This interview with Ed Hess is full of amazing insights but I don’t know if you’ll read it because a) it’s long and we live in a world of increasingly short attention spans and b) it’s an actual conversation, the responses can be hard to follow and you might have to dig a little for clarity. If you’re willing to put in the work, however, I think you’ll come away from this more knowledgeable.
Ed is the author of the best book I’ve ever read on learning, Learn or Die: Using Science to Build a Leading-Edge Learning Organization.
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INTERVIEWER
I loved your book, so I’m really excited to do this interview with you. I thought it was the best book that I’ve read on the subject of learning.
HESS
… In researching and writing the book, it was also a transformative process for me in the sense of what I learned and had to come to grips with, even though I’d had a very successful educational business, academic life.
The last five years of working on that book were eye-opening, mind-boggling and humbling.
INTERVIEWER
I have so many questions for you. First off, thank you so much for your generosity in giving this interview, I really appreciate your time.
Let’s talk briefly about your forthcoming book, called, “Learn or Die.” Can you give us an overview of the book and why you felt compelled to write it?
HESS
Yes, the book really has two important purposes in answering two questions.
Based on the science of learning and everything the research over the last 20, 25 years has shown, how does one become a better and faster learner, and how does one build a team or an organization that continuously learns better and faster than the competition?
Why is that so important? We live in a very globalized world that’s driven by technology, and the projected technology advances over the next 10 years are going to be really metamorphic.
We live in a time of high velocity change. Change requires human and organizational adaptation, and that means it requires learning. I’ve come to the conclusion that continually learning better and faster than the competition may be the only sustainable competitive advantage individually and organizationally.
Especially in the business world, the next business revolution is going to be a learning revolution. That’s why I feel passionately about the book and its purpose, but also the timing of it. Our context demands that we bring the science of learning into our lives, individually, into an organizational life.
INTERVIEWER
What do you mean by the next revolution in business is going to be a learning revolution?
HESS
Business is going to be continually transformed by technology, and artificial intelligence, smart robots and nanotechnology, the Internet of things, 3-D printing. All of this is going to be a huge impact on how business is done, and who does business.
The business of the very near future, in 10 years, if you look how a business is going to be staffed, it’s going to be some combination of smart robots, smart machines and humans. The human component of it has got to be able to perform or do things differently, or do things better, or do things that machines can’t do.
If you think about that, what is that? That is critical thinking, innovative thinking, emotional and social high engagement with other humans.
If you think about those activities, they’re fundamentally learning activities. We’re continually learning, so I think whether you’re an operationally excellent business model or an innovating business model or a combination, learning underlies both. Operational excellence can’t get better, faster and cheaper unless you change.
Underlying change is trying new things and seeing if they work in adapting and learning. The innovation basically comes as you well know, you’re an expert in it, comes from integrating experimental learning.
Learning is integral now in business, but it’s not emphasized in organizations. If you will, are not resigned in general to maximize or optimize human learning. That will be the focus of many companies. You see that right now in some leading edge companies such as Pixar, WL Gore, largest hedge fund in the world Bridgewater Associates.
INTERVIEWER
.. you have this contradiction. On one hand, you have organizations that need to compete in this ultra competitive world where competitive advantage is eroding and you need to be operationally more excellent than your competitors. Then on the other hand, you have to innovate and innovation is failure and it involves more money sometimes, and it involves trying and experimenting on things. Those two things seem in conflict with one another.
HESS
They are in conflict, they’re in, if you will, 99 percent defect free. … These innovation experiments fail about 90 percent of the time.
You are quite correct, they’re in direct conflict. How do you basically create an environment where you, in fact can be engaged in both, but use different processes and different tolerances for failure?
Your question is a great question because over the last seven years I’ve spent a lot of time teaching executives and companies and consulting with companies that have been dealing with this question.
My answer to that also led to the importance of this book, my answer that I wrote about in my last book that I did with Professor Jeanne Liedtka, “The Physics of Business Growth”, I put forth a theory or rationalization if you will, that the way to unify operational excellence and innovation in an organization is to have a learning culture, because learning underlies operational excellence and it underlies innovation.
That’s why I put in my book the chapter on UPS which is a world class operationally excellent company, so readers could compare how they create that environment of constructive dissatisfaction in high employee engagement.
Relate that, if you will, to IDEO, WL Gore, Bridgewater, just underlying the differences is, is having different processes.
You have different processes, but also the difference is having a different tolerance for failure and being able to give people permission to live that innovation, et cetera.
Underlying both operational excellence and innovation is the two foundational beliefs, or the two foundational processes. Number one, underlying innovation and operational excellence, go back to root cause analysis or the five why’s. Unpacking assumptions, good digging, the why, why, why, is underlying both processes.
