If you identify the decline, diagnose the problems that caused it so as to get at their root causes, come up with new designs, and then push them through, the trajectory will loop back on itself and continue its upward ascent, like in the second diagram.

If you don’t identify the problem, design a suboptimal solution, or fail to push it through effectively, the decline will continue as shown in the diagram at the bottom.

A manager’s ability to recognize when outcomes are inconsistent with goals and then modify designs and assemble people to rectify them makes all the difference in the world. The more often and more effectively a manager does this, the steeper the upward trajectory.

As I explained in Life Principles, this is what I believe evolution looks like for all organisms and organizations. Having a culture and people that will evolve in this way is critical because the world changes quickly and in ways that can’t possibly be anticipated. I’m sure you can think of a number of companies that failed to identify and address their problems on time and ended up in a terminal decline (see: BlackBerry and Palm) and a rare few that have consistently looped well. Most don’t. For example, only six of the companies that forty years ago made up the Dow Jones 30, which is about when Bridgewater got started, are still in the Dow 30 today. Many of them—American Can, American Tobacco, Bethlehem Steel, General Foods, Inco, F. W. Woolworth—don’t even exist; some (Sears Roebuck, Johns-Manville, Eastman Kodak) are so different as to be almost unrecognizable. And many of the standouts on the list today—Apple, Cisco—were yet to be founded.

The rare few that have been able to evolve well over the decades have been successful at that evolutionary/looping process, which also is the process that has made Bridgewater progressively more successful for forty years. That is the process I want to pass along to you.
