Saturday, 4 December 2010

The Culture at Bridgewater Associates

I'm in the process of changing my day job. So one of the things that is going around my head is considering the culture of the next place of work. I was fortunate in this regard with the employers I left this week as there was a good work culture, and I enjoyed the work experience there much more than I would have expected.  

Whilst this was turning over in my mind I found my copy of Ray Dalio's much lampooned Principles. Ray Dalio is the founder and principle of Bridgewater Associates, one of the world's largest hedge funds, which itself is a factory for producing written material. Here is what Dalio wrote about culture at his place of work.

Get the People and the Culture Right I believe that the world changes so quickly and in ways that can’t possibly be anticipated far in advance, so that the key to having a successful company over the long term is to get the really fundamental ingredients right so that decision making will be great, whatever happens. In other words, I believe that the magic formula is to combine great people with a great culture so that Bridgewater can anticipate and respond to whatever happens in the world better than its competition.

Great Culture 

As mentioned, a “culture” is an environment in which certain values are clear and the way of doing things is consistent with the values. I believe that a great culture at Bridgewater is one in which we value rapid personal and organizational evolution toward higher levels of excellence above all else. Since I believe that radical truth and radical openness are essential for this rapid evolutionary process to occur, I also believe that these need to be essential elements of our culture. I believe that radical openness enhances truthfulness (which is essential in getting at the best answers) because it prevents the secretiveness that breeds hidden agendas and stands in the way of open debate. I also believe that extreme openness allows us to honestly explore and address all of the possible impediments to excellence. So, I believe that our culture must have very open, honest and logical people debating with each other in pursuit of excellence and recognizing their mistakes and weaknesses in order to achieve rapid improvement.

In brief, at the heart of the Bridgewater culture are the following principles:

  • Rapid evolution toward higher levels of excellence, at all cost.
  • Truth is the foundation of excellence.
  • Openness helps to ensure we find truth.

“At all cost” means that there are costs to truth and excellence that we must be willing to pay in order to be successful. Two of the biggest impediments to truth and excellence are people’s egos and organizational bureaucracy. Most people like compliments and agreement, and they dislike criticisms and conflict. Yet recognizing mistakes and weaknesses is essential for rapid improvement and excellence. In our culture, there’s nothing embarrassing about making mistakes and having weaknesses. Exploring them and determining what to do about them are viewed as part of a very healthy process that we do openly and consistently. Operating this way makes the open exploration of problems and opportunities normal, which in turn makes people more comfortable doing it.

The benefits that flow from having great people operating in this great culture are numerous. Obviously, it leads to better decision-making because the decisions of great people exchanging ideas on how to best do things are far better than those made by one great person operating in isolation. It leads Bridgewater and the people at Bridgewater to evolve (i.e., get better) at a much faster pace than they would otherwise. It also leads to greater trust, understanding and commitment to common goals. For example, in this culture, people know they are treated completely honestly and not subject to spin from their bosses or anyone else. There is no reason for petty gossip, because complaints are welcomed and rewarded. People know that if they have an idea of how something can be better, we will logically and fairly assess it. So they see that they have the power to make Bridgewater better, which produces a greater connection to its results.

Even when they challenge something, and the process leads to a decision that’s contrary to what they believed, the process of exchanging thoughts to determine the best path produces greater understanding of the logic behind what is ultimately decided. Operating this way helps us keep great people who are driven to pursue truth and excellence. These are the kinds of people who wouldn’t tolerate working in a place where they are supposed to just blindly follow the instructions of bosses who are presumed to be right all the time. Operating in this environment of extreme openness also helps to minimize unpleasant and ineffective office politics, hidden agendas and gossiping, because these things are anathema to this culture.

Of course there are some disadvantages to this and, in some ways, operating in this way is very difficult. The biggest disadvantage is probably that the process is time-consuming, so it has to be done efficiently. As mentioned, probably the toughest difficulty is in overcoming people’s egos, which so often stand in the way of getting at truth. At Bridgewater people have to value getting at truth so badly that they are willing to humiliate themselves to get it. Of course, they shouldn’t feel humiliated because they should know that everyone is wrong a lot, and everyone learns more because of their mistakes. It is more heroic than humiliating to objectively explore one’s own mistakes and weaknesses, so doing so should engender admiration – not humiliation. We need and admire people who can suspend their egos to get at truth and evolve toward excellence, so we ignore ego-based impediments to truth. We have a different type of environment in which some behaviors discouraged elsewhere are rewarded here (like challenging one's superiors), and some behaviors encouraged elsewhere are punished here (like speaking behind a subordinate's back). Both require adaptation. This process is generally both challenging and rewarding, and those who make it typically describe it as highly empowering.

People increasingly and subliminally adapt to the values and behaviors of their environments over time.  This is especially true if people expect these values and behaviors to give them what they want out of life. So it follows that changing from one culture to another can produce culture shock, which continues until the adaptation is complete. Since Bridgewater’s culture is very different from what is typical in the world at large, people often encounter culture shock when they start here, until they have adapted. During this adaptation period, some who are uncomfortable often argue that the culture should change to make it more comfortable. Yet they rarely argue that there is anything wrong with the values and behaviors, other than that some people are uncomfortable with them.

We don’t want to change the culture to make it comfortable for people who are uncomfortable with it, because changing it would redefine the norm that people gravitate toward and slow the adaptation process. Changing it would also put us on a slippery slope toward having a more conventional culture, which would produce more conventional results and impede our mission to get at truth and excellence. So if this culture really is better than others, it is far better to explain it clearly up front and expect people to adapt. It is a fundamental law of nature that you get stronger only by doing difficult things. So it is far better for the people who work here and better for Bridgewater to have them adapt rather than alter the culture to make them comfortable.

So while it’s unacceptable to alter the culture because it is uncomfortable, changing it because it’s not logical or doesn’t work is perfectly acceptable. So I wholeheartedly encourage you to explore whether it’s logical and works.

1 comment:

  1. For our leadership in organizations class will be doing the final case study on the culture of Bridgewater Associates. It would be a great help if individuals with experience working at or with Bridgewater could take a quick 10 minutes to fill out the form below. Many thanks for helping us in the pursuit of truth!