Radical truth and radical transparency are fundamental to having a real idea-meritocracy. The more people can see what is happening, the good, the bad, and the ugly, the more effective they are at deciding the appropriate ways of handling things. This approach is also invaluable for training: Learning is compounded and accelerated when everyone has the opportunity to hear what everyone else is thinking. As a leader, you will get the feedback essential for your learning and for the continual improvement of the organization’s decision-making rules. And seeing firsthand what’s happening and why builds trust and allows people to make the independent assessments of the evidence that a functioning idea-meritocracy requires.
It takes getting used to. Virtually everyone who joins Bridgewater believes intellectually that radical truth and radical transparency are what they want, because, after careful thought, that’s what they signed up for. Yet most find it difficult to adjust to it because they struggle with the “two yous” as explained in Understand That People Are Wired Very Differently. While their “upper-level yous” understand the benefits of it, their “lower-level yous” tend to react with a flight-or-fight response. Adapting typically takes about eighteen months, though it varies from individual to individual, and there are those who never successfully adapt to it.
Some people tell me it’s inconsistent with human nature to operate this way, that people need to be protected from harsh truths and that such a system could never work in practice. Our experience, and our success, have proven that wrong. While it’s true that our way of being is not what most people are used to, that doesn’t make it unnatural, any more than the hard physical exercise athletes and soldiers do is unnatural. It is a fundamental law of nature that you get stronger only by doing difficult things. While our idea-meritocracy is not for everyone, for those who do adapt to it, which is about two-thirds of those who try it, it is so liberating and effective that it’s hard for them to imagine any other way to be. What most people like best is knowing there is no spin.
To give you an idea of what radical truth and transparency look like, I’ll share a difficult situation we faced a few years ago when our Management Committee began thinking about reorganizing our back office. Our back office provides the services we need to support our trading in the markets, including trade confirmations, settlements, record maintenance, and accounting. We had built this team up over many years and it was full of hardworking, close-knit employees who were part of our extended family. But at the time we were seeing a need for new capacities that would stretch us beyond what we could do in-house. This led our COO, Eileen Murray, to devise an innovative strategy for spinning off this team and having them incorporated into a tailor-made group within the Bank of New York/Mellon. It was just an exploratory conversation at first; we had no idea whether we would pursue it, how we would pursue it, or what that would ultimately mean for the members of our back office team.
Put yourself in the shoes of the Management Committee. When would you tell the back office team that you were thinking of spinning off their group into another company? Would you wait until the picture was clear? In most organizations this kind of strategic decision would typically be kept under wraps until it was a done deal, because bosses generally think it’s bad to create uncertainty among employees. We believe the opposite: that the only responsible way to operate is truthfully and transparently, so that people know what’s really going on and can help us sort through any issues that arise. In this case, Eileen led a town-hall meeting with the back office team right away. In the way typical of leaders at Bridgewater, she explained that there was a lot she didn’t know and there were a lot of questions that she wouldn’t be able to answer. This was the harsh reality at that moment, and while it did create uncertainty, had she followed the more traditional approach of being less open, the inevitable rumors and speculation would’ve made things much worse.