Tag: Learning

Ray Dalio: Open-Mindedness And The Power of Not Knowing

ray-dalio
Ray Dalio, founder of the investment firm Bridgewater Associates, offers a prime example of what a learning organization looks like in the best book I’ve ever read on learning, Learn or Die: Using Science to Build a Leading-Edge Learning Organization. He comes to us again with this bit of unconventional wisdom.

First, the context …

To make money in the markets, you have to think independently and be humble. You have to be an independent thinker because you can’t make money agreeing with the consensus view, which is already embedded in the price. Yet whenever you’re betting against the consensus there’s a significant probability you’re going to be wrong, so you have to be humble.

Early in my career I learned this lesson the hard way — through some very painful bad bets. The biggest of these mistakes occurred in 1981–’82, when I became convinced that the U.S. economy was about to fall into a depression. My research had led me to believe that, with the Federal Reserve’s tight money policy and lots of debt outstanding, there would be a global wave of debt defaults, and if the Fed tried to handle it by printing money, inflation would accelerate. I was so certain that a depression was coming that I proclaimed it in newspaper columns, on TV, even in testimony to Congress. When Mexico defaulted on its debt in August 1982, I was sure I was right. Boy, was I wrong. What I’d considered improbable was exactly what happened: Fed chairman Paul Volcker’s move to lower interest rates and make money and credit available helped jump-start a bull market in stocks and the U.S. economy’s greatest ever noninflationary growth period

What’s important isn’t that he was wrong, it’s what the experience taught him and how he implemented those lessons at Bridgewater.

This episode taught me the importance of always fearing being wrong, no matter how confident I am that I’m right. As a result, I began seeking out the smartest people I could find who disagreed with me so that I could understand their reasoning. Only after I fully grasped their points of view could I decide to reject or accept them. By doing this again and again over the years, not only have I increased my chances of being right, but I have also learned a huge amount.

There’s an art to this process of seeking out thoughtful disagreement. People who are successful at it realize that there is always some probability they might be wrong and that it’s worth the effort to consider what others are saying — not simply the others’ conclusions, but the reasoning behind them — to be assured that they aren’t making a mistake themselves. They approach disagreement with curiosity, not antagonism, and are what I call “open-minded and assertive at the same time.” This means that they possess the ability to calmly take in what other people are thinking rather than block it out, and to clearly lay out the reasons why they haven’t reached the same conclusion. They are able to listen carefully and objectively to the reasoning behind differing opinions.

When most people hear me describe this approach, they typically say, “No problem, I’m open-minded!” But what they really mean is that they’re open to being wrong. True open-mindedness is an entirely different mind-set. It is a process of being intensely worried about being wrong and asking questions instead of defending a position. It demands that you get over your ego-driven desire to have whatever answer you happen to have in your head be right. Instead, you need to actively question all of your opinions and seek out the reasoning behind alternative points of view.

Still curious? Check out my lengthy interview with Ed Hess.

Thinking About Thinking

I wrote a response on quora recently to the question ‘how do I become a better thinker’ that generated a lot of attention and feedback so I thought I’d build on that a little and post it here too.

(c) Shane Parrish fs.blog

Thinking is not IQ. When people talk about thinking they make the mistake of thinking that people with high IQs think better. That’s not what I’m talking about. I hate to break it to you but unless you’re trying to get into Mensa, IQ tests don’t matter as much as we think they do. After a certain point, that’s not the type of knowledge or brainpower that makes you better at life, happier, or more successful. It’s a measure sure, but a relatively useless one.

If you want to outsmart people who are smarter than you, temperament and life-long learning are more important than IQ.

Two of the guiding principles that I follow on my path towards seeking wisdom are: (1) Go to bed smarter than when you woke up; and (2) I’m not smart enough to figure everything out myself, so I want to ‘master the best of what other people have already figured out.’

