Book review: “High Output Management” by Andrew Grove

March 17, 2019 marcabrahamLeave a comment

“High Output Management” by the late Andrew Grove, ex Chairman and CEO of Intel, is a must read management book in my opinion. It’s easy to be quite cynical about most management and business books as a lot of them seem to introduce one central theme (or buzzword) right at the beginning of the book, followed by endless repetition throughout the remainder of the book …

In contrast, “High Output Management” contains valuable advice and tips from the beginning right to the end of the book. First published back in 1983, the book applies production principles to management. Some of these principles really resonated with me and I feel strongly about all (product) managers benefiting from these principles as part of their day-to-day working practices:

Identifying the “limiting step” – Grove defines the “limiting step” as the step in the overall shape of the production flow that will determine the overall shape of a company’s operations. In the book, Grove uses the simple example of a breakfast company, and highlights the time required to boil an egg is the critical component or the ‘limiting step’ in the production flow (see Fig. 1 below). The key idea here is to construct your production flow by starting with the longest (or most difficult, or most sensitive, or most expensive) step and work our way back. As a (product) manager you’ll thus focus on the limiting step within your context, e.g. in the workflow of your team, the customer funnel or the decision-making process.

Fig. 1 – Example of a limiting step when creating a breakfast – Taken from: http://clarkeching.com/ccblog/2018/1/21/what-are-bottlenecks-andy-grove

Detect and fix issues at the “lowest-value stage” possible – If there’s a problem with your product, you want to find out about it as early on in the production process as possible so that you can minimise risk. In the production world, I witnessed lowest-value stage thinking first hand at the assembly line of a Toyota factory. Here, employees can pull the “Andon” cord to (temporarily) bring things to a halt as soon as they come across an issue. It’s an easy way of escalating things, making sure that a problem or bottleneck is dealt with before proceeding with the rest of the assembly process. Think about when you last pulled an imaginary Andon cord to flag a product or team issue early!?

Fig. 2 Using the Andon cord to raise an issue and stop production – Taken from: https://www.lean.org/lexicon/fixed-position-stop-system

Using (leading) indicators to measure and predict – In order to run a production process well you’ll need a set of indicators which help you monitor and improve the efficiency of the production line. Grove stresses that for these indicators to be useful, “you have to focus each indicator on a specific operational goal.” He goes on to list a number of relevant production indicators (see Fig. 3 below). Leading indicators give you one way to look inside the production process by showing you in advance what the future might look like.

Fig. 3 – Indicators related to the production process – Taken from: Andrew S. Grove, “High Output Management”, p. 16:

Sales forecast
Raw material inventory
Manpower
Quality

Leverage – Grove introduces the concept of “leverage”. This is the output generated by a specific type of work activity. An activity with high leverage will generate a high level of output; an activity with low leverage, a low level of output. This raises the question about what qualifies as managerial leverage and output. Grove’s distinction between activities and output really helps to bring the concept of leverage to life (see Fig. 4 below). The overarching idea is that with each activity that the manager performs, the organisational output should increase.

Fig. 4 – Managerial activities vs output – Taken from: Andrew S. Grove, “High Output Management”, pp. 39 – 54:

Managerial activities:

Judgments and opinions
Direction
Allocation of resources
Mistakes detected
Personnel trained and subordinates developed
Courses taught
Products planned
Commitments negotiated

Managerial output:

A manager’s output is the output of all of the people and the teams that report into her. For example, if someone manages a design team, then his output consists of completed designs that are ready to be implemented. That output can take many different forms depending on the type of role and industry. Regardless of the form of output, managers must measure its quantity and quality:

A manager’s output = The output of his organisation + The output of the neighbouring organisations under his influence

High leverage activities – We’ve already touched on the impact of highly leveraged activities on an organisation’s output, and Grove explains how these activities can be achieved (see Fig. 5 below). For example, to maximise the leverage of his or her activities, a manager must keep timeliness firmly in mind. Equally, managers micro-managing or ‘meddling’ are examples of negative leverage activities. A big part of a manager’s work is to supply information and know-how, and to share a sense of the preferred method of handling things to the teams under his control or influence. A manager also makes and helps to make decisions.

