15.1 Having systemized principles embedded in tools is especially valuable for an idea meritocracy.
That is because an idea meritocracy needs to operate in accordance with agreed-upon principles and to be evidence-based and fair instead of following the more autocratic and arbitrary decisions of the CEO and his or her lieutenants. Rather than be above the principles, the people responsible for running the organization must be evaluated, chosen, and—if needed—replaced in an evidence-based way according to rules, just like everyone else in the organization. Their strengths and weaknesses, like everyone’s, must be taken into consideration. Collecting objective data about all people is essential for this. And you need good tools to convert data into decisions in agreed-upon ways. Moreover, the tools allow the people and the system to work together in a symbiotic way to improve each other.
a. To produce real behavioral change, understand that there must be internalized or habituated learning.
Thankfully, technoloy has made internalized learning much easier today than it was when books were the primary way of conveying knowledge. Don’t get me wrong, the book was a powerful invention. Johannes Gutenberg‘s printing press allowed easy dissemination of knowledge that helped people build on each other’s learnings. But experiential learning is so much more powerful. Now that technology makes it so easy to create experiential/virtual learning, I believe that we are on the brink of another step-change improvement in the quality of learning that will be as great as or even greater than Gutenberg’s.
We have been trying to create internalized learning at Bridgewater for a long time, so how we do it has evolved a lot. Since we tape virtually all our meetings, we have been able to create virtual learning case studies that allow everyone to participate without actually being in the room. People see the meeting transpire as though they were in it, and then the case study pauses and asks them for their own thinking on the matter at hand. In some cases, they input their reactions in real time as they watch. Their thinking is recorded and compared with others’ using expert systems that help us all understand more about how we think. With this information, we can better tailor their learning and their job assignments to their thinking styles.
That is just one example of a number of tools and protocols we have developed to help our people learn and operate by our principles.
b. Use tools to collect data and process it into conclusions and actions.
Imagine that virtually everything important going on in your company can be captured as data, and that you can build algorithms to instruct the computer, as you would instruct a person, to analyze that data and use it in the way you agreed it should be used. In that way, you and the computer on your behalf could look at each person and all the people together and provide tailored guidance, just like your GPS provides you guidance by knowing all the traffic patterns and routes. You don’t have to make it mandatory to follow that guidance, though you can. Generally speaking, the system operates like a coach. And the coach can learn about its team: Data is collected about what people do so that if they make more insightful moves or less insightful moves, learning will occur and be used to create improvements. Because the thinking behind the algorithms is available to everyone, anyone can assess the quality of the logic and its fairness, and have a hand in shaping it.
c. Foster an environment of confidence and fairness by having clearly-stated principles that are implemented in tools and protocols so that the conclusions reached can be assessed by tracking the logic and data behind them.
In all organizations, it’s always the case that some of the people judged to be ineffective will argue that those judgments are wrong. When that happens, a data- and rules-based system with clearly laid-out criteria allows less room for such arguements and greater belief that the system is fair. Though the system won’t be perfect, it is much less arbitrary—and can much more easily be examined for bias—than the much less specified and much less open decision making of individuals with authority. My ideal is to have a process in which everyone contributes criteria for good decision making and those criteria are assessed and selected by appropriately assigned (believable) people. If people maintain the right balance of open-mindedness and assertiveness so they understand where they are and aren’t believable to make decisions, having these open discussions on the criteria for assessing and managing people can be very powerful in building and reinforcing the idea meritocracy.
We have early-stage tools that achieve these things and we are striving to refine them so that our people management system operates as effectively as our investment management system.
Even with its imperfections, our evidence-based approach to learning about people, guiding them, and sorting them is much fairer and more effective than the arbitrary and subjective management systems that most organizations still rely on. I believe that the forces of evolution will push most organizations toward systems that combine human and computer intelligence to program principles into algorithms that substantially improve decision making.
In the Appendix, I’ve provided detailed descriptions of a number of the tools and protocols that support this idea-meritocratic approach and reinforce the behaviors that people need to operate consistently with it. They are designed to help us achieve our goals of 1) learning what people are like, 2) sharing what people are like, 3) providing personalized training and development, 4) offering guidance and oversight in specific situations, and 5) helping managers sort people into the right roles or out of the company based on what they are like and what is required.
You don’t need to use these same tools and protocols for your own idea meritocracy, but you should have ways of producing the internalized learning that it will require. While ours have evolved a lot, yours don’t have to be as fancy or automated. For example, providing a form or a template to help guide people through the steps required for them to manage their work or carry out a process will yield better results than expecting them to just remember—or figure it out—on their own.
How you decide to use tools and protocols is up to you. The main point I want to make here is that they’re important.
* Source: Principles by Ray Dalio