Acquiring wisdom is hard. Learning how to think is hard. It means sifting through information, filtering the bunk, and connecting it to a framework that you can use. A lot of people want to get their opinions from someone else. I know this because whenever anyone blurts out an opinion and I ask why, I get some hastily re-phrased sound-byte that doesn’t contextualize the problem, identify the forces at play, demonstrate differences or similarities with previous situations, consider base rates, or … anything else that would demonstrate some level of thinking. (One of my favorite questions to probe thinking is to ask what information would cause someone to change their mind. Immediately stop listening and leave if they say ‘I can’t think of anything.’)

Thinking is hard work. I get it. You don’t have time to think but that doesn’t mean you get a pass from me. I want to think for myself, thank you.

***

So one effective thing you can do if you want to think better is to become better at probing other people’s thinking. Ask questions. Simple ones are better. “Why” is the best. If you ask that three or four times you get to a place where you’re going to understand more and you’ll be able to tell who really knows what they are talking about. Shortcuts in thinking are easy, and this is how you tease them out. Not to make the other person look bad – don’t do this maliciously – but to avoid mistakes, air assumptions, and discuss conclusions.

Another thing you can do is to slow down. Make sure you give yourself time to think. I know, it’s a fast-paced internet world where we get some cultural machoism points for answering on the spot but unless it has to be decided at that very moment, simply say “let me think about that for a bit and get back to you.” The world will not end while you think about it.

You should also probe yourself. Try and understand if you’re talking about something you really know something about or if you’re just regurgitating some talking head you heard on the news last night. Your life will become instantly better and your mind clearer if you simply stop the latter. You’re only fooling yourself and if you don’t understand the limits of what you know, you’re going to get in trouble.

***

Learning how to think really means continuously learning.

How can we do that?

First we need a framework to put things on so we can remember, integrate, and make them available for use.

A Latticework of Mental Models, if you will.

Acquiring knowledge may seem like a daunting task. There is so much to know and time is precious. Luckily, we don’t have to master everything. To get the biggest bang for the buck we can study the big ideas from physics, biology, psychology, philosophy, literature, and sociology.

Our aim is not to remember facts and try to repeat them when asked. We’re going to try and hang these ideas on a latticework of mental models. Doing this puts them in a useable form and enables us to make better decisions.

A mental model is simply a representation of an external reality inside your head. Mental models are concerned with understanding knowledge about the world.

Decisions are more likely to be correct when ideas from multiple disciplines all point towards the same conclusion.

It’s like the old saying, “To the man with only a hammer, every problem looks like a nail.” Let’s make every attempt not to be the man with only a hammer.

Charlie Munger further elaborates:

And the models have to come from multiple disciplines because all the wisdom of the world is not to be found in one little academic department. That’s why poetry professors, by and large, are so unwise in a worldly sense. They don’t have enough models in their heads. So you’ve got to have models across a fair array of disciplines.

You may say, “My God, this is already getting way too tough.” But, fortunately, it isn’t that tough because 80 or 90 important models will carry about 90% of the freight in making you a worldly wise person. And, of those, only a mere handful really carry very heavy freight.

These models generally fall into two categories: (1) ones that help us simulate time (and predict the future) and better understand how the world works (e.g. understanding a useful idea from like autocatalysis), and (2) ones that help us better understand how our mental processes lead us astray (e.g., availability bias).

When our mental models line up with reality they help us avoid problems. However, they also cause problems when they don’t line up with reality as we think something that isn’t true. So Beware.

In Peter Bevelin’s masterful book Seeking Wisdom, he highlights Munger talking about autocatalysis:

If you get a certain kind of process going in chemistry, it speeds up on its own. So you get this marvellous boost in what you’re trying to do that runs on and on. Now, the laws of physics are such that it doesn’t run on forever. But it runs on for a goodly while. So you get a huge boost. You accomplish A – and, all of a sudden, you’re getting A + B + C for awhile.

