Leaving this here for future reference.
And this outline from https://inside.bwater.com/publications/principles_excerpt as a guide:
P R I N C I P L E S
BY RAY DALIO
• Think for yourself to decide 1) what you want,
2) what is true, and 3) what you should do to
achieve #1 in light of #2, and do that with humility
and open-mindedness so that you consider the
best thinking available to you.
LIFE PRINCIPLES INTRODUCTION
• Look to the patterns of those things that affect you
in order to understand the cause-effect relationships
that drive them and to learn principles for dealing
with them effectively.
PART II: LIFE PRINCIPLES
1. EMBRACE REALITY AND DEAL WITH IT.
1.1 Be a hyperrealist.
a. Dreams + Reality + Determination = A Successful Life.
1.2 Truth—or, more precisely, an accurate understanding of reality
—is the essential foundation for any good outcome.
1.3 Be radically open-minded and radically transparent.
a. Radical open-mindedness and radical transparency are
invaluable for rapid learning and effective change.
b. Don’t let fears of what others think of you stand in your way.
c. Embracing radical truth and radical transparency will bring
more meaningful work and more meaningful relationships.
1.4 Look to nature to learn how reality works.
a. Don’t get hung up on your views of how things “should” be
because you will miss out on learning how they really are.
b. To be “good,” something must operate consistently with the
laws of reality and contribute to the evolution of the whole; that
is what is most rewarded.
c. Evolution is the single greatest force in the universe; it is the
only thing that is permanent and it drives everything.
d. Evolve or die.
SUMMARY AND TABLE
OF LIFE PRINCIPLES
1.5 Evolving is life’s greatest accomplishment and its greatest
a. The individual’s incentives must be aligned with the group’s
b. Reality is optimizing for the whole—not for you.
c. Adaptation through rapid trial and error is invaluable.
d. Realize that you are simultaneously everything and nothing
—and decide what you want to be.
e. What you will be will depend on the perspective you have.
1.6 Understand nature’s practical lessons.
a. Maximize your evolution.
b. Remember “no pain, no gain.”
c. It is a fundamental law of nature that in order to gain
strength one has to push one’s limits, which is painful.
1.7 Pain + Reflection = Progress.
a. Go to the pain rather than avoid it.
b. Embrace tough love.
1.8 Weigh second- and third-order consequences.
1.9 Own your outcomes.
1.10 Look at the machine from the higher level.
a. Think of yourself as a machine operating within a machine
and know that you have the ability to alter your machines to
produce better outcomes.
b. By comparing your outcomes with your goals, you can
determine how to modify your machine.
c. Distinguish between you as the designer of your machine
and you as a worker with your machine.
d. The biggest mistake most people make is to not see
themselves and others objectively, which leads them to
bump into their own and others’ weaknesses again and again.
e. Successful people are those who can go above themselves to
see things objectively and manage those things to shape change.
f. Asking others who are strong in areas where you are weak
to help you is a great skill that you should develop no matter
what, as it will help you develop guardrails that will
prevent you from doing what you shouldn’t be doing.
g. Because it is difficult to see oneself objectively, you need to
rely on the input of others and the whole body of evidence.
h. If you are open-minded enough and determined, you can
get virtually anything you want.
2. Use the 5-Step Process to Get What You Want Out of Life
2.1 Have clear goals.
a. Prioritize: While you can have virtually anything you want,
you can’t have everything you want.
b. Don’t confuse goals with desires.
c. Decide what you really want in life by reconciling your
goals and your desires.
d. Don’t mistake the trappings of success for success itself.
e. Never rule out a goal because you think it’s unattainable.
f. Remember that great expectations create great capabilities.
g. Almost nothing can stop you from succeeding if you have
a) flexibility and b) self-accountability.
h. Knowing how to deal well with your setbacks is as important
as knowing how to move forward.
2.2 Identify and don’t tolerate problems.
a. View painful problems as potential improvements that are
screaming at you.
b. Don’t avoid confronting problems because they are rooted in
harsh realities that are unpleasant to look at.
c. Be specific in identifying your problems.
d. Don’t mistake a cause of a problem with the real problem.
e. Distinguish big problems from small ones.
f. Once you identify a problem, don’t tolerate it.
2.3 Diagnose problems to get at their root causes.
a. Focus on the “what is” before deciding “what to do about it.”
b. Distinguish proximate causes from root causes.
c. Recognize that knowing what someone (including you) is
like will tell you what you can expect from them.
