A great organization has both great people and a great culture. Companies that get progressively better over time have both. Nothing is more important or more difficult than to get the culture and people right.
Great people have both great character and great capabilities. By great character, I mean they are radically truthful, radically transparent, and deeply committed to the mission of the organization. By great capabilities, I mean they have the abilities and skills to do their jobs excellently. People who have one without the other are dangerous and should be removed from the organization. People who have both are rare and should be treasured.
Great cultures bring problems and disagreements to the surface and solve them well, and they love imagining and building great things that haven’t been built before. Doing that sustains their evolution. In our case, we do that by having an idea-meritocracy that strives for meaningful work and meaningful relationships through radical truth and radical transparency. By meaningful work, I mean work that people are excited to get their heads into, and by meaningful relationships, I mean those in which there is genuine caring for each other (like an extended family). I find that these reinforce each other and that being radically truthful and radically transparent with each other makes both the work and the relationships go better.
By constantly looking down on the machine, its managers can objectively compare the outcomes it produces with their goals. If those outcomes are consistent with those goals, then the machine is working effectively; if the outcomes are inconsistent with the goals, then something is wrong with either the design of the machine or the people who are a part of it, and the problem needs to be diagnosed so the machine can be modified. As laid out in Chapter Two of Life Principles, this ideally happens in a 5-Step Process: having clear goals, identifying the problems preventing the goals from being achieved, diagnosing what parts of the machine (i.e., which people or which designs) are not working well, designing changes, and doing what is needed. This is the fastest and most efficient way for an organization improve.
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, which is about when Bridgewater got started, are still in the Dow 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.
As I mentioned earlier, nothing is more important or more difficult than to get the culture and the people right. Whatever successes we’ve had at Bridgewater were the result of doing that well, and whatever failures were due to our not doing it adequately. That might seem odd because, as a global macroeconomic investor, one might think that, above all else, I had to get the economics and investments right, which is true. But to do that, I needed to get the people and culture right first. And, to inspire me to do what I did, I needed to have meaningful work and meaningful relationships.
As the entrepreneur/builder of Bridgewater, I naturally shaped the organization to be consistent with my values and principles. I went after what I wanted most, in the way that seemed most natural to me with the people I chose to be with, and we and Bridgewater evolved together.