Dalio’s Principles

When I write and talk about hidden motives, many respond by asking how they could be more honest about their motives. I usually emphasize that we have limited budgets for honesty, and that it is much harder to be honest about yourself than others. And it is especially hard to be honest about the life areas that are the most sacred to you. But some people insist on trying to be very honest, and our book can make them unhappy when they see just how far they have to go.

It is probably easier to be honest if you have community support for honesty. And that makes it interesting to study the few groups who have gone the furthest in trying to create such community support. An interesting example is the hedge fund Bridgewater, as described in Dalio’s book Principles:

An idea meritocracy where people can speak up and say what they really think. (more)

#1 New York Times Bestseller … Ray Dalio, one of the world’s most successful investors and entrepreneurs, shares the unconventional principles that he’s developed, refined, and used over the past forty years to create unique results in both life and business—and which any person or organization can adopt to help achieve their goals. … Bridgewater has made more money for its clients than any other hedge fund in history and grown into the fifth most important private company in the United States. … Along the way, Dalio discovered a set of unique principles that have led to Bridgewater’s exceptionally effective culture. … It is these principles … that he believes are the reason behind his success. … are built around his cornerstones of “radical truth” and “radical transparency,” … “baseball cards” for all employees that distill their strengths and weaknesses, and employing computerized decision-making systems to make believability-weighted decisions. (more)

This book seems useful if you were the absolute undisputed ruler of a firm, so that you could push a culture of your choice and fire anyone who seems to resist. And were successful enough to have crowds eager to join, even after you’d fired many. And didn’t need to coordinate strongly with customers, suppliers, investors, and complementors. Which I guess applies to Dalio.

But he has little advice to offer those who don’t sit in an organization or social network that consistently rewards “radical truth.” He offers no help in thinking about how to trade honesty against the others things your social contexts will demand of you. Dalio repeatedly encourages honesty, but he admits that it is often painful, and that many aren’t suited for it. He mainly just says to push through the pain, and get rid of people who resist it, and says that these big visible up-front costs will all be worth it in the long run.

Dalio also seems to equate conflict and negative opinions with honesty. That is, he seeks a culture where people can say things that others would rather not hear, but doesn’t seem to consider that such negative opinions need not be “honest” opinions. The book makes hundreds of claims, but doesn’t cite outside sources, nor compare itself to other writings on the subject. Dalio doesn’t point to particular evidence in support of particular claims, nor give them any differing degrees of confidence, nor credit particular people as the source of particular claims. It is all just stuff he’s all sure of, that he endorses, all supported by the evidence of his firm’s success.

I can believe that the firm Bridgewater is full of open conflict, with negative opinions being frequently and directly expressed. And it would be interesting to study social behavior in such a context. I accept that this firm functions doing things this way. But I can’t tell if it succeeds because of or in spite of this open conflict. Yes this firm succeeds, but then so do many others with very different cultures. The fact that the top guy seems pretty self-absorbed and not very aware of the questions others are likely to ask of his book is not a good sign.

But if its a bad sign its not much of one; plenty of self-absorbed people have built many wonderful things. What he has helped to build might in fact be wonderful. Its just too bad that we can’t tell much about that from his book.

25May2019: Someone who wishes to remain anonymous just wrote to me saying:

I just happen to read your article from last year on Dalios Principles. I was struck by the quality of your observations. In Bridgewater terms I am ‘believable’ in assessing this as I was there for a number of years. Your inferences are especially insightful given you did not work there. Well done on your article.