BLOG 11 - “How to Build a Company Where the Best Ideas Win”

 

“How to Build a Company Where the Best Ideas Win”

Ray Dalio is the founder, chair and co-chief investment officer of Bridgewater Associates, a global leader in institutional portfolio management and the largest hedge fund in the world.

How can we overcome our own personal biases, and how can the best idea win over popularity in an organization? How do you know if your idea or opinion is RIGHT? Do you utilize collective decision making in your business? Do radical truth and radical transparency really help a work environment? In this “Anatomy of a TED Talk,” we are exploring Ray Dalio’s talk, who gets raw and shares his painful mistakes and how he turned them into puzzles to produce gems! Using Masters in Clarity’s proprietary framework for writing an engaging talk, let’s break down Dalio’s talk. Ray Dalio, the founder of the largest hedge fund Bridgewater Associates, makes a case for using radical transparency and algorithmic decision-making to create an idea meritocracy where people can speak up and say what they really think. The objective has been to have meaningful work and meaningful relationships with the people. Great ideas can help investors finding asymmetrical risk opportunities. To make a high-returning investment, you have to bet against the consensus and also be right! The first part is easy. It’s easy to spot something contrarian. Most current stock prices reflect the consensus opinion about a company. Therefore, you will need to look for companies that are still not correctly valued or understood by the market. But the second part is tough. It is challenging to be right about the future. To achieve this, you have to be more emotionally resilient and back-test your investment thesis. According to Ray Dalio, his company Bridgewater Associates uses radical transparency and algorithmic decision-making to create an idea meritocracy where people can speak up and say what they really think. The best starting point is looking at the counterarguments. Collective decision-making is so much better than individual decision-making if it’s done well. It’s been the secret sauce behind our success. It’s why we’ve made more money for our clients than any other hedge fund in existence and made money 23 out of the last 26 years. So for that last 25 years that’s how we’ve been operating. We’ve been operating with this radical transparency and then collecting these principles. This will stress test your perspective. During this exercise, it’s vital to overcome personal biases and get an in-depth understanding of the counterarguments. The largest problem is that everyone seeks validation instead of the truth. This validation trap needs to be overcome. The system works on an iPad app called “Dot Collector”. Employees are expected to bring their iPads to every meeting, to give and receive constant feedback in the form of “dots”. Every dot you give and receive is public. Your credibility/believability is ranked on how thoughtful you have ranked the ideas over time and weighted when a decision is made. This helps the best idea to win and enables an idea meritocracy.

 

Reference: https://www.ted.com/talks/ray_dalio_how_to_build_a_company_where_the_best_ideas_win?referrer=playlist-an_essential_guide_to_start_up_success#t-980790