. Instead, build a machine by observing what you’re doing and why, extrapolating the relevant principles from the cases at hand, and systemizing that process. It typically takes about twice as long to build a machine as it does to resolve the task at hand, but it pays off many times over because the learning and efficiency compound into the future.
While the best designs are drawn from a rich understanding of actual problems, when you’re just starting out on something, you often have to design based on anticipated problems as opposed to actual ones. That’s why having systematic ways of tracking issues (the Issue Log) and what people are like (the Dot Collector) is so useful: Instead of just relying on your best guesses of what might go wrong, you can look at data from prior “at bats” for yourself and others and come to the design process with understanding rather than having to start from scratch.
Everyone’s objective must be to get at the best answers, not the answers that will make the most people happy.
To get at the root cause, keep asking “Why?”
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.
Remember that if you have the same people doing the same things, you should expect the same results.
Keep in mind that managers usually fail or fall short of their goals for one (or more) of five reasons.
1. They are too distant.
2. They have problems perceiving bad quality.
3. They have lost sight of how bad things have become because they have gotten used to it.
4. They have such high pride in their work (or such large egos) that they can’t bear to admit they are unable to solve their own problems.
5. They fear adverse consequences from admitting failure.
Identifying the fact that someone else doesn’t know what to do doesn’t mean that you know what to do.
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.” Remember: It’s your job to guide the conversation toward an accurate and clear synthesis.
To diagnose well, ask the following questions:
1. Is the outcome good or bad?
2. Who is responsible for the outcome?
3. If the outcome is bad, is the Responsible Party incapable and/or is the design bad?
Bad outcomes don’t just happen; they occur because specific people make, or fail to make, specific decisions.
The most common mistake I see people make is dealing with their problems as one-offs rather than using them to diagnose how their machine is working so that they can improve it. They move on to fix problems without getting at their root causes, which is a recipe for continued failure. A thorough and accurate diagnosis, while more time-consuming, will pay huge dividends in the future.
Think of the problems you perceive in a machinelike way. There are three steps to doing this well: First, note the problem; then determine who the RPs to raise it to are; and finally decide when the right time to discuss it is. In other words: what, who, when. Then follow through.
Don’t be afraid to fix the difficult things.
In some cases, people accept unacceptable problems because they are perceived as too difficult to fix. Yet fixing unacceptable problems is a lot easier than not fixing them, because not fixing them will lead to more stress, more work, and chronic bad outcomes that could get you fired. So remember one of the first principles of management: You need to look at the feedback you’re getting on your machine and either fix your problems or escalate them, if need be, over and over again. There is no easier alternative than bringing problems to the surface and putting them in the hands of good problem solvers.
Avoid the anonymous “we” and “they,” because they mask personal responsibility. Things don’t just happen by themselves—they happen because specific people did or didn’t do specific things. Don’t undermine personal accountability with vagueness.
Realize that the people closest to certain jobs probably know them best. At the very least, they have perspectives you need to understand, so make sure you see things through their eyes.
“Pop the cork.” It’s your responsibility to make sure communications from your people flow freely, so encourage it by giving them plenty of opportunities to speak up. Don’t just expect them to provide you with regular and honest feedback—explicitly ask them for it.
Beware of group-think: The fact that no one seems concerned doesn’t mean nothing is wrong. If you see something that seems unacceptable to you, don’t assume that the fact that others also know about it and aren’t screaming means it’s not a problem. This is an easy trap to fall into—and a deadly one. Whenever you see badness, point it out to the Responsible Party and hold them accountable for doing something about it. Never stop saying, “This meal stinks!”
If you’re not worried, you need to worry—and if you’re worried, you don’t need to worry.
That’s because worrying about what can go wrong will protect you and not worrying about what will go wrong will leave you exposed.
On your way to your goals, you will inevitably encounter problems. To be successful you must perceive and not tolerate them. Problems are like coal thrown into a locomotive engine because burning them up—inventing and implementing solutions for them—propels us forward. Every problem you find is an opportunity to improve your machine. Identifying and not tolerating problems is one of the most important and disliked things people can do.
It’s critical that escalation not be seen as a failure but as a responsibility. All Responsible Parties will eventually face tests that they don’t know whether they can handle; what’s important is raising their concerns so their boss knows about the risks and both the boss and the escalating RP can get in sync about what to do about it. There is no greater failure than to fail to escalate a responsibility you cannot handle. Make sure your people are proactive; demand that they speak up when they can’t meet agreed-upon deliverables or deadlines.
Put things in perspective by going back before going forward. Before moving forward with a new plan, take the time to reflect on how the machine has been working up till now.
Sometimes people have problems putting current conditions into perspective or projecting into the future. 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 highlight important items that were done well or poorly in relation to their consequences, draw attention to the bigger picture and the overarching goals, specify the people who are responsible for specific goals and tasks, and help achieve agreement.
Watch out for people who confuse goals and tasks, because if they can’t make that distinction, you can’t trust them with responsibilities. People who can see the goals are usually able to synthesize too. 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 up-front of how XYZ is going overall and, if needed, will support it by accounting for the tasks that were done to achieve it. People who see the tasks and lose sight of the goals will just describe the tasks that were done.
If you didn’t make an expectation clear, you can’t hold people accountable for it not being fulfilled. Don’t assume that something was implicitly understood. Common sense isn’t actually all that common—be explicit.
If you want to be followed, either for egotistical reasons or because you believe it more expedient to operate that way, you will pay a heavy price in the long run. When you are the only one thinking, the results will suffer.
Have the open disagreement and be happy to either win or lose the thought battles, as long as the best ideas win out. I believe that an idea meritocracy will not only produce better results than other systems but will also ensure more alignment behind appropriate yet unpopular decisions.
The most effective leaders work to 1) open-mindedly seek out the best answers and 2) bring others along as part of that discovery process. That is how learning and getting in sync occurs. A truly great leader is appropriately uncertain but well equipped to deal with that uncertainty through open-minded exploration.
Force yourself and the people who work for you to do difficult things. It’s a basic law of nature: You must stretch yourself if you want to get strong. You and your people must act with each other like trainers in gyms in order to keep each other fit.
Prioritization can be a trap if it causes you to ignore the problems around you. Allowing small problems to go unnoticed and unaddressed creates the perception that it’s acceptable to tolerate such things. 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. While you don’t need to pick up every piece, you should never lose sight of the fact that you’re stepping over the trash nor that it’s probably not as hard as you think to pick up a piece or two as you go on your way.
Make your probing transparent rather than private. This helps assure the quality of the probing (because others can make their own assessments), and it will reinforce the culture of truth and transparency.
Don’t assume that people’s answers are correct. People’s answers 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 it is the equivalent of saying they don’t trust their people. These managers need to understand that this process is how trust is earned or lost. Your people will learn to be much more accurate in what they tell you if they understand this—and you will learn who you can rely on.
Probing shouldn’t just come from the top down. The people who work for you should constantly challenge you, so that you can become as good as you can be. In doing so, they will understand that they are just as responsible for finding solutions as you are. It’s much easier for people to remain spectators than to become players. Forcing them onto the field strengthens the whole team.
Great managers know the difference. They strive to hire, train, and oversee in a way in which others can superbly handle as much as possible on their own.
You should be able to delegate the details. If you keep getting bogged down in details, you either have a problem 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. Managers should view the need to get involved in the nitty-gritty as a bad sign.
