Page 398 - Ray Dalio - Principles

Sample size is important. Any problem can be a one-off imperfection or a symptom of root
causes that will show up as problems repeatedly. If you look at enough problems, which one it is
will become clear.
b. Understand that a great manager is essentially an organizational engineer. Great managers are not philosophers,
entertainers, doers, or artists. They are engineers. They see their organizations as machines and
work assiduously to maintain and improve them. They create process-flow diagrams to show how
the machine works and to evaluate its design. They build metrics to light up how well each of the
individual parts of the machine (most importantly, the people) and the machine as a whole are
working. And they tinker constantly with its designs and its people to make both better.
They don’t do this randomly. They do it systematically, always keeping the cause-and-effect
relationships in mind. And while they care deeply about the people involved, they cannot allow their
feelings for them or their desire to spare them discomfort to stand in the way of the machine’s
constant improvement. To do otherwise wouldn’t be good for either the individuals on the team or
the team that the individuals are a part of.
Of course, the higher up you are in an organization, the more important vision and creativity
become, but you still must have the skills required to manage/orchestrate well. Some young
entrepreneurs start with the vision and creativity and then develop their management skills as they
scale their companies; others start with management skills and develop vision as they climb the
ladder. But like great musicians, all great managers have both creativity and technical skills. And no
manager at any level can expect to succeed without the skill set of an organizational engineer.
c. Build great metrics. Metrics show how the machine is working by providing numbers and setting off
alert lights in a dashboard. Metrics are an objective means of assessment and they tend to have a
favorable impact on productivity. If your metrics are good enough, you can gain such a complete
and accurate view of what your people are doing and how well they are doing it that you can almost
manage via the metrics alone.
In constructing your metrics, imagine the most important questions you need answered in order
to know how things are going and imagine what numbers will give you the answers to them. Don’t
look at the numbers that you have and try to adapt them to your purposes, because you won’t get
what you need. Instead start with the most important questions and imagine the metrics that will
answer them.
Remember that any single metric can mislead; you need enough evidence to establish patterns.
And of course the information that goes into the metrics must be assessed for accuracy. A reluctance
to be critical can be detected by looking at the average grade each grader gives; those giving higher
average grades might be easy graders and vice versa. Similarly helpful are “forced rankings,” in
which people must rank co-worker performance from best to worst. Forced rankings are essentially
the same thing as “grading on a curve.” Metrics that allow for independent grading across
departments and groups are especially valuable.
d. Beware of paying too much attention to what is coming at you and not enough attention to your machine. If you keep
your focus on each individual task, you will inevitably get bogged down. If instead you pay
attention to building and managing your machines, you will be rewarded many times over.
e. Don’t get distracted by shiny objects. No matter how complete any project or plan, there will always be
things that come out of nowhere and look like the most important or urgent or attractive thing to
focus on. These shiny objects may be traps that will distract you from thinking in a machinelike
way, so be on your guard for them and don’t let yourself be seduced.

10.2 Remember that for every case you deal with, your
approach should have two purposes . . .

. . . 1) to move you closer to your goal, and 2) to train and test your machine (i.e., your people and your design). The second
purpose is more important than the first because it is how you build a solid organization that works
well in all cases. Most people focus more on the first purpose, which is a big mistake.
a. Everything is a case study. Think about what type of case it is and what principles apply to that type of
case. By doing this and helping others to do this you’ll get better at handling situations as they
repeat over and over again through time.