Fig. 5 – Three ways in which to achieve high leverage activities – Taken from: Andrew S. Grove, “High Output Management”, pp. 54 – 55:

When many people are affected by one manager.
When a person’s activity or behaviour over a long period of time is affected by a manager’s, well focused-set of words or actions.
When a large group’s work is affected by an individual supplying a unique, key piece of knowledge or information.

Applying production principles to management – In the book, Grove rightly points out how time management techniques are commonly used to improve managerial output. He then uses production principles to improve on some of these time management techniques (see Fig. 6 below).

Fig. 6 – Ways to improve on time management techniques – Taken from: Andrew S. Grove, “High Output Management”, pp. 62 – 63:

Identify our limiting step: determine which things that have to happen on a schedule that’s absolute, and which can’t be moved. You can then plan more flexible activities around it and thus work more efficiently.
Batching similar tasks: group similar activities, e.g. performance reviews, as these activities tend to require (mental) set-up time. You can thus maximise the set-up time needed for the task and reduce duplication of effort.
Forecasting your activities: Your calendar can be a valuable production-planning tool (and not a dumping ground for random meetings or “orders” by others). If you want to use your calendar as better forecasting and planning tools, Grove suggest that two conditions should be met. Firstly, you should move toward the active use of your calendar, taking the initiative to fill the holes between the time-critical events with non-time critical though necessary activities. Secondly, you should say “no” at the outset to work beyond your capacity to handle.

Meetings, the output of managerial work – A lot of managerial tasks (see “High leverage activities” above) are best suited for face-to-face interactions, and more often than not, for meetings. Grove provides a useful distinction between two basic kinds of meetings: process-oriented and mission-oriented meetings (see Fig. 7 below). I love how at the end of the book’s chapter about meetings, Grove reminds us of a quote by the late management guru Peter Drucker who said that “If people spend more than 25 percent of their time in meetings, it’s a sign of malorganisation.”

Fig. 7 – Process-oriented and mission-oriented meetings – Taken from: Andrew S. Grove, “High Output Management”, pp. 72 – 87:

Process-oriented meetings: Knowledge is shared and information is exchanged during process-oriented meetings, which take place on a regular, scheduled basis. One-on-ones and team meetings are good examples of process-oriented meetings.
Mission-oriented meetings: The purpose of mission-oriented meetings is to solve a specific problem and often produce a decision. These meetings are ad hoc affairs, not scheduled long in advance, because they usually can’t be. The key to the success of a mission-oriented meeting is what the chair of the meeting does. The person leading the meeting needs to have a clear understanding of the meeting’s objective – what needs to happen and what decision needs to be made.

Planning: today’s actions for tomorrow’s output – In High Output Management, Grove offers three simple steps of a planning process (see Fig. 8 below). He describes planning as an ordinary everyday activity, something we all do – both in our professional and personal lives. The planning process enables you to reflect on what’s needed, the gap with the current situation and the specific actions necessary to close the gap.

Fig. 8 – Three steps your planning process should consist of – Taken from: Andrew S. Grove, “High Output Management”, pp. 103 – 120:

Step 1 – Establish projected need or demand: What will the environment demand from you, your business, or your organisation?

Step 2 – Established your present status: What are you producing now? What will you be producing as your projects in the pipeline are completed?

Step 3 – Compare and reconcile steps 1 and 2: What more (or less) do you need to do to produce what your environment will demand?

Main learning point: “High Output Management” is probably one of the most valuable management books I’ve read in the last couple of years. If you’re looking for an inspiring but practical book about management, I suggest you look no further: High Output Management is the book for you!

Book review: “The Fearless Organization” by Amy C. Edmondson

February 22, 2019February 22, 2019 marcabraham1 Comment

Before you read this review of “The Fearless Organization” by Amy Edmondson, I’d encourage you to watch Amy’s Tedx Talk in which she talks about how to build psychological safety. Edmondson is a management professor at Harvard Business School and has done a tremendous amount of work in the area of psychological safety. In her Tedx Talk, she describes psychological safety as “a shared belief that the team is safe for interpersonal risk taking.” I believe that psychological safety is a critical yet often overlooked concept, and one which underpins Edmondson’s latest book, The Fearless Organization – Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth.

