Page 73 - Ray Dalio - Principles

that would have only encouraged other people to hide theirs,
which would have led to even bigger and more costly errors. I
believed strongly that we should bring problems and

disagreements to the surface to learn what should be done to
make things better. So Ross and I worked to build out an
“error log” in the trading department. From then on, anytime
there was any kind of bad outcome (a trade wasn’t executed,
we paid significantly higher transaction costs than expected,
etc.), the traders would make a record of it and we would
follow up. As we consistently tracked and addressed those

issues, our trade execution machine continually improved.

Having a process that ensures problems are brought to the
surface, and their root causes diagnosed, assures that continual
improvements occur.

For that reason I insisted that an issue log be adopted
throughout Bridgewater. My rule was simple: If something
went badly, you had to put it in the log, characterize its

severity, and make clear who was responsible for it. If a
mistake happened and you logged it, you were okay. If you
didn’t log it, you would be in deep trouble. This way managers
had problems brought to them, which was worlds better than
having to seek them out. The error log (which we now call the
issue log) was our first management tool. I learned
subsequently how important tools are in helping to reinforce

desired behaviors, which led us to create a number of tools I
will describe later.

This culture of bringing problems and disagreements to the
surface generated a lot of discomfort and conflict, especially
when it came to exploring people’s weaknesses. Before long,
things came to a boil.

MY “INTRACTABLE” PEOPLE

PROBLEM

One winter day in 1993, Bob, Giselle, and Dan proposed

taking me out to dinner with the stated purpose of “giving Ray
feedback about how he affects people and company morale.”