2.4 Design a plan.
a. Go back before you go forward.
b. Think about your problem as a set of outcomes produced
by a machine.
c. Remember that there are typically many paths to achieving
d. Think of your plan as being like a movie script in that you
visualize who will do what through time.
e. Write down your plan for everyone to see and to measure
your progress against.
f. Recognize that it doesn’t take a lot of time to design a
2.5 Push through to completion.
a. Great planners who don’t execute their plans go nowhere.
b. Good work habits are vastly underrated.
c. Establish clear metrics to make certain that you are
following your plan.
2.6 Remember that weaknesses don’t matter if you find solutions.
a. Look at the patterns of your mistakes and identify at which
step in the 5-Step Process you typically fail.
b. Everyone has at least one big thing that stands in the way
of their success; find yours and deal with it.
2.7 Understand your own and others’ mental maps and humility.
3 Be Radically Open-Minded
3.1 Recognize your two barriers.
a. Understand your ego barrier.
b. Your two “yous” fight to control you.
c. Understand your blind spot barrier.
3.2 Practice radical open-mindedness.
a. Sincerely believe that you might not know the best possible
path and recognize that your ability to deal well with “not
knowing” is more important than whatever it is you do know.
b. Recognize that decision making is a two-step process:
First take in all the relevant information, then decide.
c. Don’t worry about looking good; worry about achieving
d. Realize that you can’t put out without taking in.
e. Recognize that to gain the perspective that comes from
seeing things through another’s eyes, you must suspend
judgment for a time—only by empathizing can you properly
evaluate another point of view.
f. Remember that you’re looking for the best answer, not
simply the best answer that you can come up with yourself.
g. Be clear on whether you are arguing or seeking to understand,
and think about which is most appropriate based on your and
3.3 Appreciate the art of thoughtful disagreement.
3.4 Triangulate your view with believable people who are willing
a. Plan for the worst-case scenario to make it as good as
3.5 Recognize the signs of closed-mindedness and
open-mindedness that you should watch out for.
3.6 Understand how you can become radically open-minded.
a. Regularly use pain as your guide toward quality reflection.
b. Make being open-minded a habit.
c. Get to know your blind spots.
d. If a number of different believable people say you are doing
something wrong and you are the only one who doesn’t see
it that way, assume that you are probably biased.
f. Be evidence-based and encourage others to be the same.
g. Do everything in your power to help others also be
h. Use evidence-based decision-making tools.
i. Know when it’s best to stop fighting and have faith in your
4 Understand That People Are Wired Very Differently
4.1 Understand the power that comes from knowing how you
and others are wired.
a. We are born with attributes that can both help us and hurt
us, depending on their application.
4.2 Meaningful work and meaningful relationships aren’t just
nice things we chose for ourselves—they are genetically
programmed into us.
4.3 Understand the great brain battles and how to control them
to get what “you” want.
a. Realize that the conscious mind is in a battle with the
b. Know that the most constant struggle is between feeling
c. Reconcile your feelings and your thinking.
d. Choose your habits well.
e. Train your “lower-level you” with kindness and persistence
to build the right habits.
f. Understand the differences between right-brained and
g. Understand how much the brain can and cannot change.
4.4 Find out what you and others are like.
a. Introversion vs. extroversion.
b. Intuiting vs. sensing.
c. Thinking vs. feeling.
d. Planning vs. perceiving.
e. Creators vs. refiners vs. advancers vs. executors vs. flexors.
f. Focusing on tasks vs. focusing on goals.
g. Workplace Personality Inventory.
h. Shapers are people who can go from visualization to
4.5 Getting the right people in the right roles in support of your
goal is the key to succeeding at whatever you choose to
a. Manage yourself and orchestrate others to get what you want.
5 Learn How to Make Decisions Effectively
5.1 Recognize that 1) the biggest threat to good decision making
is harmful emotions, and 2) decision making is a two-step
process (first learning and then deciding).
5.2 Synthesize the situation at hand.
a. One of the most important decisions you can make is
who you ask questions of.
b. Don’t believe everything you hear.
c. Everything looks bigger up close.
d. New is overvalued relative to great.
e. Don’t oversqueeze dots.
5.3 Synthesize the situation through time.
a. Keep in mind both the rates of change and the levels of
things, and the relationships between them.
b. Be imprecise.
c. Remember the 80/20 Rule and know what the key
20 percent is.
d. Be an imperfectionist.