Going all the way back, if you will, to the Toyota method, underlying both processes is the fact that mistakes are to be illuminated. Stop the line, pull the cord, Toyota. Mistakes are to be illuminated, and mistakes are opportunities to improve, or opportunities to learn.
Yes, they’re in direct conflict. But if you really dig deeper and use learning as the unifier, I believe you can make a compelling argument that they can and they do exist in some organizations, but they can exist in more organizations if you use learning as the environment. Does that make any sense to you?
INTERVIEWER
Yeah, totally. Do you think that organizations have this conflict with incentives, whereby a learning organization sounds great, but it’s going to take a while to set up, and I know that in the meantime, I’m measured on these very short term quantitative objectives, which are usually oriented towards fewer defects, less variance and things like that?
Although people would agree that we want to set up a learning culture, and if you sat everybody in an organization in the room, they’d all say yes. Why doesn’t that ever happen, then? What are the impediments to enacting that?
HESS
Another good question, and a complex question. Let me approach it this way. A learning culture is only one part of the proposal. That’s why I write and emphasize a learning system.
As you know from reading my book, I’m very behavioral-oriented. I start with what behaviors we want to drive and say, let’s create a system that’s going to drive those behaviors, and what are the parts of the system — it’s culture, leadership behaviors, measurements, rewards, processes, HR policies.
If you go back to it, putting in a culture is not enough unless you define the behaviors you’re trying to get, and unless you measure and reward. If you want to measure and reward learning behaviors, if you want to put them in, it’s more complex.
You’re an expert, so I know you weren’t saying this, but I talk to business people. The easy way is to go, quote, “put in a culture,” and talk about it. Nothing really changes with talk. You’re back to those two business maxims. You get what you measure, and if you measure and reward it, you really get a lot of it.
You’ve got to start at the bottom and say, “What type of behavioral changes are we trying to get here?” It’s interesting, and that’s why the Intuit story is in the book.
You take Intuit and look at, and they’ve been now on an over seven-year journey. Really putting in a learning culture in the sense of making experimentation, and small, fast, cheap experiments their basic business model, but also empowering line employees to do experiments even if their bosses don’t like the experiments.
It’s been a huge success, but the reason it’s been a huge success is a couple of things. They got leadership involved, and they focused on changing leadership behaviors and leadership mindsets about learning, and about power and hierarchy.
If you look at a lot of great learning organizations, whether it is Intuit, or the ones I always talk about, Pixar, IDEO, WL Gore, Bridgewater, UPS, there’s always hierarchy. But hierarchy as an elitism, is de-emphasized, and there is a real push for highly engaging employees and leadership humility, and intellectual humility.
What you’re really talking about here, if you think about the book, is changing the organizational mental model. To do that, you’ve got to change leaders’ mental models. Basically, in order for change to occur in the company, you’ve got to have leaders model the behaviors you want.
If you think about in my book, when I have the high performance learning organization checklists that I put in the book, the first thing on the checklist. Does the CEO own the learning culture and walk the talk? The second thing, has the organization put in place culture, structured leadership behaviors, HR policies, measurement and rewards to enable and promote learning behaviors?
If you don’t approach it from a package, your next question is, “Well, it’s very hard to do this.” Yes, and that’s why you’ve got to start small in the sense you can’t roll out 22 behaviors. You’ve got to start small and figure out and prioritize what you are really going to start working on.
What Intuit started working on was, “Let’s use experimentation as a way to change the culture and change the behaviors, and basically teach learning, teach exploration, teach root cause analysis, teach stress testing of ideas, and devaluing real power and hierarchy.”
INTERVIEWER
I think that’s key. A lot of times, organizations want to implement something, so they come in and they take the whole package, and they try to implement it. It’s a lot easier to start with something small, but only, in my mind, if you have an understanding of why that works somewhere else.
HESS
The other thing we have to take into account is the context of, at least in the United States, the public markets and the obsession with short-termism and quarterly earnings, and the high volatility of the public markets in the United States with the average tenure of public CEOs being less than five years, the high turnover of share ownership and the volatility of corporate existence, the short lifespan of organizations today.
If you think about it and look at where the great learning and innovation is going on, they’re going into where it’s happening the easiest, if you will. It’s private companies, or it’s public companies that have dual classes of stock, where the founders or founder’s family have the control positions, voting control or strong voting positions in a sense to be able to ward off the immense pressures of short-termism in our capital markets.
That’s why I write in the epilogue that if we really want innovation, you really want more learning, sometimes the untouched has got to basically enable it, too.
