WEBVTT - Ray Dalio on Failure, Meaningful Work and Relationships 0:00:02.240 --> 0:00:06.800 This is Masters in Business with Barry Ridholts on Bloomberg Radio. 0:00:09.280 --> 0:00:11.799 What can I say about this week's podcast? I sit 0:00:11.880 --> 0:00:16.760 down with Ray Dahio of Bridgewater Associates and you have 0:00:16.840 --> 0:00:19.560 to hear the whole thing there. I can't even preface 0:00:19.600 --> 0:00:24.160 it by describing it. He's Ray Dahio. It's awesome. I 0:00:24.200 --> 0:00:27.040 will share a quick story about the first time I 0:00:27.080 --> 0:00:30.360 met Ray. I had been reading various things. He had 0:00:30.400 --> 0:00:33.760 been posted an early version of of Principles, and I 0:00:33.800 --> 0:00:39.040 loved his idea of radical transparency and failure learning from 0:00:39.040 --> 0:00:43.400 failure era mistakes. Failures, they are an opportunity to learn, 0:00:43.600 --> 0:00:46.400 and we should not ignore our mistakes, but we should 0:00:46.440 --> 0:00:49.280 own them and learn from them. And because of that, 0:00:49.320 --> 0:00:52.319 I started doing my annual Mia culpus. I've been doing 0:00:52.320 --> 0:00:55.080 it for about a decade. So I wanted when there 0:00:55.120 --> 0:00:58.200 was an event, I wanted the opportunity to, uh say 0:00:58.240 --> 0:01:00.600 thank you to him. I couldn't get you were near 0:01:00.680 --> 0:01:03.920 the guy after he spoke, where a million institutional salespeople 0:01:03.920 --> 0:01:06.880 all over him. I step outside and I'm just standing there, 0:01:06.959 --> 0:01:10.720 kind of fuming, and I see the scrum coming towards me. 0:01:10.720 --> 0:01:14.280 It's Ray and his assistant and all these salespeople and 0:01:14.400 --> 0:01:16.399 it was sort of like an Andy Cap cartoon with 0:01:16.400 --> 0:01:19.520 these guys all trying to get in there. Eventually he 0:01:19.800 --> 0:01:22.759 is the scrum works its way, so he's like two 0:01:22.760 --> 0:01:26.440 ft from me, and I just looked up and said, hey, Ray, 0:01:26.520 --> 0:01:28.280 I don't have a business card for you. I just 0:01:28.319 --> 0:01:30.640 wanted to say thank you. And he kind of swiveled 0:01:30.640 --> 0:01:32.920 around and looked at me. Who are you. I introduced 0:01:32.959 --> 0:01:36.720 myself and I tell him hey, because of your uh 0:01:36.959 --> 0:01:40.399 concept of of owning mistakes and the value of failure, 0:01:40.720 --> 0:01:44.679 I started posting my Mia Culpaz publicly. Here's where I 0:01:44.720 --> 0:01:46.760 screwed up. Here is what I learned. And we just 0:01:46.920 --> 0:01:49.640 chatted for two or three minutes, and you could feel 0:01:49.680 --> 0:01:52.800 the white hot hate of all these salespeople who were 0:01:52.840 --> 0:01:56.680 looking for uh entree for a commission business with Bridgewater 0:01:57.080 --> 0:01:59.800 and I'm just chit chatting and saying thank you. So 0:02:00.200 --> 0:02:02.960 he and his assistant get in the car with a 0:02:03.080 --> 0:02:07.280 giant stack of papers and folders and stuff you know 0:02:07.320 --> 0:02:10.919 they're throwing out immediately um and I basically said, gee, 0:02:10.960 --> 0:02:13.000 I have to sit down and have a longer conversation 0:02:13.400 --> 0:02:16.560 with that guy. He's pretty fascinating Well here it is 0:02:16.600 --> 0:02:21.000 almost a decade later, with no further ado. My conversation 0:02:21.280 --> 0:02:28.160 with Ray Dalio, my guests this week requires little in 0:02:28.160 --> 0:02:31.160 the way of introduction from me. His name is Ray 0:02:31.280 --> 0:02:36.040 Dalio and he is the founder, chairman, and outgoing CEO 0:02:36.600 --> 0:02:40.679 of Bridgewater Associates, the world's largest hedge fund, managing over 0:02:40.680 --> 0:02:44.840 a hundred and sixty billion dollars in assets for institutional clients. 