These are the things that I took away from reading The Fearless Organization:

Starting with “Personal and Organizational Change through Group Methods” – The aforementioned concept of psychological safety dates back to a 1965 book titled “Personal and Organizational Change through Group Methods” by Edgar Schein and Warren Bennis, which addresses the need for psychological safety for to help people cope with the uncertainty and anxiety of organizational change. Schein later noted that psychological safety was vital for helping people overcoming the defensiveness and “learning anxiety” they face at work, especially when something doesn’t go as they’d hoped or expected.
Psychological safety isn’t a personality trait or difference – Based on her extensive research, Edmondson observes that psychological safety “is not a personality difference but rather a feature of the workplace that leaders can and must help create.” This observation made me think about the conditions that leaders can and must ‘enable’ to create a culture of psychological safety within the organisation, establishing a climate that supports learning. Edmondson mentions a number of other things which psychological safety is not, and which I’ve captured in Fig. 1 below.
Measuring psychological safety – Perhaps you think of psychological safety as quite a fluffy idea, but it can actually be measured. I like the seven survey items which Edmondson introduced in her original research dissertation and which I’ve included in Fig. 3 below. She uses a seven-point Liker scale to obtain responses (from strongly agree to strongly disagree), and three out of seven items are expressed positively. Agreement with these items indicates greater psychological safety, whilst those items items expressed negatively (highlighted with an “R” for reverse), such that disagreement is consistent with higher psychological safety.
Adopting an agile approach to strategy – I loved Edmondson’s point about viewing a company strategy as a hypothesis, to be tested continuously, rather than a plan. This perspective ties in with Edmondson’s broader theme around organisational learning. She argues that organisational learning – championed by company leaders but enacted by everyone – requires actively seeking deviations that challenge the assumptions underpinning a current strategy.
Set the stage for psychological safety – In the book, Edmondson offers some useful tips with respect to ‘facilitating’ psychological safety, sharing a valuable toolkit (see Fig. 4 below).
Proactive inquiry – Being able to say that you don’t know and driving participation through inquiry are two strong tenets of psychological safety. Edmondson shares some rules of thumb for asking a good question: one, you don’t know the answer; two, you ask questions that don’t limit responses to Yes or No, and three, you phrase the question in a way that helps others share their thinking in a focused way (see also Fig. 5 below).

Main learning point: In “The Fearless Organization”, Edmondson has written a valuable book about psychological safety. Even if you’re unable to create a truly fearless organisation anytime soon, Edmondson offers a number of valuable starting points with respect to critical aspects such as questioning, conflict and speaking up.

Fig. 1 – What Psychological Safety Is Not – Taken from: Amy Edmondson, The Fearless Organisation, pp. 15-19

Psychological safety isn’t about being nice – Working in a psychologically safe environment doesn’t mean that people always agree with one another for the sake of being nice. It also doesn’t mean that people offer unequivocal praise or unconditional support for everything you have to say. Psychological safety is about candour, about making it possible for productive disagreement and free exchange of ideas. Conflict inevitably arises in any workplace. Psychological safety enables people on different sides of a conflict to speak candidly about what’s bothering them.
Psychological safety isn’t a personality factor – Some have interpreted psychological safety as a synonym for extroversion. They might have previously concluded that people don’t speak up at work because they’re shy or lack confidence, or simply keep to themselves. Psychological safety, however, refers to the work climate, and climate affects people with different personality traits in roughly similar ways. In a psychologically safe climate, people will offer ideas and voice their concerns regardless of whether they tend to toward introversion or extroversion.
Psychological safety isn’t just another word for trust – Although trust and psychological safety have much in common, they aren’t interchangeable concepts. A key difference is that psychological safety is experienced at a group level. Further, psychological safety describes a temporally immediate experience.
Psychological safety isn’t about lowering performance standards – Psychological safety is not an “anything goes” environment where people aren’t expected to adhere to high standards or meet deadlines. It isn’t about becoming “comfortable” at work (see Fig. 2 below). Psychological safety enables candour and openness and, as such, thrives in an environment of mutual respect.