INTERVIEWER
I’ve always thought that was one reason for Berkshire Hathaway’s remarkable success: the fact that Warren and Charlie controlled 40 percent of the stock for a long period of time. They were able to take these counterculture or counter-organizational moves where they would sit with cash for a long period of time and not do anything. There was no activist that could take charge of the company and force them to pay a dividend. They set their incentives up, even without that dual class of shareholders, to do that.
HESS
Yes.
INTERVIEWER
Let’s go to the book for a second. What is learning, and does it change as we get older?
HESS
That’s an interesting question. If you define learning as the incorporation of experience and conflicting data into your existing mental models, or learning is the transformation, enhancement of your mental models.
The older you get, and the more successful you are…This is not science. This is a hypothesis. The more successful you are and the older you get, changing your mental models, being open-minded, slowing down your thinking and subjecting it to stress testing by other people.
Is it human for it to get harder? Probably. I haven’t done a lot of research into the age issue. There is tangential research which basically shows that arrogance is a huge inhibitor to learning. Arrogance comes also from success in positional authority.
Let me give you an example that’s very interesting. My two young granddaughters, when they were three and five, we would have conversations where the word they used the most often was why. In fact, I remember a conversation where with the youngest one, when I asked her a question, I said, “Could you please not answer everything with why?” Her answer was, “Why?”
They’re 8 and 10 now, and they rarely use the word why. If you think about what happens as we go into the education system, as we age and go into the workforce, instead of being about curiosity and questioning, the whole system changes to being about being right, getting good grades, not making mistakes.
All of this is part of the answer to your question. In most organizations, you become successful for doing something very, very well. Therefore, you become really focused on avoiding mistakes and avoiding taking risk, and not losing what you have. All of that builds up, makes learning hard.
INTERVIEWER
That relates to one of the stories you tell in the book, which was during the first 20 years of work experience, you became an expert at what you call speedy thinking. You were right often enough to prosper and didn’t think much about thinking.
You even mention that the speed of your thinking was a competitive advantage. You thought you were a good thinker and you thought you had all the right answers but then something happened …
HESS
A couple of things happened all at the same time. One involved my emotional intelligence, and one involved, if you will, my first big business failure. The third involved, if you will, being in the final two slots for a wonderful CEO position, and being told that I was not getting it, and the reason why (Hess elaborates on this in the book). It was a combination. Two of the events, my first big business failure and the emotional event, happened in the same week.
In a nutshell, I evolved my first 20 years in the business world as a highly effective, I will call it machine, in the sense that I was very successful. I had great teams, but I always told my teams that, “Look, we’re going to do things right. We never cross the line. I will never ask you to do something that I wouldn’t do. We’re going to be high performance, but I don’t have a lot of time for chitchat. You perform for me. I’ll take care of you. I’ll get you development. I’ll get you training. I’ll get you promoted. I’ll help you go to wherever you want. That’s the quid pro quo. You perform well. I’ll help you be all you can be.”
It’s very similar to what Reid Hoffman writes in “Alliance.” I don’t have time for chitchat. Shane, don’t bring your personal life to work. I hope things are well with you, but football, kids, family…Let’s just work.
Emotionally, I became very focused on and consumed by getting things done and stress at home and in my marriage. I was not a good listener. I wasn’t empathetic. My wife wanted to talk a lot of things out, and I kept wanting to interrupt, and let’s get to the bottom line and solve the problem. She was very interested in the process, and being listened to and respected as to how she was thinking through it and all of this.
That led to such unhappiness on her part that she told me one morning at breakfast that she needed a separation. I’m not sure this was in the book, but it is true. I teach this, I tell students this. I heard her. It was upsetting, but I said to her…It’s embarrassing to admit this, but I did. This just tells you how bad I was, how much work I really needed.
I said to her, “This is very important, but I’ve got a couple of meetings. Can we talk about it when I get home?” Instead of saying, “We’ll pick up the phone and cancel those meetings, delay those meetings and have a conversation.” I in effect told her my meetings were more important than her wanting to talk about needing a separation. I came home that night, and she was gone. That was huge.
Later that afternoon, I got a call from my brother. We had invested some money in a company. Basically, the call was that something’s gone wrong, I need a million dollars. I in effect lost my first million in business. That was a time that a million dollars was a lot of money in the business world. It’s a lot of money to me and every individual today.
In one day, I took my first business loss, and I thought I was really good in business, and I took a huge human loss. Both of which I had to learn from, which I did. As I write in the book, my wife and I reconciled. We’ll celebrate next month our 33rd year of marriage.