5.4 Navigate levels effectively.
a. Use the terms “above the line” and “below the line” to
establish which level a conversation is on.
b. Remember that decisions need to be made at the
appropriate level, but they should also be consistent
5.5 Logic, reason, and common sense are your best tools for
synthesizing reality and understanding what to do about it.
5.6 Make your decisions as expected value calculations.
a. Raising the probability of being right is valuable no matter
what your probability of being right already is.
b. Knowing when not to bet is as important as knowing what
bets are probably worth making.
c. The best choices are the ones that have more pros than cons,
not those that don’t have any cons at all.
5.7 Prioritize by weighing the value of additional information
against the cost of not deciding.
a. All of your “must-dos” must be above the bar before you
do your “like-to-dos.”
b. Chances are you won’t have time to deal with the
unimportant things, which is better than not having
time to deal with the important things.
c. Don’t mistake possibilities for probabilities.
5.9 Use principles.
5.10 Believability weight your decision making.
5.11 Convert your principles into algorithms and have the
computer make decisions alongside you.
5.12 Be cautious about trusting AI without having
PART III: WORK PRINCIPLES
• An organization is a machine consisting of two
major parts: culture and people.
a. A great organization has both great people and a great
b. Great people have both great character and great
c. Great cultures bring problems and disagreements to the
surface and solve them well, and they love imagining and
building great things that haven’t been built before.
• Tough love is effective for achieving both great
work and great relationships.
a. In order to be great, one can’t compromise the
• A believability-weighted idea meritocracy is the
best system for making effective decisions.
• Make your passion and your work one and the
same and do it with people you want to be with.
TO GET THE CULTURE RIGHT . . .
1 Trust in Radical Truth and Radical Transparency
1.1 Realize that you have nothing to fear from knowing the truth.
1.2 Have integrity and demand it from others.
a. Never say anything about someone that you wouldn’t say to
them directly and don’t try people without accusing them
to their faces.
b. Don’t let loyalty to people stand in the way of truth and
the well-being of the organization.
I’m including this summary and table of Work Principles here so that you
have the choice of skimming them all, finding the ones you’re most interested
in, or skipping this section and continuing your reading on page 296.
1.3 Create an environment in which everyone has the right to
understand what makes sense and no one has the right
to hold a critical opinion without speaking up.
a. Speak up, own it, or get out.
b. Be extremely open.
c. Don’t be naive about dishonesty.
1.4 Be radically transparent.
a. Use transparency to help enforce justice.
b. Share the things that are hardest to share.
c. Keep exceptions to radical transparency very rare.
d. Make sure those who are given radical transparency
recognize their responsibilities to handle it well and to
weigh things intelligently.
e. Provide transparency to people who handle it well and
either deny it to people who don’t handle it well or remove
those people from the organization.
f. Don’t share sensitive information with the organization’s
1.5 Meaningful relationships and meaningful work are mutually
reinforcing, especially when supported by radical truth and
2 Cultivate Meaningful Work and Meaningful Relationships
2.1 Be loyal to the common mission and not to anyone who is not
operating consistently with it.
2.2 Be crystal clear on what the deal is.
a. Make sure people give more consideration to others than
they demand for themselves.
b. Make sure that people understand the difference between
fairness and generosity.
c. Know where the line is and be on the far side of fair.
d. Pay for work.
2.3 Recognize that the size of the organization can pose a threat
to meaningful relationships.
2.4 Remember that most people will pretend to operate in your
interest while operating in their own.
2.5 Treasure honorable people who are capable and will treat
you well even when you’re not looking.
3 Create a Culture in Which It Is Okay to Make
Mistakes and Unacceptable Not to Learn from
3.1 Recognize that mistakes are a natural part of the evolutionary
a. Fail well.
b. Don’t feel bad about your mistakes or those of others.
3.2 Don’t worry about looking good—worry about achieving
a. Get over “blame” and “credit” and get on with “accurate”
3.3 Observe the patterns of mistakes to see if they are products
3.4 Remember to reflect when you experience pain.
a. Be self-reflective and make sure your people are
b. Know that nobody can see themselves objectively.
c. Teach and reinforce the merits of mistake-based learning.
3.5 Know what types of mistakes are acceptable and what types
are unacceptable, and don’t allow the people who work for
you to make the unacceptable ones.
4 Get and Stay in Sync
4.1 Recognize that conflicts are essential for great relationships
because they are how people determine whether their
principles are aligned and resolve their differences.
a. Spend lavishly on the time and energy you devote to getting
in sync, because it’s the best investment you can make.