Believability applies to management too. The better your track record, the more value you can add as a coach.
Great managers orchestrate rather than do. Like the conductor of an orchestra, they do not play an instrument, but direct their people so that they play beautifully together. Micromanaging, in contrast, is telling the people who work for you exactly what tasks to do or doing their tasks for them. Not managing is having them do their jobs without your oversight and involvement.
Everything is a case study. Think about what type of case it is and what principles apply to that type of case. By doing this and helping others to do this you’ll get better at handling situations as they repeat over and over again through time.
Remember that for every case you deal with, your approach should have two purposes . . .
. . . 1) to move you closer to your goal, and 2) to train and test your machine (i.e., your people and your design). The second purpose is more important than the first because it is how you build a solid organization that works well in all cases. Most people focus more on the first purpose, which is a big mistake.
If you keep your focus on each individual task, you will inevitably get bogged down. If instead you pay attention to building and managing your machines, you will be rewarded many times over.
Some young entrepreneurs start with the vision and creativity and then develop their management skills as they scale their companies; others start with management skills and develop vision as they climb the ladder. But like great musicians, all great managers have both creativity and technical skills. And no manager at any level can expect to succeed without the skill set of an organizational engineer.
Understand that a great manager is essentially an organizational engineer. Great managers are not philosophers, entertainers, doers, or artists. They are engineers. They see their organizations as machines and work assiduously to maintain and improve them. They create process-flow diagrams to show how the machine works and to evaluate its design. They build metrics to light up how well each of the individual parts of the machine (most importantly, the people) and the machine as a whole are working. And they tinker constantly with its designs and its people to make both better.
Most people get caught up in the blizzard of things coming at them. In contrast, successful people get above the blizzard so they can see the causes and effects at play. This higher-level perspective allows them to see themselves and others objectively as a machine, to understand who can and cannot do what well, and how everyone can fit together in a way that will produce the best outcomes.
Tough love is both the hardest and the most important type of love to give.
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. Don’t let yourself be held hostage to anyone; there is always someone else. Never compromise your standards or let yourself be squeezed.
Knowing what people are like is the best indicator of how well they are likely to handle their responsibilities in the future. At Bridgewater, we call this “paying more attention to the swing than the shot.” 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 change is difficult. Anything that requires change can be difficult. Yet in order to learn and grow and make progress, you must change. When facing a change, ask yourself: Am I being open-minded? Or am I being resistant? Confront your difficulties head-on, force yourself to explore where they come from, and you’ll find that you’ll learn a lot.
Understand that making sure people are doing a good job doesn’t require watching everything that everybody is doing at all times. You just have to know what they are like and get a sampling. Regular sampling of a statistically reliable number of cases will show you what a person is like and what you can expect from them.
Recognize that while most people prefer compliments, accurate criticism is more valuable. You’ve heard the expression “no pain no gain.” Psychologists have shown that the most powerful personal transformations come from experiencing the pain from mistakes that a person never wants to have again—known as “hitting bottom.”
Know that most everyone thinks that what they did, and what they are doing, is much more important than it really is.
In the end, accuracy and kindness are the same thing. What might seem kind but isn’t accurate is harmful to the person and often to others in the organization as well.
Sometimes you need to stand by and let someone make a mistake (provided it’s not too serious) so they can learn. It’s a bad sign if you are constantly telling people what they should do; micromanagement typically reflects inability on the part of the person being managed.
They should be given enough freedom to learn and think for themselves while being coached so they are prevented from making unacceptable mistakes. The feedback they receive should help them reflect on whether their problems are the kind that can be resolved by additional learning or stem from natural abilities that are unlikely to change. Typically it takes from six to twelve months to get to know a new employee in a by-and-large sort of way, and about eighteen months for them to internalize and adapt to the culture. During this time there should be periodic mini-reviews and several major ones. Following each of these assessments, new assignments should be made that are tailored to their likes and dislikes and strengths and weaknesses. This is an iterative process, in which the accumulated experiences of training, testing, and adjusting direct the person to ever more suitable roles and responsibilities. At Bridgewater, it is typically both a challenging and rewarding process that benefits the individual by providing better self-understanding and greater familiarity with various jobs. When it results in a parting of ways, it’s usually because people find they cannot be excellent and happy in any job at the firm.
Helping people acquire skills is easy—it’s typically a matter of providing them with appropriate training. Improvements in abilities are more difficult but essential to expanding what a person can be responsible for over time. And changing someone’s values is something you should never count on. In every relationship, there comes a point when you must decide whether you are meant for each other—that’s common in private life and at any organization that holds high standards. At Bridgewater, we know that we cannot compromise on the fundamentals of our culture, so if a person can’t get to the bar in an acceptable time frame, he or she must leave.
Remember that the only purpose of money is to get you what you want, so think hard about what you value and put it above money.
Pay people enough so that they’re not under financial stress, but not so much that they become fat and happy. You want your people to be motivated to perform so they can realize their dreams. You don’t want people to accept a job for the security of making a lot more money—you want them to come for the opportunity to earn it through hard and creative work.
Ultimately, what you need in the people you work with are excellent character and excellent capabilities, which is why it’s so hard to find great people.
Idealistic people who have moralistic notions about how people should behave without understanding how people really do behave do more harm than good.
While it’s best to have great conceptual thinkers, understand that great experience and a great track record also count for a lot.
If you’re less than excited to hire someone for a particular job, don’t do it.
Think through which values, abilities, and skills you are looking for (in that order). Values are the deep-seated beliefs that motivate behaviors and determine people’s compatibilities with each other. People will fight for their values, and they are likely to fight with people who don’t share them. Abilities are ways of thinking and behaving. Some people are great learners and fast processors; others possess the ability to see things at a higher level. Some focus more on the particulars; still others think creatively or logically or with supreme organization. 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., software proficiency can be learned) and often change in worth (today’s most in-demand programming language is likely to be obsolete in a few years).
[...] hiring is a high-risk gamble that needs to be approached deliberately. A lot of time, effort, and resources go into hiring and developing new employees before it’s clear whether or not they are good fits.
When putting someone in a position of responsibility, make sure their incentives are aligned with their responsibilities and they experience the consequences of the outcomes they produce.
When I was younger I didn’t really understand the saying, “Hire someone better than you.” Now, after decades of hiring, managing, and firing people, I understand that to be truly successful I need to be like a conductor of people, many of whom (if not all) can play their instruments better than I can—and that if I was a really great conductor, I would also be able to find a better conductor than me and hire him or her. My ultimate goal is to create a machine that works so well that I can just sit back and watch beauty happen.
I cannot emphasize enough how important the selection, training, testing, evaluation, and sorting out of people is.
In the end, what you need to do is simple:
1. Remember the goal.
2. Give the goal to people who can achieve it (which is best) or tell them what to do to achieve it (which is micromanaging and therefore less good).
3. Hold them accountable.
4. If they still can’t do the job after you’ve trained them and given them time to learn, get rid of them.
See things from the higher level. You are expected to go to the higher level and look down on yourself and others as part of a system. In other words, you must get out of your own head, consider your views as just some among many, and look down on the full array of points of view to assess them in an idea-meritocratic way rather than just in your own possessive way.
