Readings.

Meditations on the books that shape how I think, and short spoken meditations recorded across the last months. Dated as I wrote or recorded them, lightly edited for clarity, kept close to how they first came out.

Ray Dalio

Principles

07/02/24

Today the book focuses, as a first point, on identifying problems and not tolerating them; and then on discovering the root causes of those problems, in order to later design or redesign systems to attack and resolve them over the long term. Great emphasis is put on differentiating between people and design as primary sources of error, and, in the case of people, knowing how to differentiate between behavior patterns (linked to the mistakes made), where it is important to distinguish exceptions from patterns. Also, the difference between capabilities and skills, in the case of people, is fundamental. Design plays a key role. In principle, managers, as company engineers, see things from above and supervise that the orchestra plays in tune through the analysis of performance indicators, tracking of progress, and setting of specific goals. In this case, design failure is the manager's responsibility. It is also necessary that these failures are accepted and rectified. Escaping the responsibility of accepting mistakes at the top of leadership can be a clear signal of a lack of character and, above all, of high ego, which in the long run harms the organization. The search for truth is another relevant point in these chapters. A quality manager should not put the 'happiness' of the group or of each individual above what is good for the collective as a whole. That means placing people in positions they do not necessarily want to fill, and letting go of people who are nice but do not perform according to the quality standards of the organization. Finally, I think the most relevant piece of these chapters is using mind maps or flow diagrams to identify at which exact point in the machine's value chain the failure occurred. Above all, the questioning mechanism the analyst in charge (the diagnostician) needs to use is based on the 5 Whys, which I learned once in Design Thinking classes and in many entrepreneurship talks tied to the Lean methodology. In short, the goal of these methods is to find the root of the matter by knowing how to segment each step systematically, placing yes/no questions to separate them, adding layers of complexity about people (capabilities, skills, patterns, exceptions), and finally weighing whether it was really a manager's mistake (design) or a mistake of the people that make up that design. A good diagnosis of these fundamental errors can prevent many spillover effects in the near and long term of an organization since, as the book notes: 20% of the causes generate 80% of the suboptimal results of the organization (including companies, nations, or individuals). Given the importance of finding truth in this case, it is important to always rely on as many involved people as possible, individually, to reach the core of the problem effectively and, above all, in an organized way.