But knowing is not enough. You need to know how to apply this to other problems outside of the domain in which you learned it.

Munger continues:

Disney is an amazing example of autocatalysis … They had those movies in the can. They owned the copyright. And just as Coke could prosper when refrigeration came, when the videocassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette.

***

What models do we need?

I keep a running list that I’m filling in over time, but really how we store and sort these are individual preferences. The framework is not a one-stop-shop, it’s how it fits into your brain.

How can we acquire these models?

There are several ways to acquire the models, the first and probably best source is reading. Even Warren Buffett says reading is one of the best ways to get wiser.

But sadly if your goal is wisdom acquisition, you can’t just pick up a book and read it. You need to Learn How To Read A Book all over again. Most people look at my reading habits (What I’m Reading) and think that I speed read. I don’t. I think that’s a bunch of hot air. If you think you can pick up a book on a subject you’re unfamiliar with and in 30 minutes become an expert … well, good luck to you. Please go back to getting your opinions from twitter.

Focus on the big, simple ideas.

Focus on deeply understanding the simple ideas (see Five Elements of Effective Thinking). These simple ideas, not the cutting-edge ones are the ones you want to hang on your latticework. The latticework is important because it makes the knowledge useable – you not only recall but you internalize.

But the world is always changing … what should we learn first?

One of the biggest mistakes I see people making is to try and learn the cutting-edge research first. The way we prioritize learning has huge implications beyond the day-to-day. When we chase the latest thing, we’re really jumping into an arms race (see: The Red Queen Effect). We have to spend more and more of our time and energy to stay in the same place.

Despite our intentions, learning in this way fails to take advantage of cumulative knowledge. We’re not adding, we’re only maintaining.

If we are to prioritize learning, we should focus on ideas that change slowly – these tend to be the ones from the hard sciences. (see Adding Mental Models to Your Toolbox)

The models that come from hard science and engineering are the most reliable models on this Earth. And engineering quality control – at least the guts of it that matters to you and me and people who are not professional engineers – is very much based on the elementary mathematics of Fermat and Pascal: It costs so much and you get so much less likelihood of it breaking if you spend this much… And, of course, the engineering idea of a backup system is a very powerful idea. The engineering idea of breakpoints – that’s a very powerful model, too. The notion of a critical mass – that comes out of physics – is a very powerful model.

To help further prioritize learning

From : What Should I Read?

Knowledge has a half-life. The most useful knowledge is a broad-based multidisciplinary education of the basics. These ideas are ones that have lasted, and thus will last, for a long time. And by last, I mean mathematical expectation; I know what will happen in general but not each individual case.

Integrating Knowledge

(Source: Adding Mental Models to Your Toolbox)

Our world is mutli-dimensional and our problems are complicated. Most problems cannot be solved using one model alone. The more models we have the better able we are to rationally solve problems. But if we don’t have the models we become the proverbial man with a hammer.

To the man with a hammer everything looks like a nail. If you only have one model you will fit whatever problem you face to the model you have. If you have more than one model, however, you can look at the problem from a variety of perspectives and increase the odds you come to a better solution.

No one discipline has all the answers, only by looking at them all can we come to grow worldly wisdom.

Charles Munger illustrates the importance of this:

Suppose you want to be good at declarer play in contract bridge. Well, you know the contract – you know what you have to achieve. And you can count up the sure winners you have by laying down your high cards and your invincible trumps.

But if you’re a trick or two short, how are you going to get the other needed tricks? Well, there are only six or so different, standard methods: You’ve got long-suit establishment. You’ve got finesses. You’ve got throw-in plays.

You’ve got cross-ruffs. You’ve got squeezes. And you’ve got various ways of misleading the defense into making errors. So it’s a very limited number of models. But if you only know one or two of those models, then you’re going to be a horse’s patoot in declarer play…

If you don’t have the full repertoire, I guarantee you that you’ll over-utilize the limited repertoire you have – including use of models that are inappropriate just because they’re available to you in the limited stock you have in mind.

