In typical organizations, most decisions are made either autocratically, by a top-down leader, or democratically, where everyone shares their opinions and those opinions that have the most support are implemented. Both systems produce inferior decision-making. That’s because the best decisions are made by an idea-meritocracy with believability-weighted decision-making, in which the most capable people work through their disagreements with other capable people who have thought independently about what is true and what to do about it.
It is far better to weigh the opinions of more capable decision-makers more heavily than those of less capable decision-makers. This is what we mean by “believability weighting.” So how do you determine who is capable at what? The most believable opinions are those of people who have repeatedly and successfully accomplished the thing in question and have demonstrated that they can logically explain the cause-effect relationships behind their conclusions. When believability weighting is done correctly and consistently, it is the fairest and the most effective decision-making system. It not only produces the best outcomes but also preserves alignment, since even people who disagree with the decision will be able to get behind it.
But for this to be the case, the criteria for establishing believability must be objective and trusted by everybody. At Bridgewater everyone’s believability is tracked and measured systematically, using tools such as Baseball Cards and the Dot Collector that actively record and weigh their experience and track records. In meetings we regularly take votes about various issues via our Dot Collector app, which displays both the equal-weighted average and the believability-weighted results (along with each person’s vote).
Typically, if both the equal-weighted average and the believability weighted votes align, we consider the matter resolved and move on. If the two types of votes are at odds, we try again to resolve them and, if we can’t, we go with the believability-weighted vote. Depending on what type of decision it is, in some cases, a single responsible-parties can override a believability-weighted vote; in others, the believability-weighted vote supersedes the responsible-parties’s decision. But in all cases believability-weighted votes are taken seriously when there is disagreement. Even in cases in which the responsible-parties can overrule the believability weighted vote, the onus is on the responsible-parties to try to resolve the dispute before overruling it. In my forty years at Bridgewater, I never made a decision contrary to the believability-weighted decision because I felt that to do so was arrogant and counter to the spirit of the idea-meritocracy, though I argued like hell for what I thought was best.
To give you an example of what this process looks like in action, during the spring of 2012 our research teams used believability weighted decision-making to resolve a disagreement about what would happen next as the European debt crisis was heating up. At that time, the borrowing and debt-service needs of the governments of Italy, Ireland, Greece, Portugal, and especially Spain had reached levels that far exceeded their abilities to pay. We knew that the European Central Bank would either have to make unprecedented purchases of government bonds or allow the debt crisis to worsen to the point where defaults and the breakup of the Eurozone would probably occur. Germany was adamantly opposed to a bailout. It was clear that the fates of these countries’ economies, and of the Eurozone itself, depended on how well Mario Draghi, the president of the European Central Bank, orchestrated the ECB’s next move. But what would he do?
Like analyzing a chess board to visualize the implications and inclinations of the different moves of the different players, each of us looked at the situation from every angle. After a lot of discussion we remained split: About half of us thought the ECB would print more money to buy the bonds and about half thought they wouldn’t, because breaking with the Germans would threaten the Eurozone even more. While such thoughtful and open exchanges are essential, it’s also critical to have mutually agreed-upon ways of resolving them to arrive at the best decision. So we used our believability-weighting system to break the stalemate.