While it’s easier to avoid confrontations in the short run, the consequences of doing so can be massively destructive in the long term. It’s critical that conflicts actually get resolved—not through superficial compromise, but through seeking the important, accurate conclusions.
Having everyone randomly probe everyone else is an unproductive waste of time. For heaven’s sake don’t bother directing your questions to people who aren’t responsible or, worse still, throw your questions out there without directing them at all.
I regularly see people ask totally uninformed or nonbelievable people questions and get answers that they believe. This is often worse than having no answers at all.
I have often seen less believable people (students) insist that the more believable people (teachers) understand their thinking and prove why the teacher is wrong before listening to what the teacher (the more believable party) has to say. That’s backward.
All parties should remember that the purpose of debate is to get at truth, not to prove that someone is right or wrong, and that each party should be willing to change their mind based on the logic and evidence.
Think about whether the person you’re disagreeing with is more or less believable than you. If you are less believable, you are more of a student and should be more open-minded, primarily asking questions in order to understand the logic of the person who probably knows more. If you’re more believable, your role is more of a teacher, primarily conveying your understanding and answering questions. And if you are approximate peers, you should have a thoughtful exchange as equals. When there is a disagreement about who is more believable, be reasonable and work it through. In cases when you can’t do this alone effectively, seek out the help of an agreed-upon third party.
Don’t pay as much attention to people’s conclusions as to the reasoning that led them to their conclusions.
Be especially wary of those who comment from the stands without having played on the field themselves and who don’t have good logic, as they are dangerous to themselves and others.
Having open-minded conversations with believable people who disagree with you is the quickest way to get an education and to increase your probability of being right.
Remember that everyone has opinions and they are often bad. Opinions are easy to produce; everyone has plenty of them and most people are eager to share them—even to fight for them. Unfortunately many are worthless or even harmful, including a lot of your own.
If you can’t successfully do something, don’t think you can tell others how it should be done.
Treating all people equally is more likely to lead away from truth than toward it.
Simply look down on yourself and your team when a decision needs to be made and consider who is most likely to be right. I assure you that, if you do, you will make better decisions than if you don’t.
Three to five smart, conceptual people seeking the right answers in an open-minded way will generally lead to the best answers. It may be tempting to convene a larger group, but having too many people collaborate is counterproductive, even if the members of the larger group are smart and talented. The symbiotic advantages of adding people to a group grow incrementally (2+1=4.25) up to a point; beyond that, adding people actually subtracts from effectiveness. That is because 1) the marginal benefits diminish as the group gets larger (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 ones.
1+1=3. Two people who collaborate well will be about three times as effective as each of them operating independently, because each will see what the other might miss—plus they can leverage each other’s strengths while holding each other accountable to higher standards.
There is no reason to get angry because you still disagree. People can have a wonderful relationship and disagree about some things; you don’t have to agree on everything.
Watch out for assertive “fast talkers.” Fast talkers are people who articulately and assertively say things faster than they can be assessed as a way of pushing their agenda past other people’s examination or objections. Fast talking can be especially effective when it’s used against people worried about appearing stupid. Don’t be one of those people. Recognize that it’s your responsibility to make sense of things and don’t move on until you do. If you’re feeling pressured, say something like “Sorry for being stupid, but I’m going to need to slow you down so I can make sense of what you’re saying.” Then ask your questions. All of them.
Enforce the logic of conversations. People’s emotions tend to heat up when there is disagreement. Remain calm and analytical at all times; it is more difficult to shut down a logical exchange than an emotional one. Remember too that emotions can shade how people see reality. For example, people will sometimes say, “I feel like (something is true)” and proceed as though it’s a fact, when other people may interpret the same situation differently. Ask them, “Is it true?” to ground the conversation in reality.
If either party to a disagreement is too emotional to be logical, the conversation should be deferred. Pausing a few hours or even a few days in cases where decisions do not have to be made immediately is sometimes the best approach.
Distinguish open-minded people from closed-minded people. Open-minded people seek to learn by asking questions; they realize how little they know in relation to what there is to know and recognize that they might be wrong; they are thrilled to be around people who know more than they do because it represents an opportunity to learn something. Closed-minded people always tell you what they know, even if they know hardly anything. They are typically uncomfortable being around those who know a lot more than they do.
Remember that every story has another side. Wisdom is the ability to see both sides and weigh them appropriately.
Distinguish between idle complaints and complaints meant to lead to improvement. Many complaints either fail to take into account the full picture or reflect a closed-minded point of view. They are what I call “chirping,” and are generally best ignored. But constructive complaints may lead to important discoveries.
Many people mistakenly believe that papering over differences is the easiest way to keep the peace. They couldn’t be more wrong. By avoiding conflicts one avoids resolving differences. People who suppress minor conflicts tend to have much bigger conflicts later on, which can lead to separation, while people who address their mini-conflicts head on tend to have the best and the longest-lasting relationships.
Remember this: The pain is all in your head. If you want to evolve, you need to go where the problems and the pain are. By confronting the pain, you will see more clearly the paradoxes and problems you face. Reflecting on them and resolving them will give you wisdom. The harder the pain and the challenge, the better.
Worrying about “blame” and “credit” or “positive” and “negative” feedback impedes the iterative process that is essential to learning. Remember that what has already happened lies in the past and no longer matters except as a lesson for the future. The need for phony praise needs to be unlearned.
[...] failing is a painful experience while succeeding is a joyous one, so it requires much more character to fail, change, and then succeed than to just succeed.
It seems to me that if you look back on yourself a year ago and aren’t shocked by how stupid you were, you haven’t learned much.
Mistakes will cause you pain, but you shouldn’t try to shield yourself or others from it. Pain is a message that something is wrong and it’s an effective teacher that one shouldn’t do that wrong thing again.
Everyone makes mistakes. The main difference is that successful people learn from them and unsuccessful people don’t.
When the company was just me and a small group of people, I didn’t provide employees with health insurance; I assumed that they would buy it on their own. But I did want to help the people I shared my life with during their times of need. If someone I worked with got seriously sick and couldn’t afford proper care, what was I going to do, stand by and not help them? Of course I’d help them financially, to whatever extent I could. So when I did begin providing health insurance to my employees, I felt that I was insuring myself against the money I knew I’d give them if they were injured or fell ill as much as I was insuring them.
Share the things that are hardest to share. While it might be tempting to limit transparency to the things that can’t hurt you, it is especially important to share the things that are most difficult to share, because if you don’t share them you will lose the trust and partnership of the people you are not sharing with.
Be extremely open. Discuss your issues until you are in sync with each other 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.”
Speak up, own it, or get out. In an idea meritocracy, openness is a responsibility; you not only have the privilege to speak up and “fight for right” but are obliged to do so. This extends especially to principles. Just like everything else, principles need to be questioned and debated. What you’re not allowed to do is complain and criticize privately—either to others or in your own head. If you can’t fulfill this obligation, then you must go.
Never say anything about someone that you wouldn’t say to them directly and don’t try people without accusing them to their faces.
Integrity comes from the Latin word integritas, meaning “one” or “whole.” People who are one way on the inside and another way on the outside—i.e., not “whole”—lack integrity; they have “duality” instead. While presenting your view as something other than it is can sometimes be easier in the moment (because you can avoid conflict, or embarrassment, or achieve some other short-term goal), the second- and third-order effects of having integrity and avoiding duality are immense. 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 their best.