I’m still a work in progress. It took a huge wakeup call for me to slow down and begin the process of being emotionally engaged, suspending judgment, learning to be intellectually humble. That also along the way led me to start being much more open to stress testing my thinking.
Writing this book took all of that even to a much, much higher level. Researching and writing the book made me realize that I can even be a better thinker. Into the last three years, I think I have made the most progress I have made in my life in quieting my ego and being much more open-minded and changing my language.
On daily basis thinking about how I’m thinking, and thinking about how I’m relating, and trying to improve on a daily basis how I think and how I relate, and how I engage in learning conversations. Longwinded answer. As my little granddaughter would say, TMI, too much information. [laughs]
INTERVIEWER
Not at all. That’s a very personal story, and it clearly had a major impact on your life. When I hear you tell it again, I wonder how you changed. You come to this moment where you realized something needed to change and you created it but what did this process look like? How did you go about slowing down and evaluating your thinking, and listening more to other people, and being more humble? How did you bring about this change? I imagine it didn’t happen overnight.
HESS
No, it takes years. The first thing it took, I realized that I needed, just as I write in my book, and just as Daniel Kahneman has written, it is very, very hard for anyone to, if you will, evaluate or be critical of one’s own thinking. That’s why all of this learning stuff is a team activity that I write.
I sat back and I said, “Hmm, I need some help.” In my normal anal-compulsive way, I spoke to a lot of people, and a lot of executive recruiters that I trusted, and a lot of executives, and found a person who everyone agreed was one of the best executive coaches, and was trained. She was a psychologist, psychiatrist, and executive coach. She was a graduate of Columbia Medical School.
I went to her and explained my issue. She basically helped me understand where all of this came from. As I write in my book, it all came from back to my elementary school days.
In my elementary school days, I learned to be the person who sits in the first row. I was a kid that was most likely to succeed and all that kind of crap. I was a kid that sat on the first row, and was the first one waving his hand to answer the teacher’s questions. I performed for gold stars and A’s.
All of that started, but understanding that and understanding that behavior, and understanding my niche, too, and the home environment in which I grew up, which I write about in another part of my book, where I’m very thankful to my parents.
I had loving parents who sacrificed, and made really everything possible in my life, but my home environment was not a real emotional environment. I never remember either my mother or father ever saying they loved me. I never remember being hugged or anything.
That happens to a lot of kids, but it was just saying emotions were not on the table. It was what did you do, and I earned love and respect at home by getting A’s, by performing. I became a high performer, and all of that carries.
Understanding all of that goes back to what happened. My counseling sessions basically is what my friend Robert Kegan from Harvard in “We Need to Change” writes about, and I talk about his miscellaneous book in my book. I had to basically get down and unpack my mental model that was underlying why I was performing this way, because I was performing that way because it was producing good results for me.
Underlying that was a big assumption that if I wasn’t the first one with the answer, if I didn’t interrupt my wife and solve the problem, she wouldn’t love me. I defined that as helping. She defined that as disrespect. What I had to learn was that by listening and humble inquiry, instead of solving problems, I had to learn that if I don’t have the answer, I had to learn that saying I don’t know. I had to learn by quieting myself.
I had to learn, and that takes time. I had to learn through experience that I still could be successful doing those things. In fact, I would be more successful. I wrote about that in my book. That when I started changing in my workplace and putting in new behaviors, the amazing thing is that my team performance went off the charts. It went from high to supersonic.
It was amazing, because all of a sudden, it was like I released something inside of people. They felt more cared about and more engaged. The same thing happened in my personal relationships and friendships. The answer to your question is no. It’s never over. I’m working on it. This all began for me, this huge transformation, in 1988, ’89. This is umpteen years later. It’s 16 years later, and I’m still a work in progress.
You’re a great learner. If you look at what you do and the service you provide to the world, you’re out there. You are curious. You’re out there, and you’re testing and you’re critiquing and you’re learning. The fact is that if we were to talk 20 years from now, you would be a different person in many ways than you are today.
INTERVIEWER
I hope so. I think we all evolve into what we’re learning and focusing on. Like you said, what gets measured gets done a lot of the time. When you start really critically evaluating yourself in the context of your goals and objectives and how other people feel, you subjectively start to measure that. That’s one way that you can change.
You talk in your book about metacognition, which is the process of managing how we think, and focusing on that helps us understand what strategies are likely to be effective in various circumstances.
How do we consciously recognize situations where we need to move from maybe a habit and system one thinking to system two thinking, which is more reflective?
A great example would be your conversation with your wife that morning at the table. How do you in the moment grasp that your default is to say, “Oh, can we reschedule this conversation for later,” and move to, “No, this is really more important,” which is thoughtful? You’re moving from an immediate habitual response. How do we go about doing that?
