Creating a culture of radical transparency

it's so great to be here Thank You Patti for having me the main reason I want to I'm so excited about being here is because you're the people that I'm eager to speak with entrepreneurs and tech I'm at a different stage in my life what you've done you know you're beginning what I call the second stage of your life and I'm in the end of my second stage of my life and what I mean is I think that life exists in three stages and the first stage of your life you're a kid you're learning you're dependent on others you get out of school and then you enter the second stage of your life and in that second stage you're working others are dependent on you and you learn a lot you learn a lot and I'm at the second stage of my life the end of my second stage and the reason I'm passing along these principles is I acquired some principles along the way that helped me and I just want to say start by saying for you I think the most important thing is that you have your own principles that work well for you but principles are ways of dealing with reality that work so one big tip when we deal with your principles is that I did something that was very invaluable to me and that I'd like to pass along to you and that is every time I would make a decision I would reflect on that decision and write down the criteria for making those decisions and that's called principles and then I would take those and I made those into algorithms so principles algorithms entrepreneurship this is what I'm here to talk about and I want to give you just a taste of that so I think we have a slide the slides working oh okay thank you okay so for me like most of you I wanted to go after my audacious goals and when I went after those audacious goals I had successes and failures and what I learned is that the failures were most important in other words life is a cycle and you encounter your failures and how you deal with your failures is the most important thing because learning comes from those failures so I discovered along the way failures are valuable I learned that pain plus reflection equals progress that if I could reflect well and learn from those mistakes then I would be able to get principles certain ways of dealing with things because things happen over and over again and I'd learn those principles and I would write those principles now and as I built my company we would discuss those principles about how we are with each other and by learning those principles then we would be in a position that we would improve we wouldn't make the same mistakes again and we would go on to more audacious goals and so life looks to me like this evolutionary process of what we call looping of that going for your goals making mistakes learning from the mistakes and doing that and doing that by encoding them in words and then in algorithms so I learned that in order to be successful you only have to do five things if you do these five things well that you will be successful not this is what I learned along the way first you have to know what your goals are are your goals clear to you what are your going after and your goals are going to be a reflection of your values but you're gonna have to be clear on your goals and then that's the first step the second step is when you you'll encounter your problems on the way to your goals and how you deal with your problems is the most important thing and so you have to identify your problems and you have to not taller your problems so life is a game of identifying problems and then solving those problems and being more creative and in order to then go on you have to go on to step three which is diagnose those problems to get at their root causes now often those root causes are weaknesses that you have or weaknesses that other people have although they could be other things as well but you have to get at the specific root cause of the problem that's standing in the way and often that has to do with people's strengths and weaknesses and you got to face up to those so you have to diagnose to the root cause once you have a root cause diagnosis then you have to design a path to get around that something's got to change that will get you around your problems and then once you then once you have a design you have to follow through number five and do what you set out to do and if you do those five things well over and over again you'll have that looping that keeps bringing you to a higher level the faster and steeper you do have the looping the greater your evolution is going to be so and the problem is that nobody can very few people can do all those five steps to well individually it is that everybody has strengths and weaknesses and to know how to work with people who are strong where you are weak by being clear about those strengths and weaknesses is so important so I want to tell you about an idea meritocracy okay so what is my approach what is Bridgewater Bridgewater is an idea meritocracy in which the goal is to have meaningful work and meaningful relationships through radical truthfulness and radical transparency an idea meritocracy the best ideas went out through to have meaningful work a mission that you're on together and meaningful relationships deep meaningful relationships while that's going on because that's a power and a joy and to do that through radical truthfulness and radical transparency and I learned that approach because of mistakes that I made and I want to take you into one of my biggest mistakes and give you a flavor of what that was like and how transformative it was in 1980-81 I calculated that American banks had lent a lot more money to countries that would not be able to pay back their debt and a lot more money than they had bank capital so that we were going to have a banking crisis and that