Design your company culture like the world’s largest hedge fund

Ray Dalio, Founder of Bridgewater Associates, the world’s largest hedge fund, is a man after my own heart.  A few years ago he publicly set down his core Principles for living, managing, and investing.  Bridgewater uses these codified rules for recruiting, training, and most important, managing the firm’s culture.

It’s well worth your time to read them, or at least a summary from a Bridgewater alum.  Richard Ross, a former consultant to Bridgewater, observed, “I would say that the basic message of Ray’s Principles is, ‘be brutally honest with yourself and others; all the rest is commentary.   Whereas any individual Principle may not be immediately relevant to my new startup efforts, the intellectual rigor mandated by the Principles as a whole — the goal of understanding the inherent “truth” of a new idea — is pertinent to my activity as a fintech entrepreneur. ”

Almost all of the Principles are common sense; they mostly are what any competent MBA would say is good practice.  The difference is that most firms don’t fully implement common sense.  Almost anyone at a big (or small) company can report stories of irrational behavior they’ve witnessed.

Generically, it’s relatively easy to identify and promulgate principles for tasks you execute as an individual, e.g., how you build a financial model or speak a foreign language.  It’s harder but possible to educate people in how to manage others.  It’s dramatically harder for an organization to identify and promulgate principles for interpersonal relations, e.g., how to interact in a meeting.  That’s one of the most difficult tasks that Bridgewater is trying to execute.

I should mention that a few of the principles are idiosyncratic to Bridgewater and much less portable to other organizations, e.g., the idea of videotaping/audiotaping all meetings, or of never talking about anyone unless they’re in the room.  You don’t need to adopt the more unusual ideas to benefit from the rest of the package, although they are logically linked together.  I suspect some of the more unusual ideas flowed over time from the more conventional ideas, as a “fence” around the law.  Bridgewater is not alone in being aggressively transparent; for example, Stripe has made almost all of their internal emails visible; Buffer is aggressively transparent.

A Bridgewater alum told me:

  • “I re-read the Principles every few months.  Unless your organization explicitly endorses Bridgewater’s set of cultural norms and every employee signs up to live by that social contract, you will never use all of the Principles. However, the real value of the Principles outside of Bridgewater is that they immediately jolt you away from your everyday biases and beliefs.  We all get pulled into our local patterns of thinking, and the Principles remind you of the alternatives.”
  • “Outside of Bridgewater, most feedback fails because (a) people aren’t honest, and (b) people aren’t diagnosing to the root cause.  One of the biggest lessons from the Principles is that what appears to be a series of unrelated mistakes is almost always a manifestation of a root cause – an adjective about a person.  Managers almost always jump to proximate causes (i.e., verbs), and they’re almost always wrong.  Creating a culture that accepts this level of honesty and self-reflection is an enormous challenge.  Mature individuals understand that this level of feedback is the only way to create stepwise changes in personal development.  The deft Bridgewater alum has figured out how to take these tools and use them tactfully within their company’s cultural context.”
  • “Some of the people science components are enormously helpful as well.  Many managers make generalized judgments about individuals that are often counterproductive.  You would never say that somebody is “bad” at Bridgewater.  You’d bring that person in the room, explain the specific observations that led to your judgment, and parse out what you think this means about the person.  You’d end up with a significantly more granular understanding of that person’s strengths and weaknesses.  For example, “bad” might mean “has trouble with ambiguity,” which is likely fairer and significantly more helpful than what 90% of managers do.  This way of thinking is extremely powerful when building teams, as it forces you to think of people along a more specific set of dimensions than the typical “good/bad” spectrum.  It also helps you develop your team’s skills without enumerating their weaknesses in front of their entire department.”
  • “The Principles lead you to be wrong a lot.  I made a lot of mistakes at Bridgewater, and this was by design.  The Principles force you to say what you think, put a stake in the ground, and strive for intellectual honesty. You learn rapidly from this environment and it is enormously powerful.”

Ben Dattner, an organizational consultant, observed, “Being so open and clear about their principles and their culture helps Bridgewater create a more ‘realistic job preview’ and therefore helps ensure better employee-organization fit and [hopefully] reduce turnover.”

Get invites to exclusive events, jobs, and research.

Another alum observed, “I’ve worked at companies where there is woefully little communication, and I’ve worked at Bridgewater, which promotes the opposite: information (and meta-information: talking about talking) overload.  Given a choice, I much prefer the latter.  Up to a point of excess, more information is better.”

One of the reasons that I have been a longtime observer of Bridgewater is that so many of the Principles—and just the fact of writing down the Principles—resonates with me.  One of the reasons I wrote a book was to articulate (and thereby hold me publicly accountable to) the principles I use in selling to, working with, and managing people.

I created my blog way back in 2003 because of the scale it gives me (Principle #177, “Constantly think about how to produce leverage”).   Most of my presentations reflect my obsession with procedure manuals and checklists (#183 and #184).  As I started to build resources for my teams, I figured I should make them publicly available (#85, “Care about the people who work for you”).

One of the reasons I put some effort in designing a fitness-centered office and home was because I was seeking out the root cause (#148) for a common problem, which is the poor fitness level of the average office worker.   I also resonated with #38: “Remember that almost everything good comes from having great people operating in a great culture”.

#40 highlights the value of coming up with independent opinions.  I have the great privilege of being an investor and advisor to many great entrepreneurs, who by definition are coming up with independent opinions about what business make sense.  As Peter Thiel has observed, the best startup ideas look like bad ideas at inception.

#16 is “Write down your weaknesses and the weaknesses of others to help remember and acknowledge them”.  I agree, which is why early this year I hired a coach who interviewed all of my coworkers to determine my areas where I could improve.  For years I’ve kept a personal issue log  (#144), which I review on Yom Kippur (the Jewish holiday of repentance).  Reviewing this is always cause for a lot of repentance, sadly, because I do a lot of things wrong.

I know some Bridgewater employees have had issues with the amount of critical feedback in the culture, which some have called abrasive or confrontational.  I could see how constant feedback could be annoying, but I also relate to the necessity of pain for growth.

Implementing these principles, particularly those surrounding brutal honesty, is easier said than done.  All organizations have a culture, which is typically a hodgepodge of the work/personal cultures of the employees whom they happen to recruit.  A successful organization designs, documents, and manages to a culture optimized for their particular situation.  That’s what Bridgewater is clearly striving to do, and I think more firms would benefit by emulating them.
Photo credit: Prayitno .  Cross-posted in Forbes.


Get invites to exclusive events and research.