Page 275 - Ray Dalio - Principles

I call this process of converting problems into progress “looping,”
and how it happens through time is visualized in the diagrams to the
right. In the first, a problem occurs that takes you off track from
your goals and makes things worse than you planned.

If you identify the decline, diagnose the problems that caused it
so as to get at their root causes, come up with new designs, and then
push them through, the trajectory will loop back on itself and
continue its upward ascent, like in the second diagram.

If you don’t identify the problem, design a suboptimal solution,
or fail to push it through effectively, the decline will continue as
shown in the diagram at the bottom.

A manager’s ability to recognize when outcomes are inconsistent
with goals and then modify designs and assemble people to rectify
them makes all the difference in the world. The more often and more
effectively a manager does this, the steeper the upward trajectory.
As I explained in Life Principles, this is what I believe evolution
looks like for all organisms and organizations. Having a culture and
people that will evolve in this way is critical because the world
changes quickly and in ways that can’t possibly be anticipated. I’m
sure you can think of a number of companies that failed to identify
and address their problems on time and ended up in a terminal
decline (see: BlackBerry and Palm) and a rare few that have
consistently looped well. Most don’t. For example, only six of the
companies that forty years ago made up the Dow Jones 30, which is
about when Bridgewater got started, are still in the Dow 30 today.
Many of them—American Can, American Tobacco, Bethlehem
Steel, General Foods, Inco, F. W. Woolworth—don’t even exist;
some (Sears Roebuck, Johns-Manville, Eastman Kodak) are so
different as to be almost unrecognizable. And many of the standouts
on the list today—Apple, Cisco—were yet to be founded.