What Does Ray Dalio Have To Do With Your Business And Why Is It Important?

Ray Dalio is the founder of the investment firm Bridgewater Associates. He had an estimated net worth of $15.4 billion in 2014 according to Forbes! So, what does Ray Dalio have to do with your business?

Probably nothing directly. But, based on his net worth, Dalio knows business so we should learn from him! He came up with a simple model that describes a business or an organization that has worked well for him over the years. I would suggest that understanding his simple model is critical to the success of your business. The model is shown in the picture for this blog post (note that I have exercised my artistic license and added a few items for clarity!)

As business leaders, each of us is responsible to produce results in our organizations. Results drive our businesses. Without achieving positive results, a business is really worthless. Dalio‘s model illustrates that a business starts with a Vision and then delivers business results or Outcomes through a Machine. The model stresses that the Outcomes are a direct result of the Vision and the Machine (both of which are defined below);

  1. Vision– the long term direction that leaders set for their business. This Vision is usually broken down into shorter term goals that work at making the Vision possible. The Vision and goals are fed into the Machine.
  2. Machine – this is the inner workings of your business. The Machine is composed of everything it takes to make your business function and to turn the Vision and goals into an Outcome. Note that the Machine is basically composed of three parts; People, Processes and Tools.

If the Outcomes the business is achieving from its “Machine” do not match the Vision and goals, you have only two things you can do to fix this mismatch (as indicated by the two “feedback” loops in the diagram);

  1. You can adjust your Vision and goals
  2. You can adjust the Machine until it begins to produce the Outcomes you desire

This seems really simplistic but I am amazed at how many organizations do not understand this. Too many organizations do not have a clearly articulated Vision and many more do not have a solid Machine with clearly defined processes, established tools and trained people. These same organizations struggle every month to attain an Outcome that is unattainable because their Machine is broken or their Vision is not clear.

If you are in this position, don’t keep doing the same things over and over expecting different results. Albert Einstein called this the definition of insanity. You need to change something in your equation to get different results. Here are your options;

  1. Go back and look at your Vision. Is it clearly articulated? Do you have SMART goals defined that will help you achieve this Vision? Does it match the reality of the marketplace and the product or service that you are offering?
  2. Look under the hood of your Machine. What is not working properly? What needs to be thrown out? What needs to be upgraded? What changes do you need to make to your people, processes and tools? What can you change to start moving towards an Outcome in line with your Vision?

Spend some time this week evaluating your business through this model. What tweaks can you make that will move the Outcomes in line with your Vision and goals?

Please note: I reserve the right to delete comments that are offensive or off-topic.

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