Startup general interest

Truth is the essential foundation for producing good outcomes

By August 28, 2013 2 Comments

Following strong recommendations from two portfolio company founders (thanks Josh and Evgeny) I have just finished reading Ray Dalio’s principles, which is best thought of as a guide to running a business. Ray has distilled his principles over forty years running Bridgewater, a successful fund management business, and they encompass company culture and operational tactics.

Overall it’s a great read, and one that took me a long time because I kept pausing to consider how his thoughts might help our portfolio companies, our operations here in Forward Labs, and even my personal life. Two of the things Ray says are interesting for all startup CEOs to consider.

Firstly, getting to the truth. Ray makes a huge deal of the importance of getting to the truth. As he says:

—more precisely, an accurate understanding of reality—
is the essential foundation for producing good outcomes.

This concept is an interesting one for startups where entrepreneurs deliberately create ‘reality distortion fields’ in order to bind people to their cause, and seek to keep morale high by discouraging negative thinking, particularly when the going gets tough. The challenge is not letting a positive attitude distort assessment of the facts and lead to bad decision making. This challenge is made tougher by ‘confirmation bias’ the natural human tendency to seek out evidence that confirms what we believe and dismiss evidence that contradicts it. A positive attitude combined with confirmation bias has led too many startups to misread the tea leaves and allow hope to triumph over experience. Getting to the truth is something that non-executive other people not caught up in the day to day startup bustle can help with.

Secondly, Ray advocates operating business with a clear five step process:

  1. Set goals
  2. Identify problems
  3. Diagnose the problems
  4. Create a plan
  5. Implement the plan

His insight is that separating these steps leads to clearer thinking and better plans and execution. I’ve found that this discipline has already helped with addressing lots of smaller problems.