Fig. 2 – How psychological safety relates to performance standards – Taken from: Amy Edmondson, The Competitive Imperative of Learning, https://hbr.org/2008/07/the-competitive-imperative-of-learning

Fig. 3 – A survey measure of psychological safety – Taken from: Amy Edmondson, The Fearless Organisation, p. 20

If you make a mistake on this team, it is often held against you. (R)
Members of this team are able to bring up problems and tough issues.
People on this team sometimes reject others for being different. (R)
It is safe to take a risk on this team.
It is difficult to ask other members of this team for help. (R)
No one on this team would deliberately act in a way that undermines my efforts.
Working with members of this team, my unique skills and talents are valued and utilised.

Fig. 4 – The leader’s tool kit for building psychological safety – Taken from: Amy Edmondson, The Fearless Organisation, p. 159

Setting the stage:

Leadership tasks:

Frame the work – Set expectations about failure, and interdependence to clarify the need for voice
Emphasise the purpose – Identify what’s at stake, why it matters, and for whom

Accomplishes:

Shared expectations and meaning

Inviting participation:

Leadership tasks:

Demonstrate situational humility – Acknowledge gaps
Practice inquiry – Ask good questions and model intense listening
Set up structures and processes – Create forums for input and provide guidelines for discussion

Accomplishes:

Confidence that voice is welcome

Responding productively

Leadership tasks:

Express appreciation – Listen, acknowledge and thank
Destigmatise failure – Look forward, offer help. Discuss, consider and brainstorm next steps
Sanction clear violations

Accomplishes:

Orientation toward continuous learning

Fig. 5 – Attributes of a powerful question – Taken from: Amy Edmondson, The Fearless Organisation, p. 171

Generates curiosity in the listener
Stimulates reflective conversation
Is thought-provoking
Surfaces underlying assumptions
Invites creativity and new possibilities
Generates energy and forward movement
Channels attention and focuses inquiry
Stays with participants
Touches a deep meaning
Evokes more questions

Related links for further learning:

Book review: “The Messy Middle” by Scott Belsky

February 13, 2019 marcabraham1 Comment

I’m sure a lot of us have common misconceptions about successful entrepreneurs and their companies. It’s easy to look at people who’ve ‘made it’ and think that their journey has been all plain sailing. Scott Belsky is such an entrepreneur, having founded Behance, a platform for creative professionals to show off their work, which eventually got acquired by Adobe. In “The Messy Middle”, Belsky eradicates any illusions about the process of creating – whether it’s a business or a product – being painless. He writes about the different stages of a startup lifecycle: the start, the middle and the finish. Belsky makes the point that “it’s not about the start and finish, it’s about the journey in between.”

Fig. 1 – Scott Belsky, Navigating The Messy Middle – Taken from: https://medium.com/positiveslope/navigating-the-messy-middle-7ca6fff11966

At the start, there’s “pure joy” to begin with. That is before reality kicks in and things hit bottom. Belsky describes the finish as “final mile of journey and the recovery time between one project and the next”, the point where you can allow yourself to take a break and make a change. I, however, specifically bought the book because I was intrigued to read Belsky’s thoughts about the ‘messy middle’. Belsky writes about this period, as a collection of peaks – ‘optimising’ – and valleys – ‘enduring’. It’s this period which benefits from volatility. Volatility being positioned as a good thing might sound counterintuitive to some, but Belsky argues that “volatility is good for velocity”:

“The faster you move, the better your chances of learning and momentum to soar above the competition.”