I believe that it’s almost always better to shoot straight, even when you don’t have all the answers or when there’s bad news to convey. As Winston Churchill said, “There is no worse course in leadership than to hold out false hopes soon to be swept away.”
For me, not telling people what’s really going on so as to protect them from the worries of life is like letting your kids grow into adulthood believing in the Tooth Fairy or Santa Claus.
Some people tell me it’s inconsistent with human nature to operate this way—that people need to be protected from harsh truths and that such a system could never work in practice. Our experience—and our success—have proven that wrong. While it’s true that our way of being is not what most people are used to, that doesn’t make it unnatural, any more than the hard physical exercise athletes and soldiers do is unnatural. It is a fundamental law of nature that you get stronger only by doing difficult things.
As Harvard developmental psychologist Bob Kegan, who has studied Bridgewater, likes to say, in most companies people are doing two jobs: their actual job and the job of managing others’ impressions of how they’re doing their job. For us, that’s terrible. We’ve found that bringing everything to the surface 1) removes the need to try to look good and 2) eliminates time required to guess what people are thinking.
For most people, being part of a great community on a shared mission is even more rewarding than money. Numerous studies have shown there is little to no correlation between one’s happiness and the amount of money one accumulates, yet there is a strong correlation between one’s happiness and the quality of one’s relationships.
From the very beginning, I felt that the people I worked with at Bridgewater were a part of my extended family. When they or members of their families got sick, I put them in touch with my personal doctor to make sure that they were well taken care of. I invited all of them to stay at my house in Vermont on weekends and loved it when they took me up on it. I celebrated their marriages and the births of their children with them and mourned the losses of their loved ones. But to be clear, this was no lovefest. We were tough on each other too, so we could all be as great as we could be. I learned that the more caring we gave each other, the tougher we could be on each other, and the tougher we were on each other, the better we performed and the more rewards there were for us to share. This cycle was self-reinforcing. I found that operating this way made the lows less low and the highs higher. It even made the bad times better than the good ones in some important ways.
In order to be great, one can’t compromise the uncompromisable. Yet I see people doing it all the time, usually to avoid making others or themselves feel uncomfortable, which is not just backward but counterproductive. Putting comfort ahead of success produces worse results for everyone.
The main test of a great partnership is not whether the partners ever disagree—people in all healthy relationships disagree—but whether they can bring their disagreements to the surface and get through them well. Having clear processes for resolving disagreements efficiently and clearly is essential for business partnerships, marriages, and all other forms of partnership.
If you had asked me what my objective was when I started out, I would’ve said it was to have fun working with people I like. Work was a game I played with passion and I wanted to have a blast playing it with people I enjoyed and respected. I started Bridgewater out of my apartment with a pal I played rugby with who had no experience in the markets and a friend we hired as our assistant. I certainly wasn’t thinking about management at the time. Management seemed to me like something people in gray suits with slide presentations did. I never set out to manage, let alone to have principles about work and management.
From reading Life Principles, you know that I liked to imagine and build out new, practical concepts that never existed before. I especially loved doing these things with people who were on the same mission with me. I treasured thoughtful disagreement with them as a way of learning and raising our odds of making good decisions, and I wanted all the people I worked with to be my “partners” rather than my “employees.” In a nutshell, I was looking for meaningful work and meaningful relationships. I quickly learned that the best way to do that was to have great partnerships with great people.
A manager’s ability to recognize when outcomes are inconsistent with goals and then modify designs and assemble people to rectify them makes all the difference in the world. The more often and more effectively a manager does this, the steeper the upward trajectory.
Great cultures bring problems and disagreements to the surface and solve them well, and they love imagining and building great things that haven’t been built before. Doing that sustains their evolution.
Don’t mistake possibilities for probabilities. Anything is possible. It’s the probabilities that matter. Everything must be weighed in terms of its likelihood and prioritized. People who can accurately sort probabilities from possibilities are generally strong at “practical thinking”; they’re the opposite of the “philosopher” types who tend to get lost in clouds of possibilities.
The best choices are the ones that have more pros than cons, not those that don’t have any cons at all. Watch out for people who argue against something whenever they can find something—anything—wrong with it, without properly weighing all the pluses and minuses. Such people tend to be poor decision makers.
Think of every decision as a bet with a probability and a reward for being right and a probability and a penalty for being wrong. Normally a winning decision is one with a positive expected value, meaning that the reward times its probability of occurring is greater than the penalty times its probability of occurring, with the best decision being the one with the highest expected value.
Be wary of relying on anything else. Unfortunately, numerous tests by psychologists show that the majority of people follow the lower-level path most of the time, which leads to inferior decisions without their realizing it. As Carl Jung put it, “Until you make the unconscious conscious, it will direct your life and you will call it fate.”
Watch animals in the wild and you’ll see that they instinctively make expected value calculations to optimize the energy they expend to find food. Those that did this well prospered and passed on their genes through the process of natural selection; those that did it poorly perished. While most humans who do this badly won’t perish, they will certainly be penalized by the process of economic selection.
Be an imperfectionist. Perfectionists spend too much time on little differences at the margins at the expense of the important things.
Whenever a big-picture “by-and-large” statement is made and someone replies “Not always,” my instinctual reaction is that we are probably about to dive into the weeds—i.e., into a discussion of the exceptions rather than the rule, and in the process we will lose sight of the rule. To help people at Bridgewater avoid this time waster, one of our just-out-of-college associates coined a saying I often repeat: “When you ask someone whether something is true and they tell you that it’s not totally true, it’s probably by-and-large true.
New is overvalued relative to great. For example, when choosing which movie to watch or what book to read, are you drawn to proven classics or the newest big thing? In my opinion, it is smarter to choose the great over the new.
Everything looks bigger up close. In all aspects of life, what’s happening today seems like a much bigger deal than it will appear in retrospect. That’s why it helps to step back to gain perspective and sometimes defer a decision until some time passes.
Don’t believe everything you hear. Opinions are a dime a dozen and nearly everyone will share theirs with you. Many will state them as if they are facts. Don’t mistake opinions for facts.
One of the most important decisions you can make is who you ask questions of. Make sure they’re fully informed and believable. Find out who is responsible for whatever you are seeking to understand and then ask them. Listening to uninformed people is worse than having no answers at all.
Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored. To prevent myself from falling into this trap, I used to literally ask myself questions: Am I learning? Have I learned enough yet that it’s time for deciding? After a while, you will just naturally and open-mindedly gather all the relevant info, but in doing so you will have avoided the first pitfall of bad decision making, which is to subconsciously make the decision first and then cherry-pick the data that supports it.
Learning must come before deciding.
By identifying talents and preferences that lead people to feel a particular way, you can place them in jobs at which they will likely excel. At Bridgewater, we use a test called the “Team Dimensions Profile” (TDP) to connect people with their preferred role. The five types identified by the TDP are Creators, Refiners, Advancers, Executors, and Flexors.
• Creators generate new ideas and original concepts. They prefer unstructured and abstract activities and thrive on innovation and unconventional practices.
• Advancers communicate these new ideas and carry them forward. They relish feelings and relationships and manage the human factors. They are excellent at generating enthusiasm for work.
• Refiners challenge ideas. They analyze projects for flaws, then refine them with a focus on objectivity and analysis. They love facts and theories and working with a systematic approach.
