Page 386 - Ray Dalio - Principles

but much more valuable in the long run. Though new employees will come to appreciate what you
are doing, it is typically difficult for them to understand it at first; to be effective, you must clearly
and repeatedly explain the logic and the caring behind it.
a. Recognize that while most people prefer compliments, accurate criticism is more valuable. You’ve heard the
expression “no pain no gain.” Psychologists have shown that the most powerful personal
transformations come from experiencing the pain from mistakes that a person never wants to have
again—known as “hitting bottom.” So don’t be hesitant to give people those experiences or have
them yourself.
While it is important to be clear to people about what they are doing well, it is even more
important to point out their weaknesses and have them reflect on them.
Problems require more time than things that are going well. They must be identified and
understood and addressed, while things that are running smoothly require less attention. Instead of
celebrating how great we are, we focus on where we need to improve, which is how we got to be so
great.

9.5 Don’t hide your observations about people.

Explore them openly with the goal of figuring out how you and your people are built so that the
right people can be put in the right jobs.
a. Build your synthesis from the specifics up. By synthesizing, I mean converting a lot of data into an
accurate picture. Too many people make assessments of people without connecting them to specific
data. When you have all the specifics that we have at Bridgewater—the dots, meeting tapes, etc.—
you can and must work from the specifics up and see the patterns in the data. Even without such
tools, other data such as metrics, testing, and the input of others can help you form a more complete
picture of what the person is like, as well as examine what they did.
b. Squeeze the dots. Every observation of a person potentially tells you something valuable about how
they operate. As I explained earlier, I call these observations “dots.” A dot is a piece of data that’s
paired with your inference about what it means—a judgment about what someone might have
decided, said, or thought. Most of the time we make these inferences and judgments implicitly and
keep them to ourselves, but I believe that if they are collected systematically and put into
perspective over time, they can be extremely valuable when it’s time to step back and synthesize the
picture of a person.
c. Don’t oversqueeze a dot. Remember: A dot is just a dot; what matters is how they add up. Think of
each individual dot as an at-bat in baseball. Even great hitters are going to strike out many times,
and it would be foolish to evaluate them based on one trip to the plate. That’s why stats like on-base
percentage and batting average exist.
In other words, any one event has many different possible explanations, whereas a pattern of
behavior can tell you a lot about root causes. The number of observations needed to detect a pattern
largely depends on how well you get in sync after each observation. A quality discussion of how
and why a person behaved a certain way should help you understand the larger picture.

d. Use evaluation tools such as performance surveys, metrics, and formal reviews to document all aspects of a person’s
performance.It’s hard to have an objective, open-minded, emotion-free conversation about
performance if there is no data to discuss. It’s also hard to track progress. This is part of the reason I
created the Dot Collector. I also recommend thinking about other ways that people’s responsibilities
can be put in metrics. One example: You can have people note whether they did or didn’t do things
on checklists, which you can then use to calculate what percentage of tasks they complete. Metrics
tell us whether things are going according to plan—they are an objective means of assessment and
they improve people’s productivity.

9.6 Make the process of learning what someone is like open,
evolutionary, and iterative.

Articulate your assessment of a person’s values, abilities, and skills up front and share it; listen to
their and others’ responses to your description; organize a plan for training and testing; and reassess