As I mentioned earlier, nothing is more important or more difficult than to get the culture and the people right. Whatever successes we’ve had at Bridgwater were the result of doing that well – and whatever failures were due to our not doing it adequately. That might seem odd because, as a global macroeconomic investor, one might think that, above all else, I had to get the economics and investments right, which is true. But to do that, I needed to get the people and culture right first. And, to inspire me to do what I did, I needed to have meaningful work and meaningful relationships.
As the entrepreneur/builder of Bridgewater, I naturally shaped the organization to be consistent with my values and principles. I went after what I wanted most, in the way that seemed most natural to me with the people I chose to be with, and we and Bridgewater evolved together.
If you had asked me what my objective was when I started out, I would’ve said it was to have fun working with people I like. Work was a game I played with passion and I wanted to have a blast playing it with people I enjoyed and respected. I started Bridgewater out of my apartment with a pal I played rugby with who had no experience in the markets and a friend we hired as our assistant. I certainly wasn’t thinking about management at the time. Management seemed to me like something people in gray suits with slide presentations did. I never set out to manage, let alone to have principles about work and management.
From reading Life Principles, you know that I liked to imagine and build out new, practical concepts that never existed before. I especially loved doing these things with people who were on the same mission with me. I treasured thoughtful disagreement with them as a way of learning and raising our odds of making good decisions, and I wanted all the people I worked with to by my “partners” rather than my “employees.” In a nutshell, I was looking for meaningful work and meaningful relationships. I quickly learned that the best way to do that was to have great partnerships with great people.
To me, great partnerships come from sharing common values and interests, having similar approaches to pursuing them, and being reasonable with, and having consideration for, each other. At the same time, partners must be willing to hold each other to high standards and work through their disagreements. The main test of a great partnership is not whether the partners every disagree – people in all healthy relationships disagree – but whether they can bring their disagreements to the surface and get through them well. Having clear processes for resolving disagreements efficiently and clearly is essential for business partnerships, marriages, and all other forms of partnerships.
My wanting these things attracted others who wanted the same things, which drove how we shaped Bridgewater together. When there were five of us it was totally different than when there were fifty of us, which was totally different than it was when we were five hundred, a thousand, and so on. As we grew, most everything changed beyond recognition, except for our core values and principles.
When Bridgewater was still a small company, the principles by which we operated were more implicit than explicit. But as more and more new people came in, I couldn’t take for granted that they would understand and preserve them. I realized that I need to write our principles out explicitly and explain the logic behind them. I remember the precise moment when the shift occurred – it was when the number of people at Bridgwater passed sixty-seven. Up until then, I had personally chosen each employee’s holiday gift and written them a lengthy personalized card, but trying to do it that year broke my back. From that point on, an increasing number of people came in who didn’t work closely with me, so I couldn’t assume they would understand where I was coming from or what I was striving to create, which was an idea meritocracy built on tough love.
Tough love is effective for achieving both great work and great relationships.
To give you an idea of what I mean by tough love, think of Vince Lombardi, who for me personified it. From when I was ten years old until I was eighteen, Lombardi was head coach of the Green Bay Packers. With limited resources, he led his team to five NFL championships. He won two NFL Coach of the Year awards and many still call him the best coach of all time. Lombardi loved his players and he pushed them to be great. I admired, and still admire, how uncompromising his standards were. His players, their fans, and he himself all benefited from his approach. I was Lombardi had written out his principles for me to read.
a. In order to be great, one can’t compromise the uncompromisable. Yet I see people doing it all the time, usually to avoid making other or themselves feel uncomfortable, which in not just backward but counterproductive. Putting comfort ahead of success produces worse results for everyone. I both loved the people I worked with and pushed them to be great, and I expected them to do the same with me.
From the very beginning, I felt that people I work with at Bridgewater were part of my extended family. When they or members of their families got sick, I put them in touch with my personal doctor to make sure they were well taken care of. I invited all of them to stay at my house in Vermont on weekends and loved it when they took me up on it. I celebrated their marriages and the births of their children with them and mourned the losses of their loved ones.
But to be clear, this was no loveliest. We were tough on each other too, so we could all be as great as we could be. I learned that the more caring we gave each other, the tougher we could be on each other, and the tougher we were on each other, the better we performed and the more rewards there were for us to share. This cycle was self-reinforcing. I found that operating this way made the lows less low and the highs higher. It even made the bad times better than the good ones in some important ways.
Think about some of your toughest experiences in life. I bet it is as true for you as it has been for me that going through them with people you cared about, who cared about you, and who were working as hard as you were for the same mission, was incredibly rewarding. As hard as they were, we look back on some of these challenging times as our finest moments. For most people, being part of a great community on a shared mission is even more rewarding than money. Numerous studies have shown there is little to no correlation between one’s happiness and the amount of money one accumulates, yet there is a strong correlation between one’s happiness and the quality of one’s relationships.
I laid this out in a memo to Bridgewater in 1996:
Bridgwater is not about plodding along at some kind of moderate standard, it is about working like hell to achieve a standard that is extraordinarily high, and then getting the satisfaction that comes along with that sort of super-achievement.
Our overriding objective is excellence, or more precisely, constant improvement, a superb and constantly improving company in all respects.
Conflict in the pursuit of excellence is a terrific thing. There should be no hierarchy based on age or seniority. Power should lie in the reasoning, not the position, of the individual. The best ideas win no matter who they come from.
Criticism (by oneself and by others) is an essential ingredient in the improvement process, yet, if handled incorrectly, can be destructive. It should be handled objectively. There should be no hierarchy in the giving or receiving of criticism.
Teamwork and team spirit are essential, including intolerance of substandard performance. This is referring to 1) one’s recognition of the responsibilities on has to help the team achieve its common goals and 2) the willingness to help others (work within a group) toward these common goals. Our fates are intertwined. One should know that others can be relied upon to help. As a corollary, substandard performance cannot be tolerated anywhere because its would hurt everyone.
Long-term relationships are both a) intrinsically gratifying and b) efficient, and should be intentionally built. Turnover requires retraining and therefore creates setbacks.
Money is a byproduct of excellence, not a goal. Our overriding objective is excellence and constant improvement at Bridgewater. To be clear, it is not to make lots of money. The natural extension of this is not the you should be happy with little money. On the contrary – you should expect to make a lot. If we operate consistently with this philosophy we should be productive and the company should do well financially. There is comparatively little age- and seniority-based hierarchy.
Each person at Bridgewater should act like an owner, responsible for operating in this way and for holding others accountable to operate in this way.