4.2 Know how to get in sync and disagree well.
a. Surface areas of possible out-of-syncness.
b. Distinguish between idle complaints and complaints meant
to lead to improvement.
c. Remember that every story has another side.
4.3 Be open-minded and assertive at the same time.
a. Distinguish open-minded people from closed-minded
b. Don’t have anything to do with closed-minded people.
c. Watch out for people who think it’s embarrassing not to know.
d. Make sure that those in charge are open-minded about the
questions and comments of others.
e. Recognize that getting in sync is a two-way responsibility.
f. Worry more about substance than style.
g. Be reasonable and expect others to be reasonable.
h. Making suggestions and questioning are not the same as
criticizing, so don’t treat them as if they are.
4.4 If it is your meeting to run, manage the conversation.
a. Make it clear who is directing the meeting and whom it is
meant to serve.
b. Be precise in what you’re talking about to avoid confusion.
c. Make clear what type of communication you are going to
have in light of the objectives and priorities.
d. Lead the discussion by being assertive and open-minded.
e. Navigate between the different levels of the conversation.
f. Watch out for “topic slip.”
g. Enforce the logic of conversations.
h. Be careful not to lose personal responsibility via group
i. Utilize the “two-minute rule” to avoid persistent
j. Watch out for assertive “fast talkers.”
k. Achieve completion in conversations.
l. Leverage your communication.
4.5 Great collaboration feels like playing jazz.
b. 3 to 5 is more than 20.
4.6 When you have alignment, cherish it.
4.7 If you find you can’t reconcile major differences—especially
in values—consider whether the relationship is worth
5 Believability Weight Your Decision Making
5.1 Recognize that having an effective idea meritocracy requires
that you understand the merit of each person’s ideas.
a. If you can’t successfully do something, don’t think you can
tell others how it should be done.
b. Remember that everyone has opinions and they are often
5.2 Find the most believable people possible who disagree with
you and try to understand their reasoning.
a. Think about people’s believability in order to assess the
likelihood that their opinions are good.
b. Remember that believable opinions are most likely to come
from people 1) who have successfully accomplished the thing
in question at least three times, and 2) who have great
explanations of the cause-effect relationships that lead them
to their conclusions.
c. If someone hasn’t done something but has a theory that seems
logical and can be stress-tested, then by all means test it.
d. Don’t pay as much attention to people’s conclusions as to the
reasoning that led them to their conclusions.
e. Inexperienced people can have great ideas too, sometimes far
better ones than more experienced people.
f. Everyone should be up-front in expressing how confident
they are in their thoughts.
5.3 Think about whether you are playing the role of a teacher,
a student, or a peer and whether you should be teaching,
asking questions, or debating.
a. It’s more important that the student understand the teacher
than that the teacher understand the student, though both
b. Recognize that while everyone has the right and responsibility
to try to make sense of important things, they must do so with
humility and radical open-mindedness.
5.4 Understand how people came by their opinions.
a. If you ask someone a question, they will probably give
you an answer, so think through to whom you should
address your questions.
b. Having everyone randomly probe everyone else is an
unproductive waste of time.
c. Beware of statements that begin with “I think that . . .”
d. Assess believability by systematically capturing people’s
track records over time.
5.5 Disagreeing must be done efficiently.
a. Know when to stop debating and move on to agreeing
about what should be done.
b. Use believability weighting as a tool rather than a substitute
for decision making by Responsible Parties.
c. Since you don’t have the time to thoroughly examine
everyone’s thinking yourself, choose your believable
d. When you’re responsible for a decision, compare the
believability-weighted decision making of the crowd to
what you believe.
5.6 Recognize that everyone has the right and responsibility to try
to make sense of important things.
a. Communications aimed at getting the best answer should
involve the most relevant people.
b. Communication aimed at educating or boosting cohesion
should involve a broader set of people than would be needed
if the aim were just getting the best answer.
c. Recognize that you don’t need to make judgments about
5.7 Pay more attention to whether the decision-making system is
fair than whether you get your way.
6 Recognize How to Get Beyond Disagreements
6.1 Remember: Principles can’t be ignored by mutual agreement.
a. The same standards of behavior apply to everyone.
6.2 Make sure people don’t confuse the right to complain, give
advice, and openly debate with the right to make decisions.
a. When challenging a decision and/or a decision maker,
consider the broader context.