Scott Belsky, The Messy Middle

To achieve this level of velocity, Belsky encourages conducting experiments, and lots of them. Running these experiments means that you’ll be both enduring the lows and optimising everything that works. In “The Messy Middle”, Belsky shares a ton of lessons learned and tips, particularly in relation to those stages of your company or product that are dominated by enduring and optimising. Allow me to give you a quick shopping list of those points by Belsky which resonated with me most:

Avoid validation in the form of false positives – To objectively observe the performance of your new creation or product, put yourself in others’ shoes. Belsky refers to points made by Ben Horowitz about telling the truth in this respect (see Fig. 1 below).
Celebrate progress and impact – Especially at the early stages, celebrate anything you can. Whilst you should avoid ‘fake wins’, celebrating quick wins and progress milestones is important.
Master the art of parallel processing – This involves being able to focus on a specific problem whilst also churning through the omnipresent anxiety and uncertainty involved in building things.
Friction unlocks the full potential of working together – Hardship brings your teams together and equips you to endure for the long haul.
Do Your Fucking Job (‘DYFJ’) – Leading a team through enduring times requires many “rip off the Band-Aid” moments. Nobody wants to inflict pain on their team, but quick and controlled pain is better than a drawn out infection. This also implies checking your ego at the door, instead concentrating on what needs to be done.
Self awareness as the only sustainable competitive advantage in business – Your sense of self is likely to shift when you’re at a peak or in a valley (see Fig. 2 below).
Break the long game down into chapters – Belsky recounts the approach by Ben Silbermann, CEO of Pinterest, who breaks up every period of his company into chapters, each with a beginning, goal, reflection period, and reward. Chapters help break down the long timescale it takes to build something extraordinary. I like to think of them as strategic milestones, each time getting one step closer to achieving the vision for the business.
Do the work regardless of whose work it is – Everyone has an opinion, but few are willing to do something about it – especially if it falls outside their formal job description. Belsky describes his marvel at just how quickly an idea takes hold when someone proactively does the underlying work no one else clearly owned. He goes on to talk about how hiring for people with excitement about the idea, ability to contribute right away and the potential to learn is key when assembling a team.
Never stop crafting the “first mile” of your product’s experience – Whether you’re building a product, creating art, or writing a book, you need to remember that your customers make sweeping judgments in their first experience interacting with your creation – especially in the first 30 seconds. Belsky call this the “first mile”, and he argues that it’s important to prime your audience to the point where they know three things: 1. Why they’re there (2) What they can accomplish and (3) What to do next.
Identify and prioritise efforts with disproportionate impact – Belsky shares a nice prioritisation method by Jeffrey Kalmikoff, which Jeffrey uses to help choose where to focus his energy: look at each item on the table and assign a 3 for very important tasks that would make a huge impact on strategy and revenue, a 2 for something with less significance, and a 1 for something inconsequential.
Stress-test your opinions with radical truthfulness – “Sound judgment, achieved through aggressive truth seeking, is your most differentiating and deterministic trait. It’s all about being honest.” This is one of the founding principles behind Bridgewater, the leading hedge funded founded by Ray Dalio. One of the most fundamental principles driving behaviour at Bridgewater is the notion of “Know what you don’t know, and what to do about it.”

Main learning point: In “The Messy Middle”, Belsky has written a book that I expect to be coming back to over the coming years; it’s a great reminder of the realities involved in creating things and contains a lot of valuable lessons learned as well as practical tips.

Fig. 1 – Ben Horowitz – Three methods for assigning meaning to hard truths, taken from https://a16z.com/2017/07/27/how-to-tell-the-truth/:

State the facts clearly and honestly.
If you caused it, explain how such a bad thing could occur.
Explain why taking the action is essential to the larger mission and how important that mission is.

Fig. 2 – Self awareness, by Scott Belksy – Taken from “The Messy Middle”, pp. 54-56:

Self awareness starts with the realisation that when you’re at a peak or in a valley, you’re not your greatest self.
Self awareness means understanding your own feelings enough to recognise what bothers you.
Self awareness means being permeable.
Self awareness comes from chronicling your patterns.
Self awareness means dispelling your sense of superiority and the myths that people believe about you.

Related links for further learning:

My product management toolkit (35): effective one-on-one meetings

January 27, 2019March 6, 2019 marcabraham1 Comment

Like all meetings, it’s easy to get little out of one-on-one meetings. Ineffective one-on-one meetings affect both managers and their direct reports. Ineffective one-on-one meetings are characterised by at least one party feeling that it’s been a waste of time. These are two examples of ineffective one-on-one meetings that I’ve observed over the years:

‘The generic disengaged one-on-one’

Manager: “How are things?”