would have a devastating effect and that was a very controversial point of view at the time and but in August 1982 Mexico defaulted and a number of other countries defaulted on the debt and we had that debt crisis and with that debt crisis because it was a controversial point of view I received a lot of attention I was asked to testify to Congress I was asked to appear on Wall Street week which was the show at the time and I just want to give you a glimpse into what that was like so that video will show you that mr. chairman mr. Mitchell it's a great pleasure and a great honor to be able to appear before you and examination with what is going wrong with our economy the economy is now flat teetering on the brink of failure you were recently quoted in an article you said I can say this with absolute certainty because I know how markets work I can say with absolute certainty that if you look at the liquidity base in the corporation's and the world as a whole that there's such a reduced level of liquidity that you can't return to an era of stagflation do you read me okay wasn't I arrogant incredibly arrogant I couldn't have been more wrong I couldn't be more wrong that was the exact bottom in the stock market and I was wrong for myself I was I had two small company I had to let everybody who worked there go I was so broke than I had to borrow $4,000 from my dad to help to pay for my bills I mean it was an incredibly painful experience but it was one of the best experiences that I had because it changed my approach to decision making rather than it gave me a humility that I needed to balance with my audacity it made me think how do I know I'm right and when I started to realize how do I know on write and think about that differently I wanted to find the smartest people who would disagree with me and to understand their readings reasoning it opened my mind to take in and other points of view and to also double-check and to diversify my bets and to and all doing that raised my probabilities of being right I started to think of all those obstacles like puzzles you know those failures those problems and I would say if I could solve the puzzle which is what would I do differently in the future I could learn principles that would be my gems and I would make that sort of progress so I changed the way I ran my company and this has been the essence of our sis cooks success from that point until where we are now now bridgewater fortune said the fifth most important private company in the United States it's been a tremendously successful experience in terms of both the work and the relationships and I just want to pass that along to you so ok so that same evolutionary process so I wanted to bring in into pendant thinkers who also had a audacious goals who would challenge me and challenge each other and in order to do that I had to create a real system an idea meritocracy a lot of people talk about idea meritocracy but there's a systematic approach to assume to assure that the best ideas went out and I want to try to communicate that to you so you need principles for how you have a decision making process and we systemize those principles into decision-making algorithmic decision way that everybody could see and that produced successes and failures and learnings and that cycle meant that we evolved quickly and at a steep pace and that made happier employees and it happier clients and that was the process so what do I mean by an idea meritocracy what do you have to do in order to have an idea of meritocracy if you want to have what you have to do three things the first thing is that you have to put your honest thoughts on the table can you be honest about what you think that's a difficulty for a lot of people you know what do you really think what's going on in your head who's making what mistakes or how should we do things differently you have to be free to put that on the table and the second thing is you have to have quality disagreement you have to appreciate the art of disagreement not react negatively to disagreement in other words the art of disagreement if some if you have disagreement somebody must be wrong and how do you know that wrong person isn't you I think one of the greatest tragedies of mankind probably the greatest tragedy of mankind it's a big statement is the tragedy of holding wrong opinions in people's minds and not stress testing them and making mistakes were it's so easy to put them out there and have them well stress test it to see if they hold up so you have to understand the art of thoughtful disagreement and then you have to a draw agreement on protocols you have to agree on how to get past those disagreements when they and I think you have to have idea meritocratic ways of doing that you know I ran the company but what I needed around me were all people that would hold me accountable and not let my ideas pass and let the idea win out so what I want to do is give you a sense of that in order to have an idea meritocracy you have to know what somebody is really like and you know if you if you know what they're really like you know what they expect from them and there's a challenge in that there's an emotional challenge do you want to know your weaknesses do you want other people to know your weaknesses do you want to be radically truthful with each other those become the challenges so I want to give you a taste of what it's like along the way in order to reinforce the culture I built a lot of we built a lot of tools and apps that facilitate that and I want to show you a meeting in which we're going to which we use one of those which I call the dot collector I think by seeing that you'll get a sense of how that works so here's the dot collector in our meeting a week after the u.s. election our research team held a meeting to discuss