6.3 Don’t leave important conflicts unresolved.
a. Don’t let the little things divide you when your agreement
on the big things should bind you.
b. Don’t get stuck in disagreement—escalate or vote!
6.4 Once a decision is made, everyone should get behind it even
though individuals may still disagree.
a. See things from the higher level.
b. Never allow the idea meritocracy to slip into anarchy.
c. Don’t allow lynch mobs or mob rule.
6.5 Remember that if the idea meritocracy comes into conflict
with the well-being of the organization, it will inevitably suffer.
a. Declare “martial law” only in rare or extreme circumstances
when the principles need to be suspended.
b. Be wary of people who argue for the suspension of the idea
meritocracy for the “good of the organization.”
6.6 Recognize that if the people who have the power don’t want
to operate by principles, the principled way of operating
TO GET THE PEOPLE RIGHT . . .
7 Remember That the WHO Is More Important than the WHAT
7.1 Recognize that the most important decision for you to make
is who you choose as your Responsible Parties.
a. Understand that the most important RPs are those
responsible for the goals, outcomes, and machines at
the highest levels.
7.2 Know that the ultimate Responsible Party will be the person
who bears the consequences of what is done.
a. Make sure that everyone has someone they report to.
7.3 Remember the force behind the thing.
8 Hire Right, Because the Penalties for Hiring Wrong Are Huge
8.1 Match the person to the design.
a. Think through which values, abilities, and skills you are
looking for (in that order).
b. Make finding the right people systematic and scientific.
c. Hear the click: Find the right fit between the role and the
d. Look for people who sparkle, not just “any ol’ one of those.”
e. Don’t use your pull to get someone a job.
8.2 Remember that people are built very differently and that
different ways of seeing and thinking make people suitable
for different jobs.
a. Understand how to use and interpret personality assessments.
b. Remember that people tend to pick people like themselves,
so choose interviewers who can identify what you are looking
c. Look for people who are willing to look at themselves
d. Remember that people typically don’t change all that much.
8.3 Think of your teams the way that sports managers do: No one
person possesses everything required to produce success,
yet everyone must excel.
8.4 Pay attention to people’s track records.
a. Check references.
b. Recognize that performance in school doesn’t tell you
much about whether a person has the values and abilities
you are looking for.
c. While it’s best to have great conceptual thinkers, understand
that great experience and a great track record also count for
d. Beware of the impractical idealist.
e. Don’t assume that a person who has been successful
elsewhere will be successful in the job you’re giving them.
f. Make sure your people have character and are capable.
8.5 Don’t hire people just to fit the first job they will do; hire people
you want to share your life with.
a. Look for people who have lots of great questions.
b. Show candidates your warts.
c. Play jazz with people with whom you are compatible but
who will also challenge you.
8.6 When considering compensation, provide both stability and
a. Pay for the person, not the job.
b. Have performance metrics tied at least loosely to
c. Pay north of fair.
d. Focus more on making the pie bigger than on exactly how
to slice it so that you or anyone else gets the biggest piece.
8.7 Remember that in great partnerships, consideration and
generosity are more important than money.
a. Be generous and expect generosity from others.
8.8 Great people are hard to find so make sure you think about
how to keep them.
9 Constantly Train, Test, Evaluate, and Sort People
9.1 Understand that you and the people you manage will go
through a process of personal evolution.
a. Recognize that personal evolution should be relatively rapid
and a natural consequence of discovering one’s strengths and
weaknesses; as a result, career paths are not planned at the
b. Understand that training guides the process of personal
c. Teach your people to fish rather than give them fish, even if
that means letting them make some mistakes.
d. Recognize that experience creates internalized learning that
book learning can’t replace.
9.2 Provide constant feedback.
9.3 Evaluate accurately, not kindly.
a. In the end, accuracy and kindness are the same thing.
b. Put your compliments and criticisms in perspective.
c. Think about accuracy, not implications.
d. Make accurate assessments.
e. Learn from success as well as from failure.
f. Know that most everyone thinks that what they did, and
what they are doing, is much more important than it really is.
9.4 Recognize that tough love is both the hardest and the most
important type of love to give (because it is so rarely
a. Recognize that while most people prefer compliments,
accurate criticism is more valuable.