HESS
There is no easy answer. There are some ways to approach it. If you can start with the whole area and the research that’s being done in mind focus, and the ability, if you will, to — this even goes back to work at MIT, and the Shine and Humble Inquiry, and the work of Isaacs in dialogue — the ability to be in the moment in a conversation, and to slow down and assess.
If you go back also to the Bridgewater chapter and think about how they start a meeting, they start a meeting by defining the purpose of the meeting, what type of meeting it is and what process is going to be used in the meeting vis-a-vis the conversation or the discussion.
If you’re in a one on one situation, you can do that. When you go into a business meeting, you’re not in charge. But you can do that to yourself. A tool that I have found helpful that I talk about in the book and it’s not unique. It’s not innovative. It’s called mental rehearsal, and mental replay.
What I did back when I was in the real world, I would look at my day and, if you will, visualize my day before my day started. Take 15, 20 minutes and think about what was on my calendar, and think about what type of meeting that was going to be.
To think about, if you will, if you have more meetings which are relating, what my objectives were and who I wanted to get involved, and who I wanted to hear from, and prime myself for slowing down and letting the process evolve. Not chaos, but having a mental game plan. Not controlling, but a mental thinking game plan as to how to approach it.
Most importantly, the thing that helped me for years was what I call mental replay. On the way home or in a quiet time that evening, actually closing my eyes and replaying key meetings, and basically grading myself, and writing down. I didn’t call it a journal. I kept a legal pad, but it’s like a journal. Writing down what I did, what I would do differently, and how I could improve.
It’s interesting. For years, I would basically grade myself. Not only subjectively, but looking at the results of my behavior, other people’s behaviors, other people’s reactions. If you think about it, you can tell from my book and you can tell from my talk, I’m really big on trying to look at something from various angles.
If you really go look, if you go back to the Bridgewater case and Ray Dalio, there’s a unique individual who built the largest and arguably most successful hedge fund in the world. If you go back to his methodology from the time he started his business in his apartment in New York, he wrote down each day his decision about each trade, why he made that trade, and what were his assumptions, and he wrote down the results. The thing about it is he was using thinking rehearsal, or mental rehearsal.
You’ve got to have some processes that slow you down to where you’re thinking about how you think, and thinking about how you relate. Just saying that you’re going to do it is not enough. Good intent is not enough. It works, and everybody that I’ve worked with or talked with that has tried some of these techniques in my book, they work.
If you go to Gary Klein’s work and his visualization on his tool, if you will, that he puts out, how experts make decisions, and the examples that I use in the book of the fire chief, you go in. You assess. You recognize. You come up with a conclusion, but you train yourself to stop. Is there anything in the environment, anything in the context that is different, unusual, an aberration? Anything that I notice that may require some modification?
You’re doing that, if you will, cognitively. But also, if you will, the emotional or the intuitive reaction. You build in this, “Stop, reflect.” It could be less than a minute. It could be two minutes, reflect time. You stop the autopilot.
Again, the questions you ask are very good. It’s very hard to answer in 30 seconds, or even a few minutes.
INTERVIEWER
That’s kind of incredible. It sounds like you come up with a process by which you systemize these gates almost, where you slow down just for a second to double check what you’re doing. That’s really fascinating.
HESS
The other thing I can’t stress enough is the mental rehearsal, and keeping the journal. Just by doing that, grading yourself in the sense of, “Where can I improve? What happened today? What would I do differently in how I think? What would I do differently in that conversation as to how I relate?”
Over years of doing this, it comes back to, at least for me, to two related things, intellectual humility and quieting my ego. Because if I can quiet my ego, I can listen better. I can be more empathetic. I do suspend judgment. I can inquire. I can actively consider other views. Much of this is a discipline. Much of this is psychological.
INTERVIEWER
Speaking of psychology, one interesting thing from your book was that you spent time in these learning cultures, or models of various aspects of what you talked about for your book.
You said high performance learning organizations are a function of the right people, the right processes, and the right environment.
Then you went out to these workplaces and you sat in them, and you immersed yourself in these cultures.
What I found the most interesting was the Bridgewater experience, where you went and spent several days at this company that is incredibly unique and so different from anything I’ve ever read about before.
Can you share some of your experience with us?
HESS
It is very unique, and it is different. Not only did I go and spend time inside, but what was interesting also was the prep time.
When I was talking with Ray Dalio about doing this, he very up front said, “I’m going to lay out one condition.” I said, “OK, what is it?” He said, “I want you to agree to take the role of a new recruit coming to join Bridgewater as an employee. I’m going to send you a Bridgewater iPad, and you will basically watch over 10 hours of various films and answer questions, and get graded on your questions, to immerse yourself before you come in having some understanding of the Bridgewater way.”
