Want to listen to more stuff like this? Check out my podcast!

People forget your promise, remember your performance.

—Marshall Goldsmith

In 1969, a man named Laurence J. Peter published a book on business management called The Peter Principle. Its central hypothesis is simple:

In a hierarchy, every employee tends to rise to his level of incompetence.

In other words, employees do well and are promoted until they reach a level where they’re finally outmatched by the job (“incompetent”) and incapable of earning another promotion.

“Look around you where you work, and pick out the people who have reached their level of incompetence,” Peter wrote. “You will see that in every hierarchy the cream rises until it sours.”

Moreover, Peter asserts in the book that this phenomenon is “the key to an understanding of the whole structure of civilization.”

The Peter Principle struck a chord and quickly became a runaway hit, staying on the New York Times bestseller list for over a year, and it’s still in print today, 45 years later, with over one million copies sold.

It caught the eye of academia as well, and a number of studies have since demonstrated its validity.

For instance, research conducted by scientists from the Carlson School of Management, MIT Sloan School of Management, and Yale School of Management and published in 2018 involved the analysis of 214 American businesses and found that high-performing salespeople were more likely to be promoted to managerial roles and then fail as managers.

“I expected that the best salespeople would become merely-good managers: some skills translate to management and others don’t,” one of the researchers said. “To see that the best salespeople were becoming the worst sales managers was surprising.”

Perhaps more surprising is the fact that The Peter Principle started as a joke. The entire book was satire.

Peter’s evidence came from a “Hypothetical Case File” that contained employees like Miss Oval, Mrs. Cylinder, Mr. Eclipse, Mr. Cube, Mr. Sphere and Mr. Tinker, and some of the book’s practical suggestions include using pretended incompetence to prevent promotions that might lead to your professional demise (“Creative Incompetence”), hiding true incompetence by focusing exclusively on preparing for work as opposed to actually doing it by, for example, reaffirming the need for action, researching other ways to get the job done, and seeking expert advice (“Substitution”), and “pseudo-promoting” incompetent people by simply upgrading their titles (“Lateral Arabesque”).

The irony produced plenty of laughs, but many readers also knew that Peter was onto something real that was going on in businesses everywhere: the higher they looked in organizations, the more incompetence they found. And it turns out that Peter’s hypothesis helps explain why.

For my part, I think Peter’s Principle holds true in far more than just business. I believe that in life, we don’t rise to the level of our ambitions, but to the level of our incompetence. In other words, we can only get so far in any area, activity, or endeavor with the mindset, knowledge, and skills that we currently have.

Moreover, chances are those boundaries are well short of where we ultimately hope to arrive. And that’s okay. It happens to the best of us.

Take Ray Dalio, who’s the billionaire founder of one of the world’s largest hedge funds, Bridgewater Associates.

Imagine this for a minute: you’re Dalio, it’s 1982, and you and your growing team have spent eight years working tirelessly to build an investment firm, which is well on its way to becoming a world-class enterprise.

Based on your understanding of the economy, you’re absolutely certain that a catastrophic financial crash is on the horizon and the Fed’s strategy to avert it is going fail, and sooner rather than later.

In fact, you’re so sure of your insights that you testify before Congress that there’s a 95 percent chance the Fed’s efforts will fail to save us, and a 5 percent chance that they’ll work but trigger hyperinflation. And then you bet the farm on your prognosis.

You’re dead wrong. The economy responds to the Fed’s efforts and inflation falls while growth accelerates. The stock market soars and begins what will become a historic bull run, along with the most painful experience of your life.

Here’s how Dalio described the downfall in his penetrating 2017 memoir-cum-compendium Principles:

My experience over this period was like a series of blows to the head with a baseball bat. Being so wrong—and especially so publicly wrong—was incredibly humbling and cost me just about everything I had built at Bridgewater. I saw that I had been an arrogant jerk who was totally confident in a totally incorrect view.

So there I was after eight years in business, with nothing to show for it. Though I’d been right much more than I’d been wrong, I was all the way back to square one.

At one point, I’d lost so much money I couldn’t afford to pay the people who worked with me. One by one, I had to let them go. We went down to two employees—Colman and me. Then Colman had to go. With tears from all, his family packed up and returned to Oklahoma. Bridgewater was now down to just one employee: me.

Losing people I cared so much about and very nearly losing my dream of working for myself was devastating. To make ends meet, I even had to borrow $4,000 from my dad until we could sell our second car. I had come to a fork in the road: Should I put on a tie and take a job on Wall Street? That was not the life I wanted. On the other hand, I had a wife and two young children to support. I realized I was facing one of life’s big turning points and my choices would have big implications for me and for my family’s future.

Dalio didn’t simply “rise to the level of his incompetence”—he loaded himself into a cannon, pointed it to the sky, and blasted himself into smithereens.

What do you think you’d do if you were in his shoes? Would you pack it in?

Dalio not only didn’t give up (obviously), but he decided to turn the catastrophe into an invaluable learning experience and figure out where he had gone wrong and why. More specifically, he wanted to figure out where his systems failed him and how to improve and prepare them for another run at the markets.

I won’t spoil the entire story here (read his book!), but this process ultimately led to the development of a revolutionary new investment strategy (system) that would catapult Dalio to greater success than ever before and set the trajectory for the rest of his life.

One of the key lessons that we can learn from Dalio’s incredible story is threefold:

  1. No matter who we are, we can all be struck down by the Peter Principle.
  2. We should give just as much attention to our level of incompetence as our goals.
  3. The better our systems, the higher we can rise before reaching our limits.

We can also observe that the greater the goal, the more robust the system must be for achieving it. Mere “hustle” isn’t enough because that’s just energy that can move the machine, not determine the outcome. It’s a means, not an end.

So know this: as important as goals setting is, system building is far more so. No matter how beautifully we populate the landscapes of our futures with lush dreams and desires, only equally magnificent systems can build bridges across the chasm between what currently is and what could be.

Your goal might be to increase your powerlifting numbers by 50 pounds. Your system would involve the way you eat, train, recover, and supplement.

Or maybe your goal is to build a successful business. Your system would involve how you create and sell products and services, recruit and retain employees, and use and manage finances.

Or maybe your goal is to learn a new language. Your system would involve how often you practice, how you learn new words, and how you learn grammar and syntax.

A textbook example of the power of systems is the story of the legendary college basketball coach John Wooden, who won ten NCAA Championships in twelve years and went on an unprecedented sixty-one-game winning streak.

What many fans don’t know, however, is that Wooden coached his Bruins for fifteen years before winning his first championship. During this time, he worked in relative obscurity to assemble his system piece by piece, from recruiting