Direct report: “All ok. You know, the usual.”

Manager: “Good stuff! That’s great to hear!”

‘The full frontal attack one-on-one’

Direct report: “I’m struggling with the delivery aspect of my role.”

Manager: “Yes, I’ve noticed your underperformance with respect to delivery.”

Manager: “You haven’t met my expectations in this regard!”

Direct report: “But what do you want me to do about!?” or “Does this mean that you’re going to fire me!?”

Particularly if you’re managing or mentoring another person, it’s worth knowing how to best facilitate one-on-one meetings. I strongly believe that valuable one-on-one meetings are important when creating great products and high-performing product teams. Here are some pointers designed to get the most out of your one-on-one meetings:

In preparation for a one-on-one:

I used to be unsure about one-on-one meetings, especially when I started facilitating them. I’ve since learned that preparing for one-on-one meetings goes a long way, both for me as a manager and the person that I’m having the one-on-one with.

Revisit what was discussed in your last one-on-one – For example: actions agreed on, topics discussed, feelings shared, particular challenges or opportunities raised, etc. I like to keep brief notes of one-on-one meetings with my direct reports, purely to make sure I come back to outstanding issues or agreed actions in the next one-on-one.
Ask the direct report for agenda items – Ask beforehand for any specific things that your direct report would like to discuss in the upcoming one-on-one; things on their mind, questions, challenges, recent events, etc. Having a (loose) agenda in place helps to avoid the awkwardness of what I call the “So, what shall we talk about today!?” moment and adds structure to your conversation.
Think about things I’d like to bring up – Even though a one-on-one is mostly about the manager listening, this doesn’t mean that you as a manager can’t bring up the things you want to ask or share as part of the conversation. For example: your concerns and issues, performance feedback, personal development or non work related issues or events.

Questions to ask during the one-on-one:

There are numerous questions one could ask during a one-on-one, and I particularly like the examples previously provided by Ben Horowitz and Claire Lew (see Fig. 1-2 below). These are some of the questions I often find myself asking during one-on-one meetings:

“How have you been feeling since our last one-on-one? Why?”
“In our last one-on-one you raised your concern about ____. How do you see that now?”
“What has been going well, what hasn’t?” Why?”
“What can I do to support you better? What can do I do more or less of? Why?”
“Is there anything stopping you from doing good work?”
“What can I do to help unblock you? Where can I support you best? Why?”
“What have you learned lately that might not be related to your day-to-day work but more focused on personal development?”

Following up after the one-on-one:

Make sure to follow up after the one-on-one; I believe it’s very helpful to reflect on what came up during conversation as well as act on any next steps or actions you agreed with your direct report. For instance, if you promised your colleague that you’d look into a specific question for them, I suggest prioritising this action to ensure you follow up on your promised action, well before your next one-on-one.

It doesn’t all have to come down to one-on-one meetings:

I always stress with my colleagues that they don’t have to wait until our next one-on-one to bring up any (critical) issues or questions, as I will always try to make myself ad-hoc conversations as and when needed.

Main learning point: One-on-one meetings can offer a great opportunity to take step back from the day-to-day and reflect. As the person facilitating the conversation, it’s important to prepare for one-on-one meetings and to follow up on them.

Fig. 1 – Example one-on-one questions to ask, from Ben Horowitz – Taken from: One On One

If we could improve in any way, how would we do it?
What’s the No. 1 problem with our organization? Why?
What’s not fun about working here?
Who is really kicking ass in the company? Who do you admire?
If you were me, what changes would you make?
What don’t you like about the product?
What’s the biggest opportunity that we’re missing out on?
What are we not doing that we should be doing?
Are you happy working here?

Fig. 2 – Example one-on-one questions to ask, from Claire Lew – Taken from: Managers: You’re not prepared for your one-on-one meetings. Here’s what to do.