0:02:45.320 --> 0:02:49.359 Ray continues to work as Chief Investment officer there. According 0:02:49.440 --> 0:02:54.520 to Fortune, Bridgewater is the fifth most important private company 0:02:54.600 --> 0:02:57.800 in the United States. They have made more money for 0:02:57.840 --> 0:03:01.000 their clients than any other fund in his stree. His 0:03:01.120 --> 0:03:05.520 new book, Principles, is a New York Times bestseller. Ray Dalio, 0:03:05.720 --> 0:03:08.480 Welcome to Bloomberg. Thanks nice to be here. I have 0:03:08.600 --> 0:03:12.680 been looking forward to this conversation for so long. Let's 0:03:12.760 --> 0:03:18.720 jump right in with Bridgewater just celebrated its forty anniversary. 0:03:18.840 --> 0:03:23.040 How has the company's evolution surprised you since you first 0:03:23.120 --> 0:03:26.040 launched the firm in the nineteen seventies. Well, it surprises me, 0:03:26.040 --> 0:03:28.680 an every day, every different which way I mean. I 0:03:28.680 --> 0:03:31.040 don't know how to summarize it. Uh, you know, I 0:03:31.080 --> 0:03:33.720 started it out of a two bedroom apartment with a 0:03:33.720 --> 0:03:37.440 guy played rugby with and I was just playing my game, 0:03:37.480 --> 0:03:39.600 and I just never imagined that it would be anything 0:03:39.640 --> 0:03:42.000 like this. So you go through to these different phases. 0:03:42.040 --> 0:03:45.080 You know, first phases you have to take care of everything. 0:03:45.120 --> 0:03:48.000 You have to hire people, you hire your pals. Then 0:03:48.040 --> 0:03:50.680 you realize that you have to manage people, and then 0:03:50.720 --> 0:03:52.680 you have to you know, I had to get the 0:03:52.680 --> 0:03:55.320 file cabinets myself and all that. Then you get people 0:03:55.320 --> 0:03:57.920 who get the file cabinets, and then you have to 0:03:57.960 --> 0:03:59.800 manage them that. You know, it goes through all of 0:03:59.840 --> 0:04:03.400 its phases, and now, um, I'm at the wonderful phase 0:04:03.680 --> 0:04:06.280 of being able to transition out of the management and 0:04:06.320 --> 0:04:09.680 make other people successful. So I'm now a phase in 0:04:09.760 --> 0:04:13.320 my life which I'm describing as entering the third phase 0:04:13.360 --> 0:04:16.360 of my life of transitioning so that I'm making other 0:04:16.360 --> 0:04:19.720 people successful. So every phase is different, you know, lots 0:04:19.720 --> 0:04:22.440 of surprises. So let me tell you what surprised me. 0:04:22.839 --> 0:04:25.200 In principles, in the first part of the book that 0:04:25.279 --> 0:04:30.000 describes your history, you had roles in the creation of 0:04:30.040 --> 0:04:34.440 each of the following products tips, the inflation protected treasury bonds, 0:04:35.040 --> 0:04:40.920 US dollar futures, index, risk parity China's stock market, and 0:04:41.040 --> 0:04:44.719 chicken McNuggets. Let's discuss each of those, but I have 0:04:44.839 --> 0:04:47.880 to start with the outlier, chicken McNuggets. What was your 0:04:47.960 --> 0:04:51.680 role when chicken McNuggets, Well, you know, I was trading commodities. 0:04:51.720 --> 0:04:55.680 And when I say trading commodities down at a very 0:04:55.400 --> 0:04:59.080 basic level of understanding. You know, how many pounds of 0:04:59.120 --> 0:05:02.760 feed went in to a chicken or beef, uh, and 0:05:02.880 --> 0:05:05.279 how that would grow. I liked it because it was 0:05:05.400 --> 0:05:08.239 very mechanical and there was not no greater fool theory. 0:05:08.360 --> 0:05:10.640 You know. The value of the meat was whatever it 0:05:10.760 --> 0:05:13.880 sold for at the counter. And at the time that time, 0:05:13.920 --> 0:05:18.000 I had institutional clients who were uh, you know, hedging, 0:05:18.160 --> 0:05:21.159 and McDonald's was a client of mine, and some chicken 0:05:21.200 --> 0:05:25.560 producers were clients of money main processing. Yeah, and um 0:05:25.960 --> 0:05:28.680 McDonald's wanted to They came up with the idea of 0:05:28.680 --> 0:05:31.680 the chicken McNugget. But the big problem that they had 0:05:31.800 --> 0:05:34.599 at the time is there was a lot of volatility 0:05:34.880 --> 0:05:38.839 in prices, in chicken prices, mostly because there was grain prices. 0:05:38.839 --> 0:05:41.560 A chick is a tiny thing, it doesn't cost much, 0:05:41.560 --> 0:05:44.640 but it's all the grain, and so they were worried 0:05:44.640 --> 0:05:48.160 about you put out these at a fixed price on 0:05:48.240 --> 0:05:51.479 the menu, and then the price volatility could kill them. 0:05:51.720 --> 0:05:54.320 So they wanted to buy chicken at a fixed price. 