Page 399 - Ray Dalio - Principles

b. When a problem occurs, conduct the discussion at two levels: 1) the machine level (why that outcome was produced) and 2)
the case-at-hand level (what to do about it). Don’t make the mistake of just having the case-at-hand
discussion, because then you are micromanaging (i.e., you are doing your managee’s thinking and
your managee will mistakenly think that’s okay). When having the machine-level discussion, think
clearly how things should have gone and explore why they didn’t go that way. If you are in a rush to
determine what to do and you have to tell the person who works for you what to do, make sure to
explain what you are doing and why.
c. When making rules, explain the principles behind them. You don’t want the people you work with to merely
pay lip service to your community’s rules; they should have a high sense of ethics that makes them
want to abide by them and hold others accountable for abiding by them, while also working to
perfect them. The way to achieve this is via principles that are sound and that have been tested
through open discussion.
d. Your policies should be natural extensions of your principles. Principles are hierarchical—some are
overarching and some are less important—but they all should inform the policies that guide your
individual decisions. It pays to think those policies through to ensure that they are consistent with
each other and the principles they are derived from.
When faced with a case that doesn’t have a clear policy to follow (for example, what to do about
an employee whose job is to travel but who faces potential health risks because of his travel), one
can’t just snatch an answer out of the blue without regard for higher-level principles. Policymakers
must make policy in the same way that the judicial system creates case law—iteratively and
incrementally, by dealing with specific cases and interpreting the law as it applies to them.
That is how I have tried to operate. When a case arises, I lay out the principles behind how I am
handling it and get in sync with others to see if we agree on those principles or must modify them to
make them better. By and large, that’s how all Bridgewater’s principles and policies were
developed.
e. While good principles and policies almost always provide good guidance, remember that there are exceptions to every rule.
While everyone has the right to make sense of things—and is in fact obliged to challenge principles
and policies if they conflict with what they believe is the best approach—that’s not the same thing
as having the right to change them. Changes in policies must be approved by those who made them
(or someone else who has been made responsible for evolving them).
When someone wishes to make an exception to an important policy at Bridgewater, they must
write up a proposed alternative policy and escalate their request to the Management Committee.

Exceptions should be extremely rare because policies that have frequent exceptions are
ineffective. The Management Committee will formally consider it and either reject it, amend it, or
adopt it.

10.3 Understand the differences between managing,
micromanaging, and not managing.

Great managers orchestrate rather than do. Like the conductor of an orchestra, they do not play an
instrument, but direct their people so that they play beautifully together. Micromanaging, in
contrast, is telling the people who work for you exactly what tasks to do or doing their tasks for
them. Not managing is having them do their jobs without your oversight and involvement. To be
successful, you need to understand these differences and manage at the right level.
a. Managers must make sure that what they are responsible for works well. They can do this by 1) managing others
well (as explained above), 2) job slipping down to do work they’re not responsible for because
others can’t do their jobs well, or 3) escalating what they can’t manage well. The first choice is
optimal; the second signals that a change is needed in the people and the design; the third choice is
harder still but mandatory.
b. Managing the people who report to you should feel like skiing together. Like a ski instructor, you need to have
close contact with your people on the slopes so that you can assess their strengths and weaknesses
as they are doing their jobs. There should be a good back-and-forth as they learn by trial and error.
With time you will be able to decide what they can and can’t handle on their own.