He said, “In addition, to help you prepare, I’m going to send you lots of other stuff that, da-da-da.” It was a structured and planned immersion. It’s a fascinating place. It vets wonderful people.
You know from my book they allowed me to use quotes and tell their stories. They’re stories that made for change. Genders can sometimes change, too. They’re very compelling stories about how this transformation took place, what Ray calls getting to the other side.
It’s somewhat also analogous to my studies with the United States Marine Corps. As I write in the book, I had the Marine Corps transformation process, where a general once phrased it this way to me. He says, “Take very average people and put them in the most difficult environments and they perform consistently exceptionally well.”
Why? Because of how they, if you will, how they’re trained to think, behave, and the values. When you look at Bridgewater and you look at any organization – whether it’s UPS or someone like W. L. Gore or Pixar – all four of those organizations and the Navy SEALS or the Marine Corps or the Special Forces or the US Army, they all have strong cultures and they all have strong process. They all have a similar, what I call leadership model that is very, very humanistic and people-oriented. I do a lot of this inside companies.
You know. You’ve been around the block, too. There’s a lot of people who talk the talk that don’t walk the walk. I had read Bridgewater’s management principles. I’d used them in my classroom for a couple of years and got a surprising negativity about it all from my students. That also happened when they were used in the Harvard class, which only piqued my interest.
When I went in there and saw it, sat in meetings, and watched the process happen, where people’s thinking was challenged and there were in-sync conversations which were trying to get to the bottom of why certain things were not working, whether it was a process or whether it was a thinking pattern or whether whatever.
Watching that happen, what he writes and what I write is the reality of what they get. The interesting thing is the transformation process. If you think about a firm like Bridgewater, it hires very, very bright people who were then, generally speaking, very successful in school and very successful in extracurricular activities their entire educational life, and are nice people and know how to get along with other people.
They come in there and … it’s the first negative feedback they’d ever received in their life.
How do people change their mental model of what being smart is and change their mental model about mistakes and their emotional defensiveness to, in effect, protect their ego. That’s what it’s all about.
It’s fascinating. Many of the places I’ve studied and got involved in, each of them are different. Gallo has built a learning system. It’s got a culture. It’s got processes, measurements are lower, et cetera, all designed to mitigate…our natural inclination for System 1 thinking and System 1 conversations.
Defend, deny, deflect, protect the ego…The thing that I find amazing is that I think that if you close your eyes and think of 2025, 2030, you think of an operationally excellent company going to be set primarily by smart robots, smart machines with a small human contingent that have got to be the big thinkers. Modelled inside that company of the future is going to be something similar to what the model is in Bridgewater.
INTERVIEWER
Can you walk me through a meeting at Bridgewater where they make decisions? How is it different? What is the structure by which they organize those meetings? How do they seek dissenting views and how do they challenge one another?
HESS
I’ll refer you also…to my book. I will just say, please look at that to be specific, because off the top of my head, I may not use the exact words they use…First, who’s in charge of the meeting? What person is responsible for the meeting? Then, what’s the purpose of the meeting? Is it a view, is it a debate? Is it to find and discuss a problem and figure out what the root cause is? What’s the purpose?
Then as they go through, depending on what the purpose of the meeting is, if it’s a review, someone states what they believe the issue is and where are we not in synch? Because at the end of every meeting and at the end of every review that had happened previous to that meeting, there’s agreement on the action to be taken and a responsible party is assigned.
If something still is not working, you go back to what was agreed. Who is the responsible party? What was done? What were the results? Why is it not working? Is it a process issue or is it a people issue? If it’s a process issue, then they go down a certain line of thinking. Is it a people issue? What is the issue? Is it a skill issue or is it a capability or a mindset issue?
If you think about it, it’s a very continuous drill-down, what I call peeling back the artichoke to get to the heart of the problem. People who are in the meeting, everyone has permission to speak freely.
All conversations that I watched on the films and that I’ve viewed I would say were respectful and in their own way compassionate, in the sense that everyone at the table had been at the receiving end of it and knew they were going to be on the receiving end of it because it’s part of the daily grind.
There’s empathy and compassion. There was no raised voices. There’s no personal stuff. Was it comfortable for everyone all the time? No, it’s not. Is it hard? Is it hard to push and push people to get to the bottom of things? It’s hard to be the pusher and it’s hard to be the pushee. It takes a real belief in the power of what happens.
