A few weeks ago saw the publication of billionaire Ray Dalio’s Principles. I haven’t read the book just yet, but having previously read the original ‘version’, which used to be freely available online, we understand that Mr. Dalio’s Principles are foundational to the practice of radical transparency and, accordingly, to the culture of Bridgewater Associates, the biggest hedge fund in the world. As a general rule, at intersitio, we wholly applaud and support the action of written reflection and sensemaking which is critical to Mr. Dalio’s endeavour … however, we do have a couple of concerns, which we thought would be a good subject of today’s post!
Just to recap, for those at the back, a phenomenally successful business person has published a book that showcases his ‘principles’, a tome describing how business is conducted at Bridgewater. He’s wildly successful, and his ‘principles’ describe what he did along the way - so, maybe, if we read what he did, we’ll be as successful? Hmm … There’s a couple of concerns with this we have.
On a list of 300 ‘things’, which ‘thing’ rules supreme?
Having an expansive list of ‘prescriptive rules for life and business’ is great, but if there’s nothing that helps organizational actors balance the application of these rules accordingly, you’re left with a bewildering array of competing guidance. Prof. Erin Krupka at the University of Michigan spoke about exactly this at the 2016 Collective Intelligence meeting in NYC during a paper title ‘The Covenants We Live By: Normative Social Influence on Behavior.’ Prof. Krupka described some elegant behavioural economic experiments she’d conducted that helped organizations appreciate where there was a significant mismatch between the understanding and practice of values within all levels of a financial services company. Prof. Krupka demonstrates that it doesn’t take much to quickly create a confusing system of ‘values’, which are muddily navigated, readily exacerbated by competing material incentive schemes, which can result in serious ethical quandaries.
The Gold Standard
At the end of his book, Originals, Adam Grant describes a conversation with Mr. Dalio and points out that borrowing from the field of medicine, there’s a widespread consensus that the quality of evidence can be classified on a scale of ‘strength’ from 1 to 6. The highest standard is that of the randomized controlled trial; the least rigorous is ‘the opinion of respected authorities or expert committees.’ In embracing ‘radical transparency’ Bridgewater cultivates an environment of candid communication - a laudable aim - and one that looks to bring openness to difficult discussion and sensemaking, but one that is most describable as ‘the opinion of respected authorities or expert committees.’ So it becomes nigh on impossible for us to conflate how colleagues at Bridgewater are working, with the outcomes they are producing …
Mr. Dalio would be, I imagine, the first to tell us to ‘think for ourselves’, and so I’m left wondering how much of the Principles is broadly applicable outside of Bridgewater, and how on earth would we ever be able to determine this? Are these Principles really useful for building ‘a company where the best ideas can win’? Again, the Principles alone would be unable to help us unravel this enigma. So, what would? Well, to be frank, data and science. Rigorous hypothesis articulation and testing, data collection, thoughtful experimental design and execution and detailed reflection and interogation. As you’ll hear Mr. Dalio himself say in his recent TED Talk - “Rather than thinking, ‘I’m right.’ I started to ask myself, ‘How do I know I’m right?’”
Picture credit - Not entirely sure where this came from. I saw it first here:
— neuro.social.self (@neurosocialself) September 9, 2017