0:05:54.360 --> 0:05:56.919 But nobody produced chicken at a fixed price because there 0:05:57.000 --> 0:05:59.800 was no chicken futures market. So I went to the 0:06:00.360 --> 0:06:03.480 Lane processing and I said, would you like to do this? 0:06:03.839 --> 0:06:07.839 And I calculated how they could essentially hedge their cost 0:06:08.200 --> 0:06:11.560 by buying corn and soy meal futures, and then they 0:06:11.600 --> 0:06:14.320 locked in the price for chicken McNuggets. And I loved 0:06:14.360 --> 0:06:18.320 really commodities then I love that story. It's so fascinating 0:06:18.360 --> 0:06:21.680 how a little bit of financial engineering and lo and 0:06:21.680 --> 0:06:25.160 behold you have a consistent price for chicken. It was cool. Yeah, 0:06:25.279 --> 0:06:28.520 and you did um dollar futures index. Was that with 0:06:28.800 --> 0:06:33.640 Paul Tutor Jones volatility and the dollar and then he figured, 0:06:33.800 --> 0:06:37.280 let's put together a basket and uh so we put 0:06:37.320 --> 0:06:39.520 together a basket. We designed it, how it would it work. 0:06:39.680 --> 0:06:42.640 We did the same thing with the CRB futures. It's engineering. 0:06:42.880 --> 0:06:47.159 You've got to understand engineering. You have to understand the mechanics. 0:06:47.320 --> 0:06:50.240 It's a fair basic fundamental thing whatever you do. And 0:06:50.279 --> 0:06:53.440 so we understood a lot about engineering. I put together 0:06:53.480 --> 0:06:56.720 those products. What about your role in the development of 0:06:56.880 --> 0:07:01.960 China's equity markets, Well, yeah, I into there. I started 0:07:01.960 --> 0:07:05.479 going nineteen eighty four to China, and uh because not 0:07:05.480 --> 0:07:08.160 not for business or anything, because it was an interesting place. 0:07:08.800 --> 0:07:12.760 Um and a matter of fact, the company that invited me, Siddek, 0:07:13.200 --> 0:07:15.920 was the only company in China that was allowed to 0:07:15.960 --> 0:07:20.400 deal with the outside world. They called it a window company. Anyway, 0:07:20.840 --> 0:07:24.120 as they started to in night nine, start to think 0:07:24.120 --> 0:07:27.760 about we need financial markets. There were seven people who 0:07:27.840 --> 0:07:29.520 were in a room and that it was sort of 0:07:29.560 --> 0:07:32.120 a dingy hotel room, and they had to start to 0:07:32.160 --> 0:07:34.920 think about the markets. And I got to know them 0:07:34.960 --> 0:07:37.520 and we started to think about how they would develop 0:07:37.720 --> 0:07:40.880 a stock market, a bond market, and so on. So 0:07:40.920 --> 0:07:43.000 I got to be a participant in that, and that 0:07:43.120 --> 0:07:47.240 was a blast. These people have become, you know, lifelong friends, 0:07:47.480 --> 0:07:52.920 so you know, since that time until now, we've been friends. 0:07:52.920 --> 0:07:55.480 And then they've gone on to develop the fabulous financial 0:07:55.520 --> 0:07:58.200 markets that are there and I'm still there. So it's great. 0:07:58.280 --> 0:08:00.720 You know what I like is I like meaningful work 0:08:00.720 --> 0:08:03.400 and meaningful relationships. I like work that I can get 0:08:03.440 --> 0:08:06.800 my head into and I'm having an impact that's great, 0:08:07.160 --> 0:08:09.880 and I love the meaningful relationships. If you could do 0:08:09.920 --> 0:08:12.000 this with people you like over a period of time, 0:08:12.360 --> 0:08:16.000 that's even the greatest reward. That phrase meaningful work and 0:08:16.080 --> 0:08:20.840 meaningful relationships comes up in Principles over and over, not 0:08:21.000 --> 0:08:24.560 just in the history but in the Life Principles part, 0:08:24.720 --> 0:08:28.680 and it seems to be applied in the Work Principles part. 0:08:29.280 --> 0:08:33.160 Tell us what led you to those two elements? Well, look, 0:08:33.440 --> 0:08:37.160 I want it. I mean personally, I want the meaningful 0:08:37.160 --> 0:08:39.520 work that I get excited about to be on a mission, 0:08:40.120 --> 0:08:42.760 and then I love the meaningful