• Executors can also be thought of as Implementers. They ensure that important activities are carried out and goals accomplished; they are focused on details and the bottom line.
• Flexors are a combination of all four types. They can adapt their styles to fit certain needs and are able to look at a problem from a variety of perspectives.
The most valuable habit I’ve acquired is using pain to trigger quality reflections. If you can acquire this habit yourself, you will learn what causes your pain and what you can do about it, and it will have an enormous impact on your effectiveness.
Research suggests that if you stick with a behavior for approximately eighteen months, you will build a strong tendency to stick to it nearly forever.
Leonard Mlodinow, in his excellent book Subliminal, writes, “We usually assume that what distinguishes us [from other species] is IQ. But it is our social IQ that ought to be the principal quality that differentiates us.” He points out that humans have a unique ability to understand what other people are like and how they are likely to behave. The brain comes programmed to develop this ability; by the time they are four years old, most children are able to read others’ mental states.
Having expectations for people (including yourself) without knowing what they are like is a sure way to get in trouble. I learned this the hard way, through years of frustrating conversations and the pain of expecting things from people who were constitutionally incapable of delivering them.
While I used to get angry and frustrated at people because of the choices they made, I came to realize that they weren’t intentionally acting in a way that seemed counterproductive; they were just living out things as they saw them, based on how their brains worked.
Be evidence-based and encourage others to be the same. Most people do not look thoughtfully at the facts and draw their conclusions by objectively weighing the evidence. Instead, they make their decisions based on what their deep-seated subconscious mind wants and then they filter the evidence to make it consistent with those desires.
If a number of different believable people say you are doing something wrong and you are the only one who doesn’t see it that way, assume that you are probably biased. Be objective! While it is possible that you are right and they are wrong, you should switch from a fighting mode to an “asking questions” mode, compare your believability with theirs, and if necessary agree to bring in a neutral party you all respect to break the deadlock.
Closed-minded people say things like “I could be wrong . . . but here’s my opinion.” This is a classic cue I hear all the time. It’s often a perfunctory gesture that allows people to hold their own opinion while convincing themselves that they are being open-minded. If your statement starts with “I could be wrong” or “I’m not believable,” you should probably follow it with a question and not an assertion.
Open-minded people know when to make statements and when to ask questions.
Closed-minded people focus much more on being understood than on understanding others. When people disagree, they tend to be quicker to assume that they aren’t being understood than to consider whether they’re the ones who are not understanding the other person’s perspective.
Open-minded people always feel compelled to see things through others’ eyes.
Closed-minded people are more likely to make statements than ask questions. While believability entitles you to make statements in certain circumstances, truly open-minded people, even the most believable people I know, always ask a lot of questions. Nonbelievable people often tell me that their statements are actually implicit questions, though they’re phrased as low-confidence statements. While that’s sometimes true, in my experience it’s more often not.
Open-minded people genuinely believe they could be wrong; the questions that they ask are genuine. They also assess their relative believability to determine whether their primary role should be as a student, a teacher, or a peer.
[...] most people are instinctively reluctant to disagree. For example, if two people go to a restaurant and one says he likes the food, the other is more likely to say “I like it too” or not say anything at all, even if that’s not true. The reluctance to disagree is the “lower-level you’s” mistaken interpretation of disagreement as conflict. That’s why radical open-mindedness isn’t easy: You need to teach yourself the art of having exchanges in ways that don’t trigger such reactions in yourself or others.
People who change their minds because they learned something are the winners, whereas those who stubbornly refuse to learn are the losers.
When two people believe opposite things, chances are that one of them is wrong. It pays to find out if that someone is you. That’s why I believe you must appreciate and develop the art of thoughtful disagreement. In thoughtful disagreement, your goal is not to convince the other party that you are right—it is to find out which view is true and decide what to do about it. In thoughtful disagreement, both parties are motivated by the genuine fear of missing important perspectives.
Remember that you’re looking for the best answer, not simply the best answer that you can come up with yourself.
Open-mindedness doesn’t mean going along with what you don’t believe in; it means considering the reasoning of others instead of stubbornly and illogically holding on to your own point of view.
Don’t worry about looking good; worry about achieving your goal.
Taking in others’ perspectives in order to consider them in no way reduces your freedom to think independently and make your own decisions. It will just broaden your perspective as you make them.
Most people make bad decisions because they are so certain that they’re right that they don’t allow themselves to see the better alternatives that exist.
Radical open-mindedness is motivated by the genuine worry that you might not be seeing your choices optimally. It is the ability to effectively explore different points of view and different possibilities without letting your ego or your blind spots get in your way. It requires you to replace your attachment to always being right with the joy of learning what’s true.
Aristotle defined tragedy as a terrible outcome arising from a person’s fatal flaw—a flaw that, had it been fixed, instead would have led to a wonderful outcome. In my opinion, these two barriers—ego and blind spots—are the fatal flaws that keep intelligent, hardworking people from living up to their potential.
If you’re like most people, you have no clue how other people see things and aren’t good at seeking to understand what they are thinking, because you’re too preoccupied with telling them what you yourself think is correct. In other words, you are closed-minded; you presume too much.
To be effective you must not let your need to be right be more important than your need to find out what’s true. If you are too proud of what you know or of how good you are at something you will learn less, make inferior decisions, and fall short of your potential.
Let’s look at what tends to happen when someone disagrees with you and asks you to explain your thinking. Because you are programmed to view such challenges as attacks, you get angry, even though it would be more logical for you to be interested in the other person’s perspective, especially if they are intelligent. When you try to explain your behavior, your explanations don’t make any sense. That’s because your lower-level you is trying to speak through your upper-level you. Your deep-seated, hidden motivations are in control, so it is impossible for you to logically explain what “you” are doing.
Understand your ego barrier. When I refer to your “ego barrier,” I’m referring to your subliminal defense mechanisms that make it hard for you to accept your mistakes and weaknesses. Your deepest-seated needs and fears—such as the need to be loved and the fear of losing love, the need to survive and the fear of not surviving, the need to be important and the fear of not mattering—reside in primitive parts of your brain such as the amygdala, which are structures in your temporal lobe that process emotions. Because these areas of your brain are not accessible to your conscious awareness, it is virtually impossible for you to understand what they want and how they control you. They oversimplify things and react instinctively. They crave praise and respond to criticism as an attack, even when the higher-level parts of the brain understand that constructive criticism is good for you. They make you defensive, especially when it comes to the subject of how good you are.
[...] have humility so you can get what you need from others!
Distinguish proximate causes from root causes. Proximate causes are typically the actions (or lack of actions) that lead to problems, so they are described with verbs (I missed the train because I didn’t check the train schedule). Root causes run much deeper and they are typically described with adjectives (I didn’t check the train schedule because I am forgetful). You can only truly solve your problems by removing their root causes, and to do that, you must distinguish the symptoms from the disease.
Once you identify a problem, don’t tolerate it. Tolerating a problem has the same consequences as failing to identify it. Whether you tolerate it because you believe it cannot be solved, because you don’t care enough to solve it, or because you can’t muster enough of whatever it takes to solve it, if you don’t have the will to succeed, then your situation is hopeless. You need to develop a fierce intolerance of badness of any kind, regardless of its severity.
You only have so much time and energy; make sure you are investing them in exploring the problems that, if fixed, will yield you the biggest returns. But at the same time, make sure you spend enough time with the small problems to make sure they’re not symptoms of larger ones.
