- Ray Dalio founded Bridgewater Associates, which leads the ranks of the world’s largest hedge funds with $150 billion assets under management.
- Dalio once made a mistake in 1982 that could’ve meant the end of Bridgewater — but it ended up being foundational to the company’s future success instead.
- He elaborated on an episode of BI’s podcast “This is Success.”
- Here’s how Bridgewater’s current culture of radical transparency arose out of Dalio’s willingness to constructively disagree with his employees.
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Constructive disagreement grounded the culture of Bridgewater— allowing founder Ray Dalio and his team to build it up to dizzying heights.
Dalio baked the lessons he’d learned from a life-changing low he experienced in 1982 into the foundations of Bridgewater itself. He wanted his newly renewed company to encourage constructive dissent among the people that worked there, from the most junior employees to Dalio himself. Now Bridgewater is the world’s largest hedge fund, with over $150 billion assets under management.
Constructive disagreement means creating an environment in which dissent is allowed, even encouraged. Conflict doesn’t mean the company is broken— it means that the company is actively working towards comprehensive, truly great work.
“I think that notion of, can we be radically truthful with each other, can we know how to disagree well and then get past that disagreement to the best answers? These are questions that everybody has to face,” he previously told Business Insider.
He also recently reflected on it on an episode of “Masters of Scale” with LinkedIn co-founder Reid Hoffman.
“I think every organization, or every relationship, requires people to decide how they’re going to be with each other,” he told Hoffman. “I’m going to be radically truthful with you and radically transparent and I would expect you to be radically truthful and transparent with me. And so that’s really how it started.”
How constructive disagreement works
On an individual level, constructive disagreement could help you avoid the trap of confirmation bias, or seeking out opinions that agree with yours. If you ask people what they think about your idea, instead of what might be wrong with it, you’ll receive opinions that align with what you already believe to be true. Inviting dissent, on the other hand, means deliberately allowing for dissonance between what you think you’re saying and what other people are actually hearing.
Constructive disagreement is essentially a self-check mechanism that could uproot evidence collected through the lens of confirmation bias.
“How do I find the smartest people I know who disagree with me – and are willing to disagree with each other but who really care about your outcome?” he told Hoffman. “You learn a tremendous amount and that raises one’s probability of being right.”
Dalio realized that he needed it after he didn’t check his own opinion in 1982, to devastating results for his nascent company.
How a mistake in ’82 changed Bridgewater — and prompted constructive disagreement
In 1982, Dalio testified before Congress that he saw a looming debt crisis. He was loud, he was confident.
He was wrong.
“As a result of being wrong, I lost money for me, I lost money for my clients, I had to let everybody in my company go, and I was so broke I had to borrow $4,000 from my dad to help pay for family bills,” Dalio told BI.
Dalio’s mistake was preventable, he admits. He could’ve checked his overconfidence by seriously considering an opinion or two that would’ve challenged what he believed— or added nuance at the very least.
“My experience changed my whole approach to decision-making,” Dalio said, adding that, “It then made me think, how do I know I’m not wrong?”
Dalio built the mindset that arose from his failure into his new Bridgewater construction by creating an atmosphere of constructive disagreement. This took on the label of radical transparency: the culture that Bridgewater is famous for.
Radical transparency means that it’s okay to make mistakes, and more okay to learn from them.
Making a system for tension
Dalio instituted an “issue log,” which allows everyone at the company to write down when things go wrong.
Once the issue has been identified, Dalio encourages employees to go to the higher principles that underlie the conflict. In the process of reflecting on how employees should ideally operate with each other, the conflict takes on a constructive tone.
At Bridgewater, employees are free to disagree with one another as they constantly rate and critique how colleagues are doing through a Bridgewater-specific iPad app called “Dots.” Everyone at the meeting can view how everyone else rates them on traits like “Assertive and Open-Minded,” among others, and give specific feedback. Nearly every Bridgewater meeting is recorded for future reference (for example, in company emails).
According to Dalio, this system of radical transparency encourages constructive disagreement in how employees interact with one another.
“If you start to realize, intellectually, that being really truthful with each other is something that is to be treasured,” Dalio said, “it’ll build trust.” He adds that at Bridgewater, “There’s a lot of trust that’s going on.”
Every company has to eventually set the standards for how it’s going to handle disagreement, says Dalio, because it’ll inevitably arise. The key is disagreeing well, and moving beyond the conflict to the best answers.
That’s how Dalio built up his own company. In his words, Bridgewater’s success lies in “knowing what you don’t know and knowing I may be wrong.”