Questions that uncover concerns / issues…

“When have you felt most motivated about the work you’ve been doing?”
“When have you felt bored in the past quarter?”
“Is anything holding you back from doing the best work you can do right now?”
“Is there any red tape you’d like to cut at the company?”

Questions that elicit feedback about work performance…

“Would you like more or less feedback on your work? Why/why not?”
“Would you like more or less direction from me? Why/why not?”
“What aspect of your job you would like more help or coaching?”
“What’s a recent situation you wish you handled differently? What would you change?”

Questions that help provide career direction…

“What have you been wanting to learn more of, get better at, and improve on?”
“What’s one thing we could do today to help you with your long term goals?”
“Is there an area outside your current role where you feel you could be contributing?”
“If you could design your ideal role in a company, what would it look like?”

Questions that foster a sense of personal connection…

“How’s life?”
“What have you been reading lately?”
“Been anywhere recently for the first time?”
“What have you been excited about lately?”

Related links for further learning:

Book review: “Principles” by Ray Dalio

December 22, 2018 marcabraham1 Comment

“Principles” is the latest book by Ray Dalio – founder of Bridgewater, the world’s largest hedge fund. In this rather hefty tome of a book, Dalio offers an insight into the principles which he’s applied throughout his life and work, and his underlying reflections. He kicks off the book by explaining that “Good principles are effective ways of dealing with reality” and that “To learn my own, I spend a lot of time reflecting.”

preorder-ray-dalio-principles-book-95db76ead27720616fe067f8e730b9f17a1a1c0b115f4028e075cc73ce9dcd40.png

“Principles” consists of three parts. In the first part, titled “Where I’ coming from”, Dalio looks back on his career and the founding of Bridgewater. “Life Principles” is the name of the second part, and covers Dalio’s approach to life’s challenges and opportunities. Finally. part three covers Dalio’s “Work Principles”. Let me share the key things I’ve taken away from “Principles”, starting with Dalio’s Life Principles:

Embrace reality and deal with it – Dalio shares an important equation which in his view makes for a successful life: Dreams + Reality + Determination = A Successful Life. For the ‘reality’ component of this equation to work, Dalio encourages his readers to be radically open minded and radically transparent.
Pain + Reflection = Progress – Dalio’s point about “going to the pain rather than avoiding it” resonated with me (see Fig. 1 below). It’s easy to dismiss this statement because it’s coming from a highly successful investor, but I’d flip that as I can see how someone like Dalio has gone through his own share of pain to get to where’s he gotten to, and learned along the way.
Using the 5-step process to get what you want out of life – Start with having clear goals (step 1), followed by identifying but not tolerating the problems that stand in the way of your achieving those goals (step 2), then you accurately diagnose the problems to get at their root causes (step 3), design plans that will get you around them (step 4) and, finally, do what’s necessary to push these designs through to results (step 5). Dalio depicts this as a continuous process and people can benefit from applying this model to achieve their goals (see Fig. 2 below).
Understand that people are wired very differently – Dalio stresses the fact that all people are wired very differently, and zooms in on the differences between left and right brained thinking (see Fig. 3 – 4 below).

Fig. 1 – Going to the pain instead of avoiding it – Taken from: Ray Dalio – Principles, p. 154

Identifying, accepting, and learning how to deal with your weaknesses.
Preferring that the people around you be honest with you rather than keep their negative thoughts about you to themselves.
Being yourself rather than having to be strong where you are weak.

Fig. 2 – Ray Dalio’s 5-step process – Taken from: Ray Dalio – Principles, p. 171

Fig. 3 – Differences between left and right brain – Taken from: https://visme.co/blog/left-brain-right-brain-marketing/

Fig. 4 – Understand the differences between right-brained and left-brained thinking – Taken from: Ray Dalio – Principles, p. 223

The left hemisphere reasons sequentially, analyses details, and excels at linear analysis. “Left-brained” or “linear” thinkers who are analytically strong are often called “bright.”
The right hemisphere thinks across categories, recognises themes, and synthesises the big picture. “Right-brained” or “lateral” thinkers with more street smart are often called “smart.”