View painful problems as potential improvements that are screaming at you. Though it won’t feel that way at first, each and every problem you encounter is an opportunity; for that reason, it is essential that you bring them to the surface. Most people don’t like to do this, especially if it exposes their own weaknesses or the weaknesses of someone they care about, but successful people know they have to.
Remember that great expectations create great capabilities. If you limit your goals to what you know you can achieve, you are setting the bar way too low.
Never rule out a goal because you think it’s unattainable. Be audacious. There is always a best possible path. Your job is to find it and have the courage to follow it. What you think is attainable is just a function of what you know at the moment. Once you start your pursuit you will learn a lot, especially if you triangulate with others; paths you never saw before will emerge.
Life is like a giant smorgasbord with more delicious alternatives than you can ever hope to taste. Choosing a goal often means rejecting some things you want in order to get other things that you want or need even more. Some people fail at this point, before they’ve even started. Afraid to reject a good alternative for a better one, they try to pursue too many goals at once, achieving few or none of them.
So what if you don’t have all the skills you need to succeed? Don’t worry about it because that’s true for everyone. You just have to know when they are needed and where you can go to get them. With practice, you will eventually play this game with a calm unstoppable centeredness in the face of adversity. Your ability to get what you want will thrill you.
First you have to pick what you are going after—your goals. Your choice of goals will determine your direction. As you move toward them, you will encounter problems. Some of those problems will bring you up against your own weaknesses. How you react to the pain that causes is up to you. If you want to reach your goals, you must be calm and analytical so that you can accurately diagnose your problems, design a plan that will get you around them, and do what’s necessary to push through to results. Then you will look at the new results you achieve and go through the process again. To evolve quickly, you will have to do this fast and continuously, setting your goals successively higher.
It seems to me that the personal evolutionary process—the looping I described in the last chapter—takes place in five distinct steps. If you can do those five things well, you will almost certainly be successful. Here they are in a nutshell:
1. Have clear goals.
2. Identify and don’t tolerate the problems that stand in the way of your achieving those goals.
3. Accurately diagnose the problems to get at their root causes.
4. Design plans that will get you around them.
5. Do what’s necessary to push these designs through to results.
1. Don’t confuse what you wish were true with what is really true.
2. Don’t worry about looking good—worry instead about achieving your goals.
3. Don’t overweight first-order consequences relative to second- and third-order ones.
4. Don’t let pain stand in the way of progress.
5. Don’t blame bad outcomes on anyone but yourself.
Asking others who are strong in areas where you are weak to help you is a great skill that you should develop no matter what, as it will help you develop guardrails that will prevent you from doing what you shouldn’t be doing. All successful people are good at this.
Whatever circumstances life brings you, you will be more likely to succeed and find happiness if you take responsibility for making your decisions well instead of complaining about things being beyond your control. Psychologists call this having an “internal locus of control,” and studies consistently show that people who have it outperform those who don’t.
By recognizing the higher-level consequences nature optimizes for, I’ve come to see that people who overweigh the first-order consequences of their decisions and ignore the effects of second- and subsequent-order consequences rarely reach their goals. This is because first-order consequences often have opposite desirabilities from second-order consequences, resulting in big mistakes in decision making. For example, the first-order consequences of exercise (pain and time spent) are commonly considered undesirable, while the second-order consequences (better health and more attractive appearance) are desirable. Similarly, food that tastes good is often bad for you and vice versa.
Every time you confront something painful, you are at a potentially important juncture in your life—you have the opportunity to choose healthy and painful truth or unhealthy but comfortable delusion. The irony is that if you choose the healthy route, the pain will soon turn into pleasure. The pain is the signal!
Go to the pain rather than avoid it. If you don’t let up on yourself and instead become comfortable always operating with some level of pain, you will evolve at a faster pace.
It is a fundamental law of nature that in order to gain strength one has to push one’s limits, which is painful. As Carl Jung put it, “Man needs difficulties. They are necessary for health.” Yet most people instinctually avoid pain. This is true whether we are talking about building the body (e.g., weight lifting) or the mind (e.g., frustration, mental struggle, embarrassment, shame)—and especially true when people confront the harsh reality of their own imperfections.
While we don’t like pain, everything that nature made has a purpose, so nature gave us pain for a purpose. So what is its purpose? It alerts us and helps direct us.
[...] for most people success is struggling and evolving as effectively as possible, i.e., learning rapidly about oneself and one’s environment, and then changing to improve.
When I began to look at reality through the perspective of figuring out how it really works, instead of thinking things should be different, I realized that most everything that at first seemed “bad” to me—like rainy days, weaknesses, and even death—was because I held preconceived notions of what I personally wanted. With time, I learned that my initial reaction was because I hadn’t put whatever I was reacting to in the context of the fact that reality is built to optimize for the whole rather than for me.
It is a great paradox that individually we are simultaneously everything and nothing. Through our own eyes, we are everything—e.g., when we die, the whole world disappears. So to most people (and to other species) dying is the worst thing possible, and it is of paramount importance that we have the best life possible. However, when we look down on ourselves through the eyes of nature we are of absolutely no significance. It is a reality that each one of us is only one of about seven billion of our species alive today and that our species is only one of about ten million species on our planet. Earth is just one of about 100 billion planets in our galaxy, which is just one of about two trillion galaxies in the universe. And our lifetimes are only about 1/3,000 of humanity’s existence, which itself is only 1/20,000 of the Earth’s existence. In other words, we are unbelievably tiny and short-lived and no matter what we accomplish, our impact will be insignificant. At the same time, we instinctually want to matter and to evolve, and we can matter a tiny bit—and it’s all those tiny bits that add up to drive the evolution of the universe.
The world is littered with once-great things that deteriorated and failed; only a rare few have kept reinventing themselves to go on to new heights of greatness. All machines eventually break down, decompose, and have their parts recycled to create new machines. That includes us. Sometimes this makes us sad because we’ve become attached to our machines, but if you look at it from the higher level, it’s really beautiful to observe how the machine of evolution works.
Evolution is good because it is the process of adaptation that generally moves things toward improvement.
To be “good” something must operate consistently with the laws of reality and contribute to the evolution of the whole; that is what is most rewarded.
I now realize that nature optimizes for the whole, not for the individual, but most people judge good and bad based only on how it affects them.
Whenever I observe something in nature that I (or mankind) think is wrong, I assume that I’m wrong and try to figure out why what nature is doing makes sense.
While our higher-level thinking makes us unique among species, it can also make us uniquely confused. Other species have much simpler and more straightforward lives, without any of man’s wrestling with what’s good and what’s bad. In contrast with animals, most people struggle to reconcile their emotions and their instincts (which come from the animal parts of their brains) with their reasoning (which comes from parts of the brain more developed in humans). This struggle causes people to confuse what they want to be true with what actually is true.
Imagine how many fewer misunderstandings we would have and how much more efficient the world would be—and how much closer we all would be to knowing what’s true—if instead of hiding what they think, people shared it openly.
Don’t let fears of what others think of you stand in your way. You must be willing to do things in the unique ways you think are best—and to open-mindedly reflect on the feedback that comes inevitably as a result of being that way.
