- 16th April 2018
- Posted by: Manolis
There are two basic power structures, says Bridgewater Associates co-CIO Bob Prince: democracy, with one equal vote per person, and dictatorship, where all decisions come from the top.
At Bridgewater, the world’s largest hedge fund, there’s a third option.
The fund calls it “believability-weighted decision making,” and assigns certain votes more pull than others. It’s “probably the optimal way to do it,” Prince told Business Insider.
Bridgewater, with $150 billion in assets under management, is as well known for its size as it is for its unusual culture of “radical truth” and “radical transparency.” Founder, chairman, co-CEO, and co-CIO Ray Dalio’s handbook of “Principles” is required reading for all 1,500 employees, and the collection of management and life lessons serves as a sort of constitution for the Westport, Connecticut-based firm.
One of the most obvious manifestations of this culture is the way employees rate each other’s performance, which in turn affects decision-making.
Every employee has a company-issued iPad loaded with proprietary apps. One of them, called “Dots,” contains a directory of employees and options to weigh in on various elements of each person’s work life, categorized in values, abilities, skills, and track record.
There are more than 100 attributes in total, but the collections of attributes are customized to roles in the company, in the sense that an investor’s performance would not be measured according to the same traits that would be used to measure a recruiter’s performance.
Employees are free to use Dots whenever they’d like, when they want to praise or criticize a colleague for a particular action.
The chart below includes some of the attributes found in Dots.
When an employee enters a rating for a coworker, they are asked to measure the attribute on a scale from 1-10, with seven considered average. They then enter a brief statement to add context. These number and statement combos – known as “dots” – are associated with the name of the person who input them, are public, and are permanent. Prince told us that he has about 11,000 dots assigned to his name.
Prince explained that employees are not expected to strive for 10s in every category as a student would attempt to get straight As; rather, they are expected to have clear strengths and competency for other traits, the same way a basketball team is composed of players with complementary talents.
The numerical value of these Dots is considered along with performance reviews, surveys, tests, and ongoing feedback and averaged into public “baseball card” profiles for every employee. The profiles get their name from the list of attributes and corresponding ratings, the same way a baseball card would list something like a player’s batting average accompanied by a brief description of their career.
These are then brought into play in meetings where decisions are being made. Using their iPads, colleagues will vote on certain choices, and in the system of believability-weighted decision making, each vote will have a weight depending on the individual’s baseball card and the nature of the question.
“A person’s believability is constantly relevant,” Prince said. “In a meeting, it is relevant to things like how you self-regulate your own engagement in a discussion, how the person running the meeting manages the discussion, and in actual decisions. At all times a person should be assessing their own believability so that they can function well as part of a team.”
The baseball card approach fits into a system where most meetings are recorded via opt-in audio recorders or cameras, and where some of these recordings are included in weekly “management principles training” (MPT) lessons. The culture of radical truth and radical transparency that Dalio has created is demanding and not for everyone, and that’s why 30% of employees leave within their first two years.
While a culture where everything’s on the table turns out to be intolerable for some, those who stay are committing to operate within such a system. As one former employee told us last year in a conversation about MPT lessons, “Ultimately, if you’re signing up for Bridgewater, you’re saying I’m signing up to be proven wrong sometimes and I’m willing to work to look at that.”
In an interview with Business Insider CEO Henry Blodget in December, Dalio said that the aim of this radical truth and transparency is an “an idea meritocracy, and it has just worked unbelievably well.”
“I would like it to be that everybody knows that person’s knowledge on the subject, and we can draw upon those differences and actually have the more knowledgeable people have more weight in the decision making,” Dalio said. He added that the process isn’t perfect, but that finding a path to the best answers is “what I work to solve.”