As for how we can use different ideas, Munger again shows the way …

Have a full kit of tools … go through them in your mind checklist-style. … [Y]ou can never make any explanation that can be made in a more fundamental way in any other way than the most fundamental way.

When you combine things you get lollapalooza effects — the integration of more than one effect to create a non-linear response.

A two-step process for making effective decisions

There is no point in being wiser unless you use it for good. You know, as Aunt May put it to Peter Parker, “with great power comes great responsibility.”

(Source: A Two-step Process for Making Effective Decisions)

Personally, I’ve gotten so that I now use a kind of two-track analysis. First, what are the factors that really govern the interests involved, rationally considered? And second, what are the subconscious influences where the brain at a subconscious level is automatically doing these things-which by and large are useful, but which often misfunction.

One approach is rationality-the way you’d work out a bridge problem: by evaluating the real interests, the real probabilities and so forth. And the other is to evaluate the psychological factors that cause subconscious conclusions-many of which are wrong.

This is the path, the rest is up to you.

Elon Musk on How To Build Knowledge

elon musk
Elon Musk recently did an AMA on reddit. Here are three question-and-response pairs that I enjoyed, including how to build knowledge.

He knows how to say I don’t know.

Previously, you’ve stated that you estimate a 50% probability of success with the attempted landing on the automated spaceport drone ship tomorrow. Can you discuss the factors that were considered to make that estimation?

Musk: I pretty much made that up. I have no idea :)

Everyone has that one teacher…

I’m a teacher, and I always wonder what I can do to help my students achieve big things. What’s something your teachers did for you while you were in school that helped to encourage your ideas and thinking? Or, if they didn’t, what’s something they could have done better?

Musk: The best teacher I ever had was my elementary school principal. Our math teacher quit for some reason and he decided to sub in himself for math and accelerate the syllabus by a year.

We had to work like the house was on fire for the first half of the lesson and do extra homework, but then we got to hear stories of when he was a soldier in WWII. If you didn’t do the work, you didn’t get to hear the stories. Everybody did the work.

Finally, his answer on building knowledge reminds me of The Five Elements of Effective Thinking and the latticework of mental models.

How do you learn so much so fast? Lots of people read books and talk to other smart people, but you’ve taken it to a whole new level.

Musk: I do kinda feel like my head is full! My context switching penalty is high and my process isolation is not what it used to be.

Frankly, though, I think most people can learn a lot more than they think they can. They sell themselves short without trying.

One bit of advice: it is important to view knowledge as sort of a semantic tree — make sure you understand the fundamental principles, ie the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to.

Follow your curiosity to Elon Musk Recommends 12 Books.

(image source: forbes)

Richard Feynman: The Difference Between Knowing the Name of Something and Knowing Something

Richard Feynman

Richard Feynman (1918-1988) was no ordinary genius. He believed that “the world is much more interesting than any one discipline.”

His explanations — on why questions, why trains stay on the tracks as they go around a curve, how we look for new laws of science, how rubber bands work, — are simple and powerful.

Even his love letters will move you. His love letter to his wife sixteen months after her death will stir any heart.

In this short clip (below), Feynman articulates the difference between knowing the name of something and understanding it.

See that bird? It’s a brown-throated thrush, but in Germany it’s called a halzenfugel, and in Chinese they call it a chung ling and even if you know all those names for it, you still know nothing about the bird. You only know something about people; what they call the bird. Now that thrush sings, and teaches its young to fly, and flies so many miles away during the summer across the country, and nobody knows how it finds its way.

Knowing the name of something doesn’t mean you understand it. We talk in fact-deficient, obfuscating generalities to cover up our lack of understanding.