Being radically transparent and radically open-minded accelerates this learning process. It can also be difficult because being radically transparent rather than more guarded exposes one to criticism. It’s natural to fear that. Yet if you don’t put yourself out there with your radical transparency, you won’t learn.
The more open-minded you are, the less likely you are to deceive yourself—and the more likely it is that others will give you honest feedback.
Most people fight seeing what’s true when it’s not what they want it to be. That’s bad, because it is more important to understand and deal with the bad stuff since the good stuff will take care of itself.
Dreams + Reality + Determination = A Successful Life.
People who achieve success and drive progress deeply understand the cause-effect relationships that govern reality and have principles for using them to get what they want. The converse is also true: Idealists who are not well grounded in reality create problems, not progress.
I have become so much of a hyperrealist that I’ve learned to appreciate the beauty of all realities, even harsh ones, and have come to despise impractical idealism.
Don’t get me wrong: I believe in making dreams happen. To me, there’s nothing better in life than doing that. The pursuit of dreams is what gives life its flavor. My point is that people who create great things aren’t idle dreamers: They are totally grounded in reality. Being hyperrealistic will help you choose your dreams wisely and then achieve them.
Just as long-distance runners push through pain to experience the pleasure of “runner’s high,” I have largely gotten past the pain of my mistake making and instead enjoy the pleasure that comes with learning from it.
Stretching for big goals puts me in the position of failing and needing to learn and come up with new inventions in order to move forward.
Learning how reality works, visualizing the things I want to create, and then building them out is incredibly exciting to me.
I have found it helpful to think of my life as if it were a game in which each problem I face is a puzzle I need to solve. By solving the puzzle, I get a gem in the form of a principle that helps me avoid the same sort of problem in the future. Collecting these gems continually improves my decision making, so I am able to ascend to higher and higher levels of play in which the game gets harder and the stakes become ever greater.
Having good principles for dealing with the realities we encounter is the most important driver of how well we handle them.
If you were to write down what type of encounter you have every time you have one (e.g., the birth of a child, the loss of a job, a personal disagreement) and compile them in a list, it would probably total just a few hundred items and only a few of them would be unique to you. You might want to try this. Not only will you see for yourself if what I’m saying is true, but you will also start to build a list of the things you need to think about and have principles for.
It’s now clear to me that my purpose, your purpose, and the purpose of everything else is to evolve and to contribute to evolution in some small way. I didn’t think about that at the start; I just went after the things I wanted.
What I have seen is that the happiest people discover their own nature and match their life to it.
While I experienced them going from the bottom up rather than from the top down (which was preferable and probably influenced my perspective), my assessment is that the incremental benefits of having a lot and being on top are not nearly as great as most people think. Having the basics—a good bed to sleep in, good relationships, good food, and good sex—is most important, and those things don’t get much better when you have a lot of money or much worse when you have less. And the people one meets at the top aren’t necessarily more special than those one meets at the bottom or in between.
Since life brings both ups and downs, struggling well doesn’t just make your ups better; it makes your downs less bad. I’m still struggling and I will until I die, because even if I try to avoid the struggles, they will find me.
I realized that the satisfaction of success doesn’t come from achieving your goals, but from struggling well.
Studying all those painful first-time encounters, I learned that even if they hadn’t happened to me, most of them had happened to other people in other times and places, which gave me a healthy respect for history, a hunger to have a universal understanding of how reality works, and the desire to build timeless and universal principles for dealing with it.
We view our donations as investments and want to make sure that we have high philanthropic returns on our money.
Over time, as we gained experience in trying to help in a number of areas, I learned how fast money goes and that we didn’t have nearly enough to take care of everything we cared about. Additionally, when my first grandchild was born, it prompted me to wonder how many generations I should budget to protect. Speaking to others in comparable positions, I discovered that even the richest people feel short of the money they need to do the things they want to do.
They [Heroes] typically start out leading ordinary lives in an ordinary world and are drawn by a “call to adventure.” This leads them down a “road of trials” filled with battles, temptations, successes, and failures. Along the way, they are helped by others, often by those who are further along the journey and serve as mentors, though those who are less far along also help in various ways. They also gain allies and enemies and learn how to fight, often against convention. Along the way, they encounter temptations and have clashes and reconciliations with their fathers and their sons. They overcome their fear of fighting because of their great determination to achieve what they want, and they gain their “special powers” (i.e., skills) from both “battles” that test and teach them, and from gifts (such as advice) that they receive from others. Over time, they both succeed and fail, but they increasingly succeed more than they fail as they grow stronger and keep striving for more, which leads to ever-bigger and more challenging battles.
Heroes inevitably experience at least one very big failure (which Campbell calls an “abyss” or the “belly of the whale” experience) that tests whether they have the resilience to come back and fight smarter and with more determination. If they do, they undergo a change (have a “metamorphosis”) in which they experience the fear that protects them, without losing the aggressiveness that propels them forward. With triumphs come rewards. Though they don’t realize it when they are in their battles, the hero’s biggest reward is what Campbell calls the “boon,” which is the special knowledge about how to succeed that the hero has earned through his journey.
From my contacts with policymakers in a number of countries I learned quite a bit about how international relations really works. It is quite different from what most people imagine. Countries behave in a more self-interested and less considerate way than what most of us would consider appropriate for individuals. When countries negotiate with one another, they typically operate as if they are opponents in a chess match or merchants in a bazaar in which maximizing one’s own benefit is the sole objective. Smart leaders know their own countries’ vulnerabilities, take advantage of others’ vulnerabilities, and expect the other countries’ leaders to do the same.
The good habits come from thinking repeatedly in a principled way, like learning to speak a language. The good thinking comes from exploring the reasoning behind the principles.
Obviously Yunus, Canada, and Gates care deeply about other people, yet the personality tests they took rated them low. Why was that? In speaking with them and reviewing the questions that led to these ratings, it became clear: When faced with a choice between achieving their goal or pleasing (or not disappointing) others, they would choose achieving their goal every time.
Take Elon Musk. When he had just come out with the Tesla and showed me his own car for the first time, he had as much to say about the key fob that opened the doors as he did about his overarching vision for how Tesla fits into the broader future of transportation and how important that is to our planet. Later on, when I asked him how he came to start his company SpaceX, the audacity of his answer startled me.
“For a long time,” he answered, “I’ve thought that it’s inevitable that something bad is going to happen on a planetary scale—a plague, a meteor—that will require humanity to start over somewhere else, like Mars. One day I went to the NASA website to see what progress they were making on their Mars program, and I realized that they weren’t even thinking about going there anytime soon.
“I had gotten $180 million when my partners and I sold PayPal,” he continued, “and it occurred to me that if I spent $90 million and used it to acquire some ICBMs from the former USSR and sent one to Mars, I could inspire the exploration of Mars.”
When I asked him about his background in rocketry, he told me he didn’t have one. “I just started reading books,” he said. That’s how shapers think and act.
The answers these shapers provided to the standardized questions gave me objective and statistically measurable evidence about their similarities and differences.
It turns out they have a lot in common. They are all independent thinkers who do not let anything or anyone stand in the way of achieving their audacious goals. They have very strong mental maps of how things should be done, and at the same time a willingness to test those mental maps in the world of reality and change the ways they do things to make them work better. They are extremely resilient, because their need to achieve what they envision is stronger than the pain they experience as they struggle to achieve it. Perhaps most interesting, they have a wider range of vision than most people, either because they have that vision themselves or because they know how to get it from others who can see what they can’t. All are able to see both big pictures and granular details (and levels in between) and synthesize the perspectives they gain at those different levels, whereas most people see just one or the other. They are assertive and open-minded at the same time. Above all, they are passionate about what they are doing, intolerant of people who work for them who aren’t excellent at what they do, and want to have a big, beneficial impact on the world.