When you talk to people that have been there, like for 10 years, and talk to them…I remember speaking with a gentleman who’s very successful there. A quiet person, more a quant than a client relationship person. A quiet person. I started talking to him about it, difficulty in learning and was he comfortable with this?
He said, “You never truly get comfortable.” He said, “But it’s so powerful in how it’s transformed my life.” I said, “If you had to describe in one word your 10 years here at Bridgewater, what would it be?” He said — this was very surprising to me, in the sense that this was a quant guy — he said to me, “Love.” I said, “Excuse me?” He says, “Love. Love. I love this place, and I love the people I work with.” I looked at him, and he says, “You’re surprised?” I said, “Yes, because you don’t seem like a touchy feely person.”
He said, “I’m not. I truly love this place.” That was fascinating to me. I spoke to another person who was also a superstar there. I watched her really have a very difficult time in the meeting where they were getting to the bottom of why one of her teams were not performing. It really had to do with her leadership style. It was…
INTERVIEWER
Tough to watch?
HESS
Yeah. I felt for the people doing the pushing in her. She said, “Look, I need to think about this. I don’t know the answer, so let’s take a break and, let’s get back.” They came back. All this was films I watched. When I met her I said, “Can we talk about these films?” She said, “Yes.”
We talked about it, and I said, “What does all this mean to you in your life?” She said to me, “In being pushed to think more deeply, in being pushed to be more critical about how I think and how I relate has made me a much better mother. It also has changed me in terms of how I view my children’s mistakes.”
We were going on. She’s the one who gave me the quote in the book that the purpose of the whole system at Bridgewater is to overcome our humanness in a humane way. In other words, to help us view our natural proclivities for system one, ego defenses, but in a humane way.
The other thing that was fascinating at Bridgewater was how open everyone truly is. I would have people sit there and tell me that they think they probably have peaked at Bridgewater. They need to grow, and they don’t see the opportunity. I say, “Well, gosh, what have you done about this?”
They say, “Oh, I talk to Ray about it. Yeah, I talked to Ray for two years about it.” I said, “You’ve actually told Ray that you’re thinking of leaving?” They said, “I’ve actually told Ray that I’m not only thinking I’m looking, but I’d really like to stay if we can make something work where I can grow.” I said, “What did he say?”
He says, “I respect that. Let’s try and see, because I want you to stay and grow. But, also, I want you to grow. If you can grow somewhere better, we’ll help you get there.” It was like, “Wow.” I can remember two or three young people. It’s amazing. I asked to meet with lots of different people. Young people. Senior people.
I remember having lunch with three young people. We were having lunch. They have different lunch areas and cafes. It’s all catered every day. It was awesome sushi. I’m sitting there with these three guys. We’re sitting outside. The environment is very tranquil. It’s along a river. A small river. Trees.
We’re sitting there. I asked the three guys…They know who I am, and why I’m there and all this kind of stuff. “Where would you like to start?” Everyone at Bridgewater has a big burden. A big personal issue they’re working on. I had only met these guys three minutes, five minutes. The guy says, “I want to tell you what my big burden is.”
They go around the table. They basically lay out what their big issue is they’re trying to work on personally. It’s like, “Wow.” They’re looking at me, and I can see it in their eyes and feel it. They want reciprocity. “OK, Ed. What’s your big burden?” I sense that, and I volunteer it. Those then set up a wonderful, open conversation.
Think about that. How many times have you gone into a new environment and somebody…First, they’re young. They know I’m there because of Ray. The first thing they want to talk about is their vulnerability. I’m talking about a hedge fund. I’m talking about a money machine.
I’m not talking about going into an…educational environment or a social environment. It’s little things like that that gave me the feeling and also the data that this place is different.
INTERVIEWER
It struck me when I was reading that chapter that the common refrain in most organizations is pick your battles, but it seemed like nothing was too small in Bridgewater to pick apart and tease apart and try to understand.
HESS
Correct. The other thing that’s common in organizations is not only pick your battles but pick your time to raise the battle. There are no battles too small and right now is the time. I was in meetings that had purpose A. In this particular meeting I’m referring to there’s probably 12 senior executives in the room. The meeting was scheduled to last 45 minutes.
The meeting at the end of 40 minutes was over, and Ray says, “Before we leave.” He looked at person X and said, “We’ve got an open issue. I’d like to get to the bottom of this. I’d like for us to get in sync.” Some of them had knowledge of it, but everyone else…The meeting was supposed to last only five more minutes, because everyone’s got another…
There was a 45 minute discussion of that in sync issue. Afterwards, I asked Ray. I said, “Ray, why’d you do it then?” He said, “You can’t let things slide, and it was my fault I’m not getting back to it sooner, because I’ve been travelling. But, I had the responsible parties, the necessary parties.” He says it in that chapter. You don’t put things off. You deal with them directly, honestly, openly.