9.5 Don’t hide your observations about people.
a. Build your synthesis from the specifics up.
b. Squeeze the dots.
c. Don’t oversqueeze a dot.
d. Use evaluation tools such as performance surveys, metrics,
and formal reviews to document all aspects of a person’s
9.6 Make the process of learning what someone is like open,
evolutionary, and iterative.
a. Make your metrics clear and impartial.
b. Encourage people to be objectively reflective about their
c. Look at the whole picture.
d. For performance reviews, start from specific cases, look
for patterns, and get in sync with the person being reviewed
by looking at the evidence together.
e. Remember that when it comes to assessing people, the two
biggest mistakes you can make are being overconfident in
your assessment and failing to get in sync on it.
f. Get in sync on assessments in a nonhierarchical way.
g. Learn about your people and have them learn about you
through frank conversations about mistakes and their root
h. Understand that making sure people are doing a good job
doesn’t require watching everything that everybody is doing
at all times.
i. Recognize that change is difficult.
j. Help people through the pain that comes with exploring
9.7 Knowing how people operate and being able to judge whether
that way of operating will lead to good results is more important
than knowing what they did.
a. If someone is doing their job poorly, consider whether it is
due to inadequate learning or inadequate ability.
b. Training and testing a poor performer to see if he or she can
acquire the required skills without simultaneously trying to
assess their abilities is a common mistake.
9.8 Recognize that when you are really in sync with someone
about their weaknesses, the weaknesses are probably true.
a. When judging people, remember that you don’t have to get
to the point of “beyond a shadow of a doubt.”
b. It should take you no more than a year to learn what a
person is like and whether they are a click for their job.
c. Continue assessing people throughout their tenure.
d. Evaluate employees with the same rigor as you evaluate
9.9 Train, guardrail, or remove people; don’t rehabilitate them.
a. Don’t collect people.
b. Be willing to “shoot the people you love.”
c. When someone is “without a box,” consider whether there
is an open box that would be a better fit or whether you need
to get them out of the company.
d. Be cautious about allowing people to step back to another
role after failing.
9.10 Remember that the goal of a transfer is the best, highest use of
the person in a way that benefits the community as a whole.
a. Have people “complete their swings” before moving on to
9.11 Don’t lower the bar.
TO BUILD AND EVOLVE YOUR MACHINE . . .
10 Manage as Someone Operating a Machine to Achieve a Goal
10.1 Look down on your machine and yourself within it from the
a. Constantly compare your outcomes to your goals.
b. Understand that a great manager is essentially an
c. Build great metrics.
d. Beware of paying too much attention to what is coming at
you and not enough attention to your machine.
e. Don’t get distracted by shiny objects.
10.2 Remember that for every case you deal with, your approach
should have two purposes: 1) to move you closer to your goal,
and 2) to train and test your machine (i.e., your people and
a. Everything is a case study.
b. When a problem occurs, conduct the discussion at two levels:
1) the machine level (why that outcome was produced) and
2) the case-at-hand level (what to do about it).
c. When making rules, explain the principles behind them.
d. Your policies should be natural extensions of your principles.
e. While good principles and policies almost always provide
good guidance, remember that there are exceptions to
10.3 Understand the differences between managing,
micromanaging, and not managing.
a. Managers must make sure that what they are responsible
for works well.
b. Managing the people who report to you should feel like
c. An excellent skier is probably going to be a better ski coach
than a novice skier.
d. You should be able to delegate the details.
10.4 Know what your people are like and what makes them tick,
because your people are your most important resource.
a. Regularly take the temperature of each person who is
important to you and to the organization.
b. Learn how much confidence to have in your people—don’t
c. Vary your involvement based on your confidence.
10.5 Clearly assign responsibilities.
a. Remember who has what responsibilities.
b. Watch out for “job slip.”
10.6 Probe deep and hard to learn what you can expect from
a. Get a threshold level of understanding.
b. Avoid staying too distant.
c. Use daily updates as a tool for staying on top of what your
people are doing and thinking.
d. Probe so you know whether problems are likely to occur
before they actually do.
e. Probe to the level below the people who report to you.
f. Have the people who report to the people who report to
you feel free to escalate their problems to you.
g. Don’t assume that people’s answers are correct.
h. Train your ear.
i. Make your probing transparent rather than private.
j. Welcome probing.
k. Remember that people who see things and think one way
often have difficulty communicating with and relating to
people who see things and think another way.
l. Pull all suspicious threads.
m. Recognize that there are many ways to skin a cat.