relationships. It's as much 0:08:42.800 --> 0:08:45.840 important to me as whatever business with success. And if 0:08:45.880 --> 0:08:48.520 you put those two things together, being on a mission 0:08:48.520 --> 0:08:51.520 with people who you love and that great mission mission, 0:08:52.000 --> 0:08:56.560 it's um double rewards. And then it also reinforces each 0:08:56.559 --> 0:08:59.840 other because if you're if you're doing in the meaningful 0:09:00.000 --> 0:09:02.640 work and you have the meaningful relationships, you can be 0:09:02.679 --> 0:09:05.680 tough with each other and you um, you know, you 0:09:05.720 --> 0:09:09.040 get the devotion. The people who work at Bridgewater, a 0:09:09.080 --> 0:09:10.720 lot of them who work there for a long time, 0:09:11.000 --> 0:09:13.280 they would never think of working anywhere else because it's 0:09:13.320 --> 0:09:16.200 like an extended family. You have to understand that money 0:09:16.240 --> 0:09:19.920 as a reward, UH, is not a very satisfying reward 0:09:20.040 --> 0:09:23.360 really in comparison to the meaningful relationships if you do. 0:09:23.520 --> 0:09:26.800 Studies have been done on happiness right, and they said, 0:09:26.840 --> 0:09:30.080 there's very little correlation between the amount of money that 0:09:30.120 --> 0:09:32.800 you have passed a certain basic point. Once the basis 0:09:32.800 --> 0:09:36.080 have covered, there's a diminishing returns, not much correlation. The 0:09:36.200 --> 0:09:40.880 number one thing in source of happiness across countries everywhere 0:09:41.360 --> 0:09:44.079 is a sense of community. So if you have both 0:09:44.120 --> 0:09:46.920 of those things great or So I wanted those meaningful 0:09:46.920 --> 0:09:49.920 work and reading for relationships, and then in order to 0:09:50.000 --> 0:09:53.480 have those, I wanted to be radically truthful and radically 0:09:53.520 --> 0:09:56.559 transparent with each other. Because if I'm going to have 0:09:57.120 --> 0:09:59.880 a relationship with you or the people around me, I 0:10:00.040 --> 0:10:03.480 need to have an idea meritocracy in which we are 0:10:03.960 --> 0:10:09.040 radically truthful and radically transparent. And that's how the culture began, 0:10:09.120 --> 0:10:11.920 and that's how what the culture is. You know, in 0:10:11.960 --> 0:10:15.760 a nutshell, the culture is an idea meritocracy in the words, 0:10:15.760 --> 0:10:18.640 the best ideas win out, UH, in which we're going 0:10:18.679 --> 0:10:24.280 for meaningful work and meaningful relationships through being radically truthful 0:10:24.440 --> 0:10:28.080 and radically transparent and that's been the key to the success. 0:10:28.559 --> 0:10:33.199 Let's talk a little bit about mistakes. You describe mistakes 0:10:33.240 --> 0:10:37.960 as opportunities to learn and improve, saying, the key to 0:10:38.080 --> 0:10:43.480 success in life is learning how to fail well. Discuss well. 0:10:44.200 --> 0:10:47.080 I think in order to be successful you have to 0:10:47.080 --> 0:10:50.120 do five things. Basically, First, you have to know what 0:10:50.200 --> 0:10:52.960 your goals your dreams are, and on the way to 0:10:53.000 --> 0:10:56.120 going after those goals and dreams, you're going to encounter 0:10:56.520 --> 0:11:00.840 your failures and your mistakes. A lot people think that 0:11:00.840 --> 0:11:04.640 that's painful. Uh, those are your learning opportunity. So I 0:11:04.720 --> 0:11:10.040 was saying pain plus reflection equals progress. In other words, 0:11:10.160 --> 0:11:14.600 reflect what would you have done differently. So first step goals. 