One of the most amazing things, and I think I write about in the chapter, is when I was doing the book, one of my editors said, “All this sounds good, but it’s just one way, top-down.” I told her the story and how I read an email, when I was doing my research, an email that went from a, I would say, mid-level person who happened to be part of a small team — I don’t know if it’s five or six people — who had a big client, big meeting that Ray attended. This was an email. Everything at Bridgewater, every communication, every review, every performance, everything about everybody is public record.
If you went to work for Bridgewater, you could go on your little iPad and look and see every grade that Ray Dalio or Bob Prince or any individual. Every grade, everything about their performance, their measurements, their test scores, et cetera, et cetera. You could watch every film of every senior management executive meeting. We film everything. It’s totally transparent.
This gentleman puts it in the system and I read it. The substance of the email basically said, “Dear Ray, in our meeting yesterday with client so-and-so, your performance was disappointing and, quite frankly, embarrassing to the team.”
INTERVIEWER
I remember that.
HESS
“It was this, this, and this.” How many places can you be that truthful with the CEO? He’s not CEO, technically. He’s the founder.
INTERVIEWER
Not many.
HESS
Not many, at all. I read Ray’s response. “Dear So-and-So, thank you for bringing this to my attention. You are right. I was not on top of my game. I let the team down, and I apologize to the team and your organization. I need to work on these things. I will not let this happen again.”
INTERVIEWER
That’s remarkable. How often does that happen? Not only does an employee have the guts, and I guess in this place it’s cultural, but the chutzpah to send a message like that and speak so directly to the founder or CEO …Psychologically, within your organization, that is such a hard thing to do, and then have the type of response that not only encourages, but agrees with, and immediately admits a mistake.
HESS
Right. If you look at the culture, and every organization does it differently. You look at what Pixar has created. That could occur in Pixar. You look at what WL Gore has created. That could occur in WL Gore. If you look at what Intuit’s trying to do by “It’s time to bury Caesar,” in devaluing positional power and “empowering employees,” trying to have conversations about the business issues and experiments and everything. That’s what Intuit’s trying to move towards. If you think, you go to UPS, the UPS culture of constructive dissatisfaction and the devaluing of perks, no corporate jets. The whole culture.
If you think about it, and you go back and you look through the some of the high-performance organizational research that I cite in the book, you could go back all the way to confronting the Google facts. I got some nice stuff in it. You see some consistencies. They’re different degrees.
They’re different degrees, but underlying all of this is, if you will, a leadership openness to subject themselves to the same rigor and review as everyone else. The message that sends, and the vulnerability, if you think about it, goes back to McGregor….The all-knowing, decisive, wise leader, quite frankly, has always been hooey.
But it’s in the environment today that you live, where this type of thinking and learning is so critical.
In order for it to occur, it takes a humanistic type of environment that basically is, “I state permission to speak freely,” and really, intellectual humility. It goes back to my work and other people’s work in looking at high-performance organizations, to what Jim Collins calls “level five leadership” and I call “humble, passionate operators.”
It’s funny. Every talk I give to executives, I use the word “humble.” Everybody wants to have a conversation about it, because they disagree that you can be humble. Because the word “humble” means to so many people that you’re basically a pushover.
There’s this whole concept in the business world that if you’re humanistic and engaging with people, you’ll come across as soft. People will take advantage of you. That all goes back to Theory X. It’s not the case.
INTERVIEWER
I think you proved that.
HESS
You can be humanistic and have high standards and high accountability. The companies I write about, every one of them are outstanding performers because they have the highest of standards that they hold themselves to. There is no softness in standards. There’s a human element. Nobody can go put in the Bridgewater way. Nobody can go put in the WL Gore ways. You’ve got to create your own way that’s consistent with the leadership team. If people criticize Bridgewater’s culture, and UPS, but WL Gore will tell you the same thing that Bridgewater will tell you. It takes people longer than a year to adjust to working in the WL Gore environment, when they come in from the outside world, because our whole philosophy of engagement and collaboration and openness.
It’s not the same as Bridgewater. What’s fascinating is all these great companies will tell you, “We are not for everyone.”
INTERVIEWER
I’m conscious of the fact we’re way over time. Ed, I want to thank you so much for your time. This was a fascinating conversation.
HESS
No problem. I enjoyed talking with you. I like your work. …
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If you liked this interview, do yourself a favor and pick up a copy of Ed’s book Learn or Die: Using Science to Build a Leading-Edge Learning Organization.