On the Limits of Thought Meritocracy

We believe that we live in the land of opportunity. Equality of opportunity is enshrined as one of the most important principles of our republic. This is the American Dream. If you work hard and apply your talents you can achieve success in whatever dream you pursue. This is the dream that has drawn millions of people to our shores and continues to draw people from across the globe.

It is thought that this diversity of peoples and cultures is America’s greatest strength: that all these different ways of thinking and of solving problems is the key to our prosperity. Many Silicon Valley CEOs (such as Elon Musk, Sergei Brin and Steve Jobs) are immigrants or their first generation offspring as are many small business entrepreneurs.

I had thought that equality of opportunity was meritocratic: that if you learned well and worked hard anybody could achieve success and that, therefore, America was a meritocracy as well as a democracy. I have argued in previous posts (On Diversity, June 16, 2016) that diversity can help achieve superior outcomes in problem solving but that this is due to thought diversity (where meritorious ideas will rise to the top no matter their source) and not necessarily to race, gender or other types of diversity (although people of other races, genders, etc. will likely have some thought diversity as well). The key to this success is not the diversity but the commonality of the goal. If all these diverse people are working toward a common goal then the results will be outstanding. If the diverse people are working for different goals then all you will have is chaos.

I was therefore very interested when hedge fund billionaire Ray Dalio wrote a book, Principles (2016), that described how thought meritocracy was the driving source for the success of his company, Bridgewater Associates. I was curious to see how he applied thought meritocracy to a private sector business and wanted to consider if his techniques could be applied to the public sector as well.

Mr. Dalio, however, uses some very undemocratic techniques to achieve his meritocratic success. First, the corporate culture at Bridgewater is unique and not everyone can adapt to this culture and the demands it puts on individuals. His solution is to fire people who cannot adapt. In this way he can maintain a cohesive corporate culture so that everyone is using thought diversity to achieve common goals.

Secondly he uses a process he calls radical transparency to discover what is the truth and that people have nothing to fear from the truth (even if this truth is that someone is unsuitable for the company and has to be let go – they will be better off finding a workplace more suitable for them). Radical transparency goes beyond taping all meetings and distributing them to “relevant” people so that there are no secrets among company employees. Managers are required to keep a mistake log of each employee because we only learn from our mistakes. Employees are required to critique their fellow employees publicly and to discuss these criticisms with the affected employee.

All “relevant” employees are involved in decision-making and the final decision is based on the consensus of the employees involved. But the opinion of each employee is not valued the same. It is logical that the opinion of new hires would carry less weight than that of a seasoned, successful employee. But Mr. Dalio has developed a system that tabulates the weight of each employee in a “believability matrix” such that when a vote for consensus is taken each weight is known and the decision can be quickly determined (because of radical transparency this weight is publicly known within the company).

All of this may sound like a very effective meritocracy but it doesn’t sound much like a democracy. It sounds more like the Red Guards enforcement of self-criticism of bourgeois running dogs and fellow travelers. In fact Bridgewater appears to be very much like how the Communist Party of China is trying to run their country (except for the transparency part).

“Conscientious practice of self-criticism is still another hallmark distinguishing our Party from all other political parties. As we say, dust will accumulate if a room is not cleaned regularly, our faces will get dirty if they are not washed regularly. Our comrades' minds and our Party's work may also collect dust, and also need sweeping and washing.”

Mao Zedong

In China, common goals are established by the central authority and everyone else is required to work toward those goals (or else). There are even reports about China using social media to track each persons faithfulness toward the Communist Party and to give them a ranking in a nationwide Social Credit System (unlike Mr. Dalio’s believability matrix your ranking in the Chinese Social Credit System will only be known to the authorities).

Mr. Dalio might be shocked to learn that I compared his techniques to those of Communist China. His employees voluntarily joined his company and the employees he fires can get a new job and don’t have to go to re-education camps or prison. So instead of finding how Mr. Dalio’s ideas can be applied to America I have discovered a unique way to analyze the power and threat that China represents.

The question remains; how can America use its diverse human resources (along with our natural resources and geographic advantages) to compete on the global stage with countries that do not share our values and principles? The truth is that diversity of thought can achieve superior results as long all the diverse elements are working toward a common goal. The problem that America faces is that all our diverse elements are not working toward common goals but rather very different and antithetical goals.

How can we obtain the unity of purpose to defend our country and our Western Civilization given the divisive nature of American politics? See my next post: On Leadership