0:11:14.880 --> 0:11:18.800 Second step problems on the way to goals, not tolering them. 0:11:19.120 --> 0:11:22.160 Third step, you have to diagnose those problems to get 0:11:22.160 --> 0:11:25.160 at the root causes. Many of those times, the root 0:11:25.240 --> 0:11:28.360 causes is you how you're handling it. So you've got 0:11:28.360 --> 0:11:32.520 to learn a lesson. Most people learn lessons through painful mistakes, 0:11:32.720 --> 0:11:37.480 So I associate painful mistakes with learning. Okay, so first 0:11:37.520 --> 0:11:41.480 goals problems. Then diagnose those problems to the root cause, 0:11:42.040 --> 0:11:44.840 make a design of what you're going to do differently 0:11:44.840 --> 0:11:47.240 In the future when the next one comes along. Those 0:11:47.280 --> 0:11:50.400 are the principles I wrote down those principles. That's what 0:11:50.480 --> 0:11:53.800 the book is mostly about, this collection of principles. So 0:11:54.640 --> 0:11:58.560 number four, design ways of getting around them. Number five, 0:11:59.160 --> 0:12:02.280 do those things pushed through the results. You keep doing 0:12:02.280 --> 0:12:04.360 this over and over and over again, you're going to 0:12:04.440 --> 0:12:08.679 be successful. I have another um little formula that basically 0:12:08.720 --> 0:12:14.240 means that if you have your dreams, plus you embrace reality, 0:12:14.280 --> 0:12:17.920 and you learn from reality, your painful realities, and you 0:12:17.960 --> 0:12:21.320 have enough determination so you keep learning, you will inevitably 0:12:21.360 --> 0:12:23.440 have a successful life. So those are the That's what 0:12:23.520 --> 0:12:27.360 I mean. The value in learning is from mistakes, because 0:12:27.400 --> 0:12:31.040 mistakes cues the fact that you learned something that that 0:12:31.200 --> 0:12:36.120 something is wrong. But you need quality reflection. And when 0:12:36.120 --> 0:12:38.400 I started, when I did this over a period of time, 0:12:38.679 --> 0:12:45.480 my whole attitude started to change. I began to view mistakes, problems, failures. 0:12:45.720 --> 0:12:49.040 I began to view them as puzzles that they were 0:12:49.080 --> 0:12:52.360 curious to me. And if I could solve the puzzle, 0:12:52.679 --> 0:12:55.320 I would get a gem. And the gem I would 0:12:55.360 --> 0:12:58.480 get would be a lesson or a principle of what 0:12:58.600 --> 0:13:01.000 I would do differently in the future. And I wrote 0:13:01.040 --> 0:13:04.439 that down. So a big thing for me, well for 0:13:04.840 --> 0:13:07.920 I don't know, twenty five years, is to write down 0:13:08.240 --> 0:13:11.920 the my principles every time I'm making a decision, writing 0:13:11.960 --> 0:13:14.959 down those principles. And then I found out I can 0:13:15.000 --> 0:13:18.080 convert those principles to decision rules, and I could have 0:13:18.120 --> 0:13:21.480 the computer help me make those decisions because it would reflect. 0:13:21.840 --> 0:13:25.160 And that changed my life. So one of the things 0:13:25.200 --> 0:13:28.600 you wrote that really stood out to me about a 0:13:28.640 --> 0:13:33.200 related topic, you you said you fear boredom and mediocrity 0:13:33.360 --> 0:13:36.640 more than failure, and the line was great is better 0:13:36.679 --> 0:13:41.080 than terrible, but terrible is better than mediocre. Is that 0:13:41.200 --> 0:13:44.720 related to this idea well making mistakes or is it 0:13:44.760 --> 0:13:46.600 really just I don't want to be bored I want 0:13:46.600 --> 0:13:49.360 meaningful work. Well, i'd say it's probably half and half. 0:13:49.400 --> 0:13:52.840 I mean, in other words, I want flavor in my life, right, 0:13:53.440 --> 0:13:57.200 you know, And I don't mind getting banged up a 0:13:57.200 --> 0:13:59.800 little bit on the way to learning. And I love learning. 0:13:59.880 --> 0:14:03.600 I love the evolution. So boredom is the thing that 0:14:03.920 --> 0:14:07.080 is the worst for me. So pain, I can, you know, 0:14:07.160 --> 0:14:09.840 I can deal with some pain. I find even the 0:14:09.880 --> 0:14:14.640 benefit of the pain. It's become almost like failure equals success. 