what a trump presidency would mean for the US economy naturally people had different opinions on the matter and how we were approaching the discussion the dot collector collects these views it has a list of a few dozen attributes and so whenever someone thinks something about another person's thinking it's easy for them to convey that assessment they simply note the attribute and provide a rating from one to ten for example as the meeting began a researcher named Jen rated me a three in other words badly for not showing a good balance of assertiveness and open-mindedness as the meeting transpired Jen's assessment - so people added up like this others in the room had very different opinions that's normal different people are always going to have different opinions and who knows who's right let's just look at what people thought about how I was doing some people thought I did well others poorly with each of these views we can explore the thinking behind the numbers here's what Jen and Larry said note that everyone gets to express their thinking including their critical thinking regardless of their position in the company Jen who's 24 years old and fresh out of college can tell me the CEO of the company then I'm approaching things terribly this tool helps people both express their opinions and separate themselves from their opinions to see things from a higher level when Jen and others shift their attentions from inputting their opinions to looking down on the whole screen their perspective changes they see their own opinions as just one of many and naturally start to ask themselves how do I know my opinion is right that shift in perspective of going above it and seeing the full range of use shifts the conversation from arguing over individual opinions to figuring out objective criteria for determining which opinions are best behind the dot collector is a computer that is watching what all these people are thinking correlates it with how they think and communicates back to each of them based on that then it draws the data from the meetings to create a pointillist painting of what people are like and how they think and it does all that guided by algorithms knowing what people are like helps to match them up better with their jobs for example a creative thinker who is unreliable might be matched up with someone who is reliable but not creative knowing what people are like also allows us to decide what responsibilities to give them and to weigh our decisions based on people's merits we call it their believability here's an example of a vote that we took where the majority of people felt one way but when we weighed people's views on the basis of their merits the answer was completely different this process allows us to make decisions not based on democracy and not based on autocracy but based on algorithms that take people's believability into consideration you know we really do that so I just want to emphasize the following non-hierarchical right anybody could say anything they want so it's a real idea meritocracy fantastic developmental abilities because people honestly know their strengths and weaknesses and work together behind the scenes gathering data about what they're like and making it transparent agreeing on the algorithms in other words the criteria for decision-making these have been very powerful tools we're in a world now or look it's easy to for to collect data and know what you're like better than some of your best friends know what you're like and the question is how that's going to be used by algorithms so what is the problem with this okay the main obstacle like would you like to know your weaknesses would you like people to be totally straight with you would you like to be totally straight with them what's wrong with this radical truthfulness and radical transparency it's difficult emotionally I asked psychologists for some people that there's basically two yous in you there's the logical thoughtful person who would probably said yeah I'd love to know my weaknesses I'd love to know what other people are thinking about me I'd like to know whether it's true and then there's the emotional part of you that stands as a barrier and that's the big puzzle of life in other words are you going to let the emotional barriers stand in your way and when you have meaningful work and meaningful relationships so that people know that you're trying to help them and you work together on that it can produce a terrific result so I would ask you as you walk out of this and we're at the end of the talk do you want these things and in what degrees do you want to have an idea meritocracy in which the best ideas win out and people judge that to be a fair system in order for that to happen do you want to know what people are really like you and others and then what degree do you want that radical truthfulness and transparency gotta mean truthfulness about everything but a button but about most things and what about algorithmic decision-making we're in an era that if you can take your principles your criteria and put them into code you'll get tremendous leverage so now it's your choices this is a series of apps and tools that we built up over a period of time it's in the appendix of the book I don't have time to discuss it but what I'm going to be doing is making those all available for the public and mostly free of charge so that you can have an opportunity to do that thank you very much [Applause]

Channel: Web Summit

Views: 14,892

Keywords: Web Summit, web summit lisbon, web summit conference lisbon, web summit paddy, web summit portugal, web summit portugal 2018, web summit video, web summit youtube, Web summit lisboa, Ray Dalio, bridgewater, bridgewater associates

Id: 3kUQlAUoDPw

Length: 20min 40sec (1240 seconds)

Published: Wed Nov 07 2018