If you agree that a real idea-meritocracy is an extremely powerful thing, it should not be a great leap for you to see that giving people the right to see things for themselves is better than forcing them to rely on information processed for them by others. Radical transparency forces issues to the surface, most importantly (and most uncomfortably) the problems that people are dealing with and how they’re dealing with them, and it allows the organization to draw on the talents and insights of all its members to solve them. Eventually, for people who get used to it, living in a culture of radical transparency is more comfortable than living in the fog of not knowing what’s going on and not knowing what people really think. And it is incredibly effective. But, to be clear, like most great things it also has drawbacks. Its biggest drawback is that it is initially very difficult for most people to deal with uncomfortable realities. If unmanaged, it can lead to people getting involved with more things than they should, and can lead people who aren’t able to weigh all the information to draw the wrong conclusions.
For example, bringing all an organization’s problems to the surface and regarding every one of them as intolerable may lead some people to wrongly conclude that their organization has more intolerable problems than another organization that keeps its issues under wraps. Yet which organization is more likely to achieve excellence? One that highlights its problems and considers them intolerable or one that doesn’t?
Don’t get me wrong: Radical transparency isn’t the same as total transparency. It just means much more transparency than is typical. We do keep some things confidential, such as private health matters or deeply personal problems, sensitive details about intellectual property or security issues, the timing of a major trade, and at least for the short term, matters that are likely to be distorted, sensationalized, and harmfully misunderstood if leaked to the press. In the following principles, you will get a good explanation of when and why we’ve found it helpful to be transparent and when and why we’ve found it inappropriate.
Frankly, when I started off being so radically transparent, I had no idea how it would go; I just knew that it was extremely important and that I had to fight hard and find ways to make it happen. I pushed the limits and was surprised by how well it worked. For example, when I started taping all our meetings our lawyers told us we were crazy because we were creating evidence that could be used against us in court or by regulators such as the SEC. In response, I theorized that radical transparency would reduce the risk of our doing anything wrong, and of not dealing appropriately with our mistakes, and that the tapes would in fact protect us. If we were handling things well, our transparency would make that clear (provided, of course, that all parties are reasonable, which isn’t something you can always take for granted), and if we were handling things badly, our transparency would ensure that we would get what we deserve, which, in the long run, would be good for us.
I didn’t know for sure at the time, but our experience has proven this theory correct time and again. Bridgewater has had uncommonly few legal or regulatory encounters, largely because of our radical transparency. That’s because it’s tougher to do bad things and easier to find out what’s true and resolve claims through radical transparency. Over the last several decades, we have not had a single material legal or regulatory judgment against us.
Naturally, growing bigger and more successful attracts more media attention, and reporters know that salacious and controversial stories draw more eyeballs than balanced ones. Bridgewater is especially vulnerable to this kind of reporting because, with our culture of bringing problems to the surface and sharing them transparently within the company, we leave ourselves open to leaks. Would it be better not to be transparent and so avoid such problems?
I’ve learned that the people whose opinions matter most are those who know us best, our clients and our employees, and that our radical transparency serves us well with them. Not only has it led to our producing better results, but it also builds trust with our employees and clients so that mischaracterizations in the press roll off their backs. When we discuss such situations with them, they say that for us to not operate transparently would scare them much more.
Having this sort of understanding and support to do the right things has been immeasurably valuable. But we wouldn’t have known about these great payoffs if we hadn’t so steadfastly pushed the limits of this truth and transparency.