0:14:15.160 --> 0:14:18.000 That's that sounds like a weird thing, fail little process 0:14:18.000 --> 0:14:21.280 in the middle, right, failure equal success. But because I've 0:14:21.280 --> 0:14:26.280 gotten re cued programmed, essentially, what that failure means is 0:14:26.360 --> 0:14:30.640 failure means learning, and that's exciting to me. And then 0:14:30.880 --> 0:14:34.280 it produces success, and that's exciting to me. And that 0:14:34.840 --> 0:14:39.200 changing my instinctual reaction, my need jerk reaction to failure 0:14:39.280 --> 0:14:41.520 gives me a more exciting life and gives me a 0:14:41.560 --> 0:14:44.280 more successful life. So let's talk a little bit about 0:14:44.320 --> 0:14:49.280 that pain and that radical transparency. You write about a 0:14:49.320 --> 0:14:54.520 memo that your staff gave you about quote, raise intractable 0:14:54.560 --> 0:14:58.160 people problem, and I'll spare the details, it's in the book, 0:14:58.560 --> 0:15:01.040 but they really call you out. They really take you 0:15:01.080 --> 0:15:05.720 to task for the way you're interacting with staff. How 0:15:05.720 --> 0:15:08.520 did this peer review affect you? What did this dude 0:15:08.520 --> 0:15:12.440 to impact that philosophy that you've developed. Well, I always, 0:15:12.560 --> 0:15:15.480 I always really wanted that that kind of feedback because 0:15:15.520 --> 0:15:17.960 I wanted to work with independent thinkers who would speak 0:15:18.040 --> 0:15:21.120 up just like I could, radically straightforward. But as the 0:15:21.120 --> 0:15:23.360 company got to get a little bit bigger, and I 0:15:23.440 --> 0:15:25.560 think it was probably like maybe we had eighty five 0:15:25.640 --> 0:15:30.920 people or so then and that straightforwardness was making people 0:15:31.080 --> 0:15:35.720 feel comfortable uncomfortable and I didn't know that. So they 0:15:35.760 --> 0:15:38.480 called me out to dinner and they and they give 0:15:38.520 --> 0:15:40.920 me this memo and they explained to me that I'm 0:15:40.960 --> 0:15:44.960 having this effect of, I don't know, demoralizing people, upsetting people. 0:15:45.360 --> 0:15:47.600 And I didn't want to have that effect, like these 0:15:47.640 --> 0:15:50.200 are the meaningful relationships I wanted to have it. So 0:15:50.440 --> 0:15:53.400 it paused me um to make me think, well, what 0:15:53.480 --> 0:15:56.440 do I do? That's an intractable problem. Am I gonna 0:15:56.480 --> 0:15:59.960 not be as straightforward with them? Can't they be straightforward 0:16:00.080 --> 0:16:02.800 with me? And how am I going to change that? 0:16:02.840 --> 0:16:05.840 Let me interrupt your sect? You're the boss. How these 0:16:05.840 --> 0:16:09.080 people who are feeling wow? Ray really ripped me a 0:16:09.080 --> 0:16:12.040 new one today. Did you really feel they can come 0:16:12.080 --> 0:16:14.400 up to you and say, hey, Ray, even though you're 0:16:14.440 --> 0:16:16.840 the founder and boss, here, here's what you're doing wrong 0:16:16.880 --> 0:16:19.200 and you better cut it out well. In the markets, 0:16:19.640 --> 0:16:22.440 and as an entrepreneur, you've got a bet against the 0:16:22.440 --> 0:16:26.360 consensus and be right. Otherwise you're not any value in 0:16:26.360 --> 0:16:29.920 the markets. The consensus is built into the price, and 0:16:29.960 --> 0:16:32.200 you've got a bet against it and be right. You 0:16:32.240 --> 0:16:35.760 have to be an independent thinker, and you're not sure 0:16:35.800 --> 0:16:39.479 that you're going to be right. So for always, Uh, 0:16:39.560 --> 0:16:41.560 you know, I've gotten my head handed to me enough 0:16:41.640 --> 0:16:45.120 times that I'm scared about being wrong, and as a 0:16:45.200 --> 0:16:48.720 result of that, I want to work with independent thinkers. 0:16:48.760 --> 0:16:51.680 These are the people I respect who can then argue 0:16:51.720 --> 0:16:54.239 back and forth and to try to raise our probabilities 0:16:54.240 --> 0:16:56.320 of being right. So that's part of the process, right, 0:16:56.880 --> 0:17:01.440 and so um that that type of straightforwardness, um is 0:17:01.480 --> 0:17:04.679 not uh easy for people, but that's the way I've 0:17:04.680 --> 0:17:08.399 always operated, That's the way we've operated, and we've institutionalized 0:17:08.440 --> 0:17:11.520 operating that way. But at the time, some people found 0:17:11.560 --> 0:17:16.639 really that uncomfortable. Um, So then we go back. Um, 0:17:16.680 --> 0:17:19.440 I was, you know, in a position where I didn't 0:17:19.440 --> 0:17:21.760 want to do that and I and I didn't also 0:17:21.840 --> 0:17:23.800 not want I didn't want to stop doing it, So 0:17:23.840 --> 0:17:26.720 what should I do? So I thought, I reflected