To visualize what I mean by “shaping” and “shapers,” think of Steve Jobs, who was probably the greatest and most iconic shaper of our time, as measured by the size and success of his shaping. A shaper is someone who comes up with unique and valuable visions and builds them out beautifully, typically over the doubts and opposition of others. Jobs built the world’s largest and most successful company by revolutionizing computing, music, communications, animation, and photography with beautifully designed products. Elon Musk (of Tesla, SpaceX, and SolarCity), Jeff Bezos (of Amazon), and Reed Hastings (of Netflix) are other great shapers from the business world. In philanthropy, Muhammad Yunus (of Grameen), Geoffrey Canada (of Harlem Children’s Zone), and Wendy Kopp (of Teach for America) come to mind; and in government, Winston Churchill, Dr. Martin Luther King, Jr., Lee Kuan Yew, and Deng Xiaoping. Bill Gates has been a shaper in both business and philanthropy, as was Andrew Carnegie. Mike Bloomberg has been a shaper in business, philanthropy, and government. Einstein, Freud, Darwin, and Newton were giant shapers in the sciences. Christ, Muhammad, and the Buddha were religious shapers. They all had original visions and successfully built them out.
It seems to me that life consists of three phases. In the first, we are dependent on others and we learn. In the second, others depend on us and we work. And in the third and last, when others no longer depend on us and we no longer have to work, we are free to savor life.
To me, the greatest success you can have as the person in charge is to orchestrate others to do things well without you. A step below that is doing things well yourself, and worst of all is doing things poorly yourself.
I learned that much of how we think is physiological and can be changed.
We needed a way to make the data that showed what people were like even clearer and more explicit, so I began making “Baseball Cards” for employees that listed their “stats.” The idea was that they could be passed around and referred to when assigning responsibilities. Just as you wouldn’t have a great fielder with a .160 batting average bat third, you wouldn’t assign a big-picture person a task requiring attention to details.
As for our agreements with each other, the most important one was our need to do three things:
1. Put our honest thoughts out on the table,
2. Have thoughtful disagreements in which people are willing to shift their opinions as they learn, and
3. Have agreed-upon ways of deciding (e.g., voting, having clear authorities) if disagreements remain so that we can move beyond them without resentments.
Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside.
I have come to realize that bad times coupled with good reflections provide some of the best lessons, and not just about business but also about relationships. One has many more supposed friends when one is up than when one is down, because most people like to be with winners and shun losers. True friends are the opposite.
Because most people are more emotional than logical, they tend to overreact to short-term results; they give up and sell low when times are bad and buy too high when times are good. I find this is just as true for relationships as it is for investments—wise people stick with sound fundamentals through the ups and downs, while flighty people react emotionally to how things feel, jumping into things when they’re hot and abandoning them when they’re not.
I believe that all organizations basically have two types of people: those who work to be part of a mission, and those who work for a paycheck. I wanted to surround myself with people who needed what I needed, which was to make sense of things for myself. I spoke frankly, and I expected those around me to speak frankly. I fought for what I thought was best, and I wanted them to do so as well. When I thought someone did something stupid, I said so and I expected them to tell me when I did something stupid. Each of us would be better for it. To me, that was what strong and productive relationships looked like. Operating any other way would be unproductive and unethical.
I urge you to be curious enough to want to understand how the people who see things differently from you came to see them that way. You will find that interesting and invaluable, and the richer perspective you gain will help you decide what you should do.
I learned that if you work hard and creatively, you can have just about anything you want, but not everything you want. Maturity is the ability to reject good alternatives in order to pursue even better ones.
While the computer was much better than our brains in many ways, it didn’t have the imagination, understanding, and logic that we did. That’s why our brains working with the computer made such a great partnership.
“He who lives by the crystal ball is destined to eat ground glass” is a saying I quoted a lot in those days. Between 1979 and 1982, I had eaten enough glass to realize that what was most important wasn’t knowing the future—it was knowing how to react appropriately to the information available at each point in time.
At first, it seemed to me that I faced an all-or-nothing choice: I could either take on a lot of risk in pursuit of high returns (and occasionally find myself ruined) or I could lower my risk and settle for lower returns. But I needed to have both low risk and high returns, and by setting out on a mission to discover how I could, I learned to go slowly when faced with the choice between two things that you need that are seemingly at odds. That way you can figure out how to have as much of both as possible. There is almost always a good path that you just haven’t discovered yet, so look for it until you find it rather than settle for the choice that is then apparent to you.
I came to see that people’s greatest weaknesses are the flip sides of their greatest strengths. For example, some people are prone to take on too much risk while others are too risk averse; some are too focused on the details while others are too big-picture. Most are too much one way and not enough another. Typically, by doing what comes naturally to us, we fail to account for our weaknesses, which leads us to crash. What happens after we crash is most important. Successful people change in ways that allow them to continue to take advantage of their strengths while compensating for their weaknesses and unsuccessful people don’t.
I learned to be radically open-minded to allow others to point out what I might be missing. I saw that the only way I could succeed would be to:
1. Seek out the smartest people who disagreed with me so I could try to understand their reasoning.
2. Know when not to have an opinion.
3. Develop, test, and systemize timeless and universal principles.
4. Balance risks in ways that keep the big upside while reducing the downside.
Imagine that in order to have a great life you have to cross a dangerous jungle. You can stay safe where you are and have an ordinary life, or you can risk crossing the jungle to have a terrific life. How would you approach that choice? Take a moment to think about it because it is the sort of choice that, in one form or another, we all have to make.
It’s senseless to have making money as your goal as money has no intrinsic value—its value comes from what it can buy, and it can’t buy everything. It’s smarter to start with what you really want, which are your real goals, and then work back to what you need to attain them. Money will be one of the things you need, but it’s not the only one and certainly not the most important one once you get past having the amount you need to get what you really want.
The most painful lesson that was repeatedly hammered home is that you can never be sure of anything: There are always risks out there that can hurt you badly, even in the seemingly safest bets, so it’s always best to assume you’re missing something.
You better make sense of what happened to other people in other times and other places because if you don’t you won’t know if these things can happen to you and, if they do, you won’t know how to deal with them.
[...] while almost everyone expects the future to be a slightly modified version of the present, it is usually very different.
Thoreau: “If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away.”
I also feared boredom and mediocrity much more than I feared failure. For me, great is better than terrible, and terrible is better than mediocre, because terrible at least gives life flavor.
Time is like a river that carries us forward into encounters with reality that require us to make decisions. We can’t stop our movement down this river and we can’t avoid those encounters. We can only approach them in the best possible way.
To be a successful entrepreneur, the same is true: One also has to be an independent thinker who correctly bets against the consensus, which means being painfully wrong a fair amount.
I believe that the key to success lies in knowing how to both strive for a lot and fail well. By failing well, I mean being able to experience painful failures that provide big learnings without failing badly enough to get knocked out of the game.
Whatever success I’ve had in life has had more to do with my knowing how to deal with my not knowing than anything I know.