Dalio’s Work Principles are dominated by the concept of an Idea Meritocracy – i.e. a system that brings together smart, independent thinkers and has them productively disagree to come up with the best possible collective thinking and resolve their disagreements in a believability-weighted way (see Fig. 5 below). Dalio successfully implemented an Idea Meritocracy at Bridgewater and shares the components of such a system in his book:

Idea Meritocracy = Radical Truth + Radical Transparency + Believability – Weighted Decision Making

Radical Truth – Talking openly about our issues and have paths for working through them.
Radical Transparency – Giving everyone the ability to see everything. Radical transparency reduces harmful office politics and the risks of bad behaviour because bad behaviour is more likely to take place behind closed doors than out in the open.
Believability – Dalio defines believable people “as those who have repeatedly and successfully accomplished the thing in question – who have a strong track record with at least three successes – and have great explanations of their approach when probed.”
Thoughtful Disagreement – The concept of Believability is closely linked to the art of Thoughtful Disagreement; the process of having a quality back-and-forth in an openminded and assertive way to see things through each other’s eyes.
Weighted Decision Making – At Bridgewater, employees have different believability weightings for different qualities, like expertise in a particular subject, creativity, ability to synthesise, etc. Dalio explains that in order to have a true Idea Meritocracy one needs to understand the merit of each person’s ideas.
Prerequisites for an Idea Meritocracy – To have an Idea Meritocracy three conditions need to be in place. Firstly, put your honest thoughts on the table. Secondly, have thoughtful disagreement (see above). Thirdly, abide by agreed-upon ways of getting past disagreement.
Mistakes are part of the game – Dalio has a refreshing outlook on the role and value of mistakes, which he treats as “a natural part of the evolutionary process”. It’s important in this respect to assess whether people recognise and learn from their mistakes. Dalio distinguishes between people who make mistakes and who are self reflective and open to learning from their mistakes and those who are unable to embrace their mistakes and learn from them.
Get people to focus on problems and outcomes – Assign people the job of perceiving problems, give them time to investigate, and make sure they have independent reporting lines so that they can convey problems without any fear of recrimination. To perceive problems, compare how the outcomes are lining up with your goals. Dalio also offers some valuable tips on how to best diagnose problems (see Fig. 6 below).
Avoid the “Frog in the boiling water” syndrome – Apparently, if you throw a frog into a pot of boiling water it will jump out immediately, but if you put it in room-temperature water and gradually bring it to a boil, it will stay in the pot until it dies. If one uses this syndrome as a metaphor for professional life, it signifies people’s tendency to slowly get used to unacceptable things that would shock them if the say them with fresh eyes.
Don’t just pay attention to your job – Instead, pay attention to how your job will be done if you’re no longer around. Dalio talks about the ‘ninja manger’ as “somebody who can sit back and watch beauty happen-i.e. an orchestrator. If you’re always trying to hire somebody who’s as good as or better than you at your job, that will both free you up to go on to other things and build your succession pipeline.”

Fig. 5 – The Idea Meritocracy as is the best way to make decisions – Taken from: https://twitter.com/RayDalio/status/1066357616350253057

Fig. 6 – Diagnose problems to get at their root causes – Taken from: Ray Dalio – Principles, p. 484 – 490

To diagnose well, ask the following questions:

Is the outcome good or bad?
Who is responsible for the outcome?
If the outcome is bad, is the Responsible Party incapable and / or is the design bad?

Main learning point: Whilst “Principles” feels a tad repetitive at times and some of Dalio’s ideas might not be easy to implement, I feel that Dalio’s principles can provide great direction for all people working in organisations, big or small. His reflections on things such as transparency and decision-making will be valuable to anyone reading this great book.

Related links for further learning:

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This site is about everything digital, giving an update on new things as I learn

Category: Management

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“The faster you move, the better your chances of learning and momentum to soar above the competition.”

My product management toolkit (35): effective one-on-one meetings

‘The generic disengaged one-on-one’

‘The full frontal attack one-on-one’

In preparation for a one-on-one:

Questions to ask during the one-on-one:

Following up after the one-on-one:

It doesn’t all have to come down to one-on-one meetings:

Book review: “Principles” by Ray Dalio