on that, 0:17:27.080 --> 0:17:29.679 and I came up with the idea of let me 0:17:29.800 --> 0:17:32.680 just sit down with the people and decide how are 0:17:32.760 --> 0:17:35.480 we going to be with each other. For example, if 0:17:35.520 --> 0:17:39.080 I have critical thoughts about you, should I tell you 0:17:39.200 --> 0:17:41.560 or should I hold them to myself? If you've got 0:17:41.560 --> 0:17:45.160 critical thoughts about me, should you tell me or should 0:17:45.160 --> 0:17:50.720 you hold them to yourself? If everybody intellectually really says no, no, 0:17:50.840 --> 0:17:54.080 you want to know about those things, right, But emotionally 0:17:54.560 --> 0:17:57.880 then they don't. Uh, they don't like it right. And 0:17:57.960 --> 0:18:02.560 what we discovered really is the two use in everybody, 0:18:02.600 --> 0:18:06.919 there are two use. There's this intellectual, thoughtful you that 0:18:06.960 --> 0:18:09.400 would like to make decisions a certain way, and then 0:18:09.400 --> 0:18:12.639 there's an emotional, subliminal you that you don't even understand 0:18:12.760 --> 0:18:16.080 very well, and it's having a conflict. And so by 0:18:16.160 --> 0:18:19.080 making it very clear with each other, we could establish 0:18:19.160 --> 0:18:21.919 ways of being with each other. That really led me 0:18:22.000 --> 0:18:25.040 to write down a lot of my work principles. In 0:18:25.119 --> 0:18:27.040 other words, Okay, how are we going to be with 0:18:27.080 --> 0:18:29.760 each other? I wrote those down in words, we put 0:18:29.800 --> 0:18:33.119 those together, and then we moved forward. So we had that. 0:18:33.240 --> 0:18:38.400 With that, we established what our unusual way of our operating, 0:18:38.400 --> 0:18:43.840 our unusual culture was with this thoughtful disagreement, this idea meritocracy. 0:18:43.920 --> 0:18:46.840 And it was like a contract. And people realized that 0:18:46.880 --> 0:18:49.880 the struggling wasn't between me and them really as much 0:18:49.880 --> 0:18:52.800 as it was between them and them. There their emotional 0:18:53.040 --> 0:18:55.800 and their intellectual and that changed everything. So the writing 0:18:55.840 --> 0:19:00.440 down the principles changed everything and the realization that everybody 0:19:00.480 --> 0:19:04.000 has those struggles between their thoughtfulness and what they want 0:19:04.080 --> 0:19:07.000 and their emotional self and then you work on getting 0:19:07.000 --> 0:19:09.399 through that. And we found that typically it takes about 0:19:09.440 --> 0:19:12.560 eighteen months to get to a place of, you know, 0:19:12.640 --> 0:19:15.480 practicing this and getting comfortable with it. In order to 0:19:15.560 --> 0:19:19.080 have an idea meritocracy, you have to do three things. First, 0:19:19.280 --> 0:19:21.600 you have to put your honest thoughts on the table 0:19:22.160 --> 0:19:25.520 for everybody to see, holding back, no holding back everybody 0:19:25.560 --> 0:19:28.440 and everybody puts them on the table. Great, Okay, a 0:19:28.520 --> 0:19:31.000 lot of people won't do that, but when you get practiced, 0:19:31.359 --> 0:19:32.919 you don't want to do it any other way. So 0:19:32.960 --> 0:19:35.600 you put your honest thoughts on the table. Second thing 0:19:36.160 --> 0:19:39.080 is you have to know the art of thoughtful disagreement, 0:19:39.400 --> 0:19:42.960 the art of thoughtful distance and challenge right in other words, 0:19:43.600 --> 0:19:48.200 to view that as a curiosity that you also might 0:19:48.240 --> 0:19:50.960 be wrong if there's disagreement, How do you know the 0:19:50.960 --> 0:19:54.800 wrong party isn't you? So to separate oneself from one's 0:19:54.840 --> 0:19:57.800 opinions and to be able to have a quality back 0:19:57.840 --> 0:20:01.040 and forth motivated by curi city and the fear of 0:20:01.040 --> 0:20:03.119 being wrong, so that you can take in and learn 0:20:03.520 --> 0:20:08.440 that understanding the art of thoughtful disagreement is invaluable. So 0:20:08.520 --> 0:20:11.320 you so that's the second thing, put your honest thoughts 0:20:11.320 --> 0:20:15.000 on the tables. The first, UM have understand