How then should we go about learning? On this Feynman echoes Einstein, and proposes that we take things apart:

In order to talk to each other, we have to have words, and that’s all right. It’s a good idea to try to see the difference, and it’s a good idea to know when we are teaching the tools of science, such as words, and when we are teaching science itself.

[…]

There is a first grade science book which, in the first lesson of the first grade, begins in an unfortunate manner to teach science, because it starts off with the wrong idea of what science is. There is a picture of a dog–a windable toy dog–and a hand comes to the winder, and then the dog is able to move. Under the last picture, it says “What makes it move?” Later on, there is a picture of a real dog and the question, “What makes it move?” Then there is a picture of a motorbike and the question, “What makes it move?” and so on.

I thought at first they were getting ready to tell what science was going to be about–physics, biology, chemistry–but that wasn’t it. The answer was in the teacher’s edition of the book: the answer I was trying to learn is that “energy makes it move.”

Now, energy is a very subtle concept. It is very, very difficult to get right. What I mean is that it is not easy to understand energy well enough to use it right, so that you can deduce something correctly using the energy idea–it is beyond the first grade. It would be equally well to say that “God makes it move,” or “spirit makes it move,” or “movability makes it move.” (In fact, one could equally well say “energy makes it stop.”)

Look at it this way: that’s only the definition of energy; it should be reversed. We might say when something can move that it has energy in it, but not what makes it move is energy. This is a very subtle difference. It’s the same with this inertia proposition.

Perhaps I can make the difference a little clearer this way: If you ask a child what makes the toy dog move, you should think about what an ordinary human being would answer. The answer is that you wound up the spring; it tries to unwind and pushes the gear around.

What a good way to begin a science course! Take apart the toy; see how it works. See the cleverness of the gears; see the ratchets. Learn something about the toy, the way the toy is put together, the ingenuity of people devising the ratchets and other things. That’s good. The question is fine. The answer is a little unfortunate, because what they were trying to do is teach a definition of what is energy. But nothing whatever is learned.

[…]

I think for lesson number one, to learn a mystic formula for answering questions is very bad.

There is a way to test whether you understand the idea or only know the definition. It’s called the Feynman Technique, and it looks like this:

Test it this way: you say, “Without using the new word which you have just learned, try to rephrase what you have just learned in your own language.” Without using the word “energy,” tell me what you know now about the dog’s motion.” You cannot. So you learned nothing about science. That may be all right. You may not want to learn something about science right away. You have to learn definitions. But for the very first lesson, is that not possibly destructive?

I think this is what Montaigne was hinting at in his Essays when he wrote:

We take other men’s knowledge and opinions upon trust; which is an idle and superficial learning. We must make them our own. We are just like a man who, needing fire, went to a neighbor’s house to fetch it, and finding a very good one there, sat down to warm himself without remembering to carry any back home. What good does it do us to have our belly full of meat if it is not digested, if it is not transformed into us, if it does not nourish and support us?

Charlie Munger: Adding Mental Tools to Your Toolbox

In The Art of War Sun Tzu said “The general who wins a battle makes many calculations in his temple before the battle is fought.”

Those ‘calculations’ are the tools we have available to think better. One of the best questions you can ask is how we can make our mental processes work better.

Charlie Munger says that “developing the habit of mastering the multiple models which underlie reality is the best thing you can do.”

Those models are mental models.

They fall into two categories: (1) ones that help us simulate time (and predict the future) and better understand how the world works (e.g. understanding a useful idea  autocatalysis), and (2) ones that help us better understand how our mental processes lead us astray (e.g., availability bias).

When our mental models line up with reality they help us avoid problems. However, they also cause problems when they don’t line up with reality as we think something that isn’t true.

Your Mind’s Toolbox

In Peter Bevelin’s Seeking Wisdom, he highlights Munger talking about autocatalysis:

If you get a certain kind of process going in chemistry, it speeds up on its own. So you get this marvellous boost in what you’re trying to do that runs on and on. Now, the laws of physics are such that it doesn’t run on forever. But it runs on for a goodly while. So you get a huge boost. You accomplish A – and, all of a sudden, you’re getting A + B + C for awhile.

