Radical Transparency Can Reduce Bias — but Only If It’s Done Right

Radical Transparency Can Reduce Bias — but Only If It’s Done Right
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Bridgewater Associates, which was founded by Ray Dalio in 1975, is the largest hedge fund in the world, managing almost $160 billion. Its size and success are not the only interesting thing about the company. Another is Dalio’s philosophy of “radical transparency,” a topic he discusses in his new book, Principles. He brought the idea to the company in 1993, after three of his top confidants told him in a memo that he was hurting the firm by being too honest. To resolve the issue, Dalio started meeting with his employees individually to discuss how to treat one another. His goal? To create a culture where employees could engage in “thoughtful disagreement” and exchange ideas without creating lasting conflict, even when the ideas were controversial.

Dalio explained the concept of radical transparency in a recent interview:

I think the greatest tragedy of mankind is that people have ideas and opinions in their heads but don’t have a process for properly examining these ideas to find out what’s true. That creates a world of distortions. That’s relevant to what we do, and I think it’s relevant to all decision making. So when I say I believe in radical truth and radical transparency, all I mean is we take things that ordinarily people would hide, and we put them on the table, particularly mistakes, problems, and weaknesses. We put those on the table, and we look at them together. We don’t hide them.

Scientific evidence confirms Dalio’s belief that, as human beings, we tend to evaluate information in a biased manner. For instance, we often fall prey to what psychologists and decision researchers call confirmation bias: the tendency to focus on evidence that confirms our beliefs and assumptions rather than looking for data that contradicts it.

Making matters worse, we often do not realize that such biases weaken our judgments and decisions. As Benjamin Franklin once said, “There are three things extremely hard: steel, a diamond, and to know one’s self.”

Research supports Franklin’s assertion. As Tasha Eurich writes in her 2017 book, Insight, about 95% of us think we have strong self-awareness, but only about 10% to 15% of us actually possess it. And, in fact, the more power we have, and the higher we ascend in our careers, the less self-aware we become.

Part of the problem, as hundreds of studies show, is that we think too highly of ourselves on all sorts of positive dimensions. For instance, 80% of people (including me!) believe they are better-than-average drivers. One survey conducted on 1,000 Americans in 1996 showed that people rated themselves as more likely to get into heaven than Mother Theresa. When it comes to understanding ourselves, there’s a gulf between perception and reality.

Unfortunately, when others confront us with our biases, we may have difficulty listening to their feedback and learning from it, especially when it is inconsistent with the way we view ourselves and our work. In fact, as I wrote in another article, research that I conducted with Paul Green of Harvard Business School and Brad Staats of the University of North Carolina in Chapel Hill found that people tend to move away from those who provide feedback that is more negative than their self-views. We tend to strengthen bonds only with people who see our positive qualities. Why? When others provide evidence that is inconsistent with how we view ourselves or our ideas, we find that information threatening. Our natural reaction is to remove the threat — which can mean dissociating from the source of the information.

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In addition, as Dalio has observed, we tend to avoid discussing our weaknesses and mistakes, choosing instead to dwell on what we’ve done right. Take job interviews. Candidates regularly discuss their strengths and hide weaknesses in interviews, and they even engage in extensive image creation to the point of telling fictional stories to showcase their strengths. In virtually any context, it’s more comfortable to focus on the positive than the negative, even if doing just the opposite would be more beneficial.

This is quite a list of biases and problematic tendencies that we all share. Making them transparent, and making it acceptable to do something about them, as Dalio has done at Bridgewater, has the potential to be helpful. It could encourage more open conversations where people challenge one another in search of the right solution, rather than to prove themselves right. This type of transparency has proved useful in other contexts.

Research has found that transparency increases customers’ perceptions of the value of a good or service, their satisfaction of it, and their willingness to pay, irrespective of its quality. For example, when travel websites provide a visual representation of the search effort being exerted on a customer’s behalf (such as posting the number of travel sites the algorithm is searching, enumerating how many results are found, and creating a visual image of “scrolling”), customers report higher perceptions of service value. Other research has discovered that businesses that are the most transparent in the way they report results also achieve higher performance. As compared with most surgical centers, which don’t report their prices in advance, the Surgery Center of Oklahoma offers would-be patients a complete online price list for every procedure. According to center officials, the increased transparency has resulted in a large uptick in demand, with patients now traveling from other states and even other countries to Oklahoma for surgery.

Transparency generates trust in both consumers and employees, and it also helps rebuild trust when damaged or lost. In one study where all organizations used the same transparent messaging in response to a crisis, participants judged the companies that had a reputation for transparency as more trustworthy than those that had seemed less transparent.

True, some research has pointed out potential issues with transparency. In particular, work by Ethan Bernstein at Harvard Business School shows that when employees know the bosses are watching, they are less productive than when their work is more private. But in this case transparency takes a different meaning; when there is a sense that one is being monitored, we all tend to react negatively.

As Dalio describes in detail in his book, what he did at Bridgewater is rather different from monitoring people’s work. Through radical transparency, Dalio has encouraged a culture where people know it is important to challenge one another’s views, regardless of rank, and do so regularly. This approach works if people discuss ideas and issues openly, even if that involves publicly pointing out each other’s mistakes.

But as Dalio recognizes, not everybody is ready to commit to radical transparency. “It is initially very difficult for most people to deal with uncomfortable realities,” he says. But when Bridgewater employees buy into Dalio’s radical transparency, he adds, the result is a climate that enables them to constructively bring forward evidence that’s at odds with others’ ideas and views without them taking it personally.

When transparency unveils our universal human biases, we are more likely to benefit as individuals. Our organizations will benefit as well.

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