10.7 Think like an owner, and expect the people you work with to
do the same.
a. Going on vacation doesn’t mean one can neglect one’s
b. Force yourself and the people who work for you to do
10.8 Recognize and deal with key-man risk.
10.9 Don’t treat everyone the same—treat them appropriately.
a. Don’t let yourself get squeezed.
b. Care about the people who work for you.
10.10 Know that great leadership is generally not what it’s made
out to be.
a. Be weak and strong at the same time.
b. Don’t worry about whether or not your people like you and
don’t look to them to tell you what you should do.
c. Don’t give orders and try to be followed; try to be understood
and to understand others by getting in sync.
10.11 Hold yourself and your people accountable and appreciate
them for holding you accountable.
a. If you’ve agreed with someone that something is supposed
to go a certain way, make sure it goes that way—unless you
get in sync about doing it differently.
b. Distinguish between a failure in which someone broke their
“contract” and a failure in which there was no contract to
c. Avoid getting sucked down.
d. Watch out for people who confuse goals and tasks, because
if they can’t make that distinction, you can’t trust them with
e. Watch out for the unfocused and unproductive “theoretical
10.12 Communicate the plan clearly and have clear metrics
conveying whether you are progressing according to it.
a. Put things in perspective by going back before going
10.13 Escalate when you can’t adequately handle your
responsibilities and make sure that the people who
work for you are proactive about doing the same.
11 Perceive and Don’t Tolerate Problems
11.1 If you’re not worried, you need to worry—and if you’re worried,
you don’t need to worry.
11.2 Design and oversee a machine to perceive whether things are
good enough or not good enough, or do it yourself.
a. Assign people the job of perceiving problems, give them
time to investigate, and make sure they have independent
reporting lines so that they can convey problems without
any fear of recrimination.
b. Watch out for the “Frog in the Boiling Water Syndrome.”
c. Beware of group-think: The fact that no one seems
concerned doesn’t mean nothing is wrong.
d. To perceive problems, compare how the outcomes are
lining up with your goals.
e. “Taste the soup.”
f. Have as many eyes looking for problems as possible.
g. “Pop the cork.”
h. Realize that the people closest to certain jobs probably
know them best.
11.3 Be very specific about problems; don’t start with generalizations.
a. Avoid the anonymous “we” and “they,” because they mask
11.4 Don’t be afraid to fix the difficult things.
a. Understand that problems with good, planned solutions
in place are completely different from those without such
b. Think of the problems you perceive in a machinelike way.
12 Diagnose Problems to Get at Their Root Causes
12.1 To diagnose well, ask the following questions: 1. Is the
outcome good or bad? 2. Who is responsible for the
outcome? 3. If the outcome is bad, is the Responsible
Party incapable and/or is the design bad?
a. Ask yourself: “Who should do what differently?”
b. Identify at which step in the 5-Step Process the failure
c. Identify the principles that were violated.
d. Avoid Monday morning quarterbacking.
e. Don’t confuse the quality of someone’s circumstances
with the quality of their approach to dealing with the
f. Identifying the fact that someone else doesn’t know what
to do doesn’t mean that you know what to do.
g. Remember that a root cause is not an action but a reason.
h. To distinguish between a capacity issue and a capability
issue, imagine how the person would perform at that
particular function if they had ample capacity.
i. Keep in mind that managers usually fail or fall short of
their goals for one (or more) of five reasons.
12.2 Maintain an emerging synthesis by diagnosing continuously.
12.3 Keep in mind that diagnoses should produce outcomes.
a. Remember that if you have the same people doing the same
things, you should expect the same results.
12.4 Use the following “drill-down” technique to gain an 80/20
understanding of a department or sub-department that is
12.5 Understand that diagnosis is foundational to both progress
and quality relationships.
13 Design Improvements to Your Machine to Get Around Your Problems
13.1 Build your machine.
13.2 Systemize your principles and how they will be implemented.
a. Create great decision-making machines by thinking through
the criteria you are using to make decisions while you are
13.3 Remember that a good plan should resemble a movie script.
a. Put yourself in the position of pain for a while so that you
gain a richer understanding of what you’re designing for.
b. Visualize alternative machines and their outcomes, and then
c. Consider second- and third-order consequences, not just
d. Use standing meetings to help your organization run like
a Swiss clock.
e. Remember that a good machine takes into account the fact
that people are imperfect.
13.4 Recognize that design is an iterative process. Between a bad
“now” and a good “then” is a “working through it” period.
a. Understand the power of the “cleansing storm.”