the art 0:20:15.000 --> 0:20:18.240 of their thoughtful disagreement. We have protocols about how to 0:20:18.280 --> 0:20:20.679 do that. And then at the end of the day, 0:20:20.760 --> 0:20:23.040 when there's um you have to make a decision and 0:20:23.080 --> 0:20:27.320 you still have disagreements, to have protocols to get around 0:20:27.320 --> 0:20:31.280 those disagreements that you consider to be fair. I'd say 0:20:31.320 --> 0:20:34.960 this is essential for me in all my relationships. So 0:20:35.119 --> 0:20:38.719 it would be relationships with family, with friends, UM, you 0:20:38.720 --> 0:20:42.439 know I need them to be straightforward with me. I 0:20:42.480 --> 0:20:45.920 gotta be straightforward with them. We have to know how 0:20:45.920 --> 0:20:50.000 to have thoughtful disagreement. And then everybody in any relationship 0:20:50.720 --> 0:20:54.400 has to have protocols for getting around their disagreements if 0:20:54.400 --> 0:20:56.520 they still remain. If you and your wife are having 0:20:56.520 --> 0:20:58.919 a disagreement on something, you still have to have a 0:20:58.920 --> 0:21:02.600 protocol for getting around out it. So by organizing that 0:21:02.720 --> 0:21:05.280 and making it clear, we were able to have this 0:21:05.359 --> 0:21:11.000 idea meritocracy, and everybody believes the idea meritocracy is then fair. 0:21:11.200 --> 0:21:14.520 Imagine how it is different at every other place, you know, 0:21:14.600 --> 0:21:17.800 the boss tells you what it is. People bottle people 0:21:17.840 --> 0:21:21.440 bottle it up. Okay, they think, oh, he's making a mistake. 0:21:22.000 --> 0:21:25.080 He would benefit from having that feedback. But they have 0:21:25.200 --> 0:21:28.160 to bottle it up with which frustrates them. Therefore they 0:21:28.200 --> 0:21:31.199 can't have a real ownership mentality and the organization that 0:21:31.280 --> 0:21:35.760 they're with, and it undermines their relationship. That straightforwardness has 0:21:35.800 --> 0:21:39.480 been fantastic in creating better work and better relationship. So 0:21:39.680 --> 0:21:42.000 that's been the secret source. So let me do a 0:21:42.000 --> 0:21:46.840 little radical transparency with you. In the book, you discussed 0:21:46.880 --> 0:21:51.199 two things. We discussed the people problem and the social issues. 0:21:51.280 --> 0:21:54.560 You talk about bipolar running in the family. And as 0:21:54.600 --> 0:21:58.240 I read those two in sequence, I immediately said, Hey, 0:21:58.400 --> 0:22:00.280 I wonder if Ray is a little bit on the 0:22:00.280 --> 0:22:03.440 spectrum himself. So let me ask you. Have you ever 0:22:03.520 --> 0:22:08.200 considered you're an independent thinker. Your perspectives are unique. You're 0:22:08.320 --> 0:22:11.639 very different from the way the average person in finance operates. 0:22:11.640 --> 0:22:13.920 Have you ever thought, hey, maybe I'm a little a 0:22:14.000 --> 0:22:17.440 little different. Well no, but look, I'm sure i'm a 0:22:17.440 --> 0:22:20.000 little different than you know. Who knows, I'm probably crazy 0:22:20.000 --> 0:22:22.679 in a bunch of different ways. I've never been Uh, 0:22:22.840 --> 0:22:25.760 nobody said that, but you know, like who knows. We 0:22:25.800 --> 0:22:28.879 all have different spectrums. The thing I learned about it 0:22:28.920 --> 0:22:31.919 is there's always a range of thinking. So think of 0:22:31.960 --> 0:22:35.480 it as a thinking spectrum. And I don't know where 0:22:35.520 --> 0:22:38.440 I am on that thinking spectrum. But some people, for example, 0:22:38.600 --> 0:22:42.080 we'll see big pictures, some people will see detail. Some 0:22:42.160 --> 0:22:46.159 people are creative, some people are reliable. One of the 0:22:46.160 --> 0:22:49.960 things we've learned here is that everybody sees things differently, 0:22:50.280 --> 0:22:53.480 like seeing on a spectrum of of seeing, and that 0:22:54.320 --> 0:22:58.359 knowing how one thinks. UM, I tend to be more 0:22:58.400 --> 0:23:00.560 of a big picture thinker, to to be more of 0:23:00.640 --> 0:23:03.879 a you know, original thinker, that kind of thing. But 0:23:03.960 --> 0:23:07.640