Page 322 - Ray Dalio - Principles

were, you haven’t learned much. Still, few people go out of
their way to embrace their mistakes. It doesn’t have to be that
way.

Remember back in Life Principles, when I told the story

about the time that Ross, then our head of trading, forgot to
put in a trade for a client? The money just sat there in cash and
by the time the mistake was discovered it had cost the client
(actually Bridgewater, because we had to make good on it) a
lot of money. It was terrible and I could easily have fired Ross
to make the point that nothing less than perfection will be

accepted. But that would have been counterproductive. I
would have lost a good man and it would have only
encouraged other employees to hide their mistakes, creating a
culture that would not only be dishonest but crippled in its
ability to learn and grow. If Ross hadn’t experienced that pain,
he and Bridgewater would have been the worse for it.

The point I made by not firing Ross was much more

powerful than firing him would have been—I was
demonstrating to him and others that it was okay to make
mistakes and unacceptable not to learn from them. After the
dust settled, Ross and I worked together to build an error log
(we now call it the Issue Log), in which traders recorded all
their mistakes and bad outcomes so we could track them and
address them systematically. It has become one of the most

powerful tools we have at Bridgewater. Our environment is
one in which people understand that remarks such as “You
handled that badly” are meant to be helpful rather than
punitive.

Of course, in managing others who make mistakes, it is
important to know the difference between 1) capable people
who made mistakes and are self-reflective and open to

learning from them, and 2) incapable people, or capable
people who aren’t able to embrace their mistakes and learn
from them. Over time I’ve found that hiring self-reflective
people like Ross is one of the most important things I can do.

Finding this kind of person isn’t easy. I’ve often thought
that parents and schools overemphasize the value of having the

right answers all the time. It seems to me that the best students