He continues telling us how this idea can be applied:

Disney is an amazing example of autocatalysis … They had those movies in the can. They owned the copyright. And just as Coke could prosper when refrigeration came, when the videocassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette.

***

This leads us to an interesting problem. The world is always changing so which models should we prioritize learning?

How we prioritize our learning has implications beyond the day-to-day. Often we focus on things that change quickly. We chase the latest study, the latest findings, the most recent best-sellers. We do this to keep up-to-date with the latest-and-greatest.

Despite our intentions, learning in this way fails to account for cumulative knowledge. Instead, we consume all of our time keeping up to date.

If we are prioritize learning, we should focus on things that change slowly.

The models that come from hard science and engineering are the most reliable models on this Earth. And engineering quality control – at least the guts of it that matters to you and me and people who are not professional engineers – is very much based on the elementary mathematics of Fermat and Pascal: It costs so much and you get so much less likelihood of it breaking if you spend this much…

And, of course, the engineering idea of a backup system is a very powerful idea. The engineering idea of breakpoints – that’s a very powerful model, too. The notion of a critical mass – that comes out of physics – is a very powerful model.

After we learn a model we have to make it useful. We have to integrate it into our existing knowledge.

Our world is mutli-dimensional and our problems are complicated. Most problems cannot be solved using one model alone. The more models we have the better able we are to rationally solve problems.

But if we don’t have the models we become the proverbial man with a hammer. To the man with a hammer, everything looks like a nail. If you only have one model you will fit whatever problem you face to the model you have. If you have more than one model, however, you can look at the problem from a variety of perspectives and increase the odds you come to a better solution.

“Since no single discipline has all the answers,” Peter Bevelin writes in Seeking Wisdom, “we need to understand and use the big ideas from all the important disciplines: Mathematics, physics, chemistry, engineering, biology, psychology, and rank and use them in order of reliability.”

Charles Munger illustrates the importance of this:

Suppose you want to be good at declarer play in contract bridge. Well, you know the contract – you know what you have to achieve. And you can count up the sure winners you have by laying down your high cards and your invincible trumps.

But if you’re a trick or two short, how are you going to get the other needed tricks? Well, there are only six or so different, standard methods: You’ve got long-suit establishment. You’ve got finesses. You’ve got throw-in plays. You’ve got cross-ruffs. You’ve got squeezes. And you’ve got various ways of misleading the defense into making errors. So it’s a very limited number of models. But if you only know one or two of those models, then you’re going to be a horse’s patoot in declarer play…

If you don’t have the full repertoire, I guarantee you that you’ll overutilize the limited repertoire you have – including use of models that are inappropriate just because they’re available to you in the limited stock you have in mind.

As for how we can use different ideas, Munger again shows the way …

Have a full kit of tools … go through them in your mind checklist-style.. .you can never make any explanation that can be made in a more fundamental way in any other way than the most fundamental way. And you always take with full attribution to the most fundamental ideas that you are required to use. When you’re using physics, you say you’re using physics. When you’re using biology, you say you’re using biology.

But ideas alone are not enough. We need to understand how they interact and combine. This leads to lollapalooza effects.

You get lollapalooza effects when two, three or four forces are all operating in the same direction. And, frequently, you don’t get simple addition. It’s often like a critical mass in physics where you get a nuclear explosion if you get to a certain point of mass – and you don’t get anything much worth seeing if you don’t reach the mass.

Sometimes the forces just add like ordinary quantities and sometimes they combine on a break-point or critical-mass basis … More commonly, the forces coming out of … models are conflicting to some extent. And you get huge, miserable trade-offs … So you [must] have the models and you [must] see the relatedness and the effects from the relatedness.

Edward Hess, Interview No. 6

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.

***

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.