13.5 Build the organization around goals rather than tasks.
a. Build your organization from the top down.
b. Remember that everyone must be overseen by a believable
person who has high standards.
c. Make sure the people at the top of each pyramid have the
skills and focus to manage their direct reports and a deep
understanding of their jobs.
d. In designing your organization, remember that the 5-Step
Process is the path to success and that different people
are good at different steps.
e. Don’t build the organization to fit the people.
f. Keep scale in mind.
g. Organize departments and sub-departments around the
most logical groupings based on “gravitational pull.”
h. Make departments as self-sufficient as possible so that they
have control over the resources they need to achieve their
i. Ensure that the ratios of senior managers to junior managers
and of junior managers to their reports are limited to preserve
quality communication and mutual understanding.
j. Consider succession and training in your design.
k. Don’t just pay attention to your job; pay attention to how
your job will be done if you are no longer around.
l. Use “double-do” rather than “double-check” to make sure
mission-critical tasks are done correctly.
m. Use consultants wisely and watch out for consultant
13.6 Create an organizational chart to look like a pyramid, with
straight lines down that don’t cross.
a. Involve the person who is the point of the pyramid when
encountering cross-departmental or cross-sub-departmental
b. Don’t do work for people in another department or grab
people from another department to do work for you unless
you speak to the person responsible for overseeing the other
c. Watch out for “department slip.”
13.7 Create guardrails when needed—and remember it’s better
not to guardrail at all.
a. Don’t expect people to recognize and compensate for their
own blind spots.
b. Consider the clover-leaf design.
13.8 Keep your strategic vision the same while making appropriate
tactical changes as circumstances dictate.
a. Don’t put the expedient ahead of the strategic.
b. Think about both the big picture and the granular details,
and understand the connections between them.
13.9 Have good controls so that you are not exposed to the
dishonesty of others.
a. Investigate and let people know you are going to investigate.
b. Remember that there is no sense in having laws unless you
have policemen (auditors).
c. Beware of rubber-stamping.
d. Recognize that people who make purchases on your behalf
probably will not spend your money wisely.
e. Use “public hangings” to deter bad behavior.
13.10 Have the clearest possible reporting lines and delineations
a. Assign responsibilities based on workflow design and
people’s abilities, not job titles.
b. Constantly think about how to produce leverage.
c. Recognize that it is far better to find a few smart people
and give them the best technology than to have a greater
number of ordinary people who are less well equipped.
d. Use leveragers.
13.11 Remember that almost everything will take more time and
cost more money than you expect.
14 Do What You Set Out to Do
14.1 Work for goals that you and your organization are excited
about and think about how your tasks connect to those goals.
a. Be coordinated and consistent in motivating others.
b. Don’t act before thinking. Take the time to come up with
a game plan.
c. Look for creative, cut-through solutions.
14.2 Recognize that everyone has too much to do.
a. Don’t get frustrated.
14.3 Use checklists.
a. Don’t confuse checklists with personal responsibility.
14.4 Allow time for rest and renovation.
14.5 Ring the bell.
15 Use Tools and Protocols to Shape How Work Is Done
15.1 Having systemized principles embedded in tools is especially
valuable for an idea meritocracy.
a. To produce real behavioral change, understand that there
must be internalized or habitualized learning.
b. Use tools to collect data and process it into conclusions
c. Foster an environment of confidence and fairness by having
clearly-stated principles that are implemented in tools and
protocols so that the conclusions reached can be assessed
by tracking the logic and data behind them.
16 And for Heaven’s Sake, Don’t Overlook Governance!
16.1 To be successful, all organizations must have checks and
a. Even in an idea meritocracy, merit cannot be the only
determining factor in assigning responsibility and
b. Make sure that no one is more powerful than the system
or so important that they are irreplaceable.
c. Beware of fiefdoms.
d. Make clear that the organization’s structure and rules
are designed to ensure that its checks-and-balances system
e. Make sure reporting lines are clear.
f. Make sure decision rights are clear.
g. Make sure that the people doing the assessing 1) have the
time to be fully informed about how the person they are
checking on is doing, 2) have the ability to make the
assessments, and 3) are not in a conflict of interest that
stands in the way of carrying out oversight effectively.
h. Recognize that decision makers must have access to the
information necessary to make decisions and must be
trustworthy enough to handle that information safely.
16.2 Remember that in an idea meritocracy a single CEO is not
as good as a great group of leaders.
16.3 No governance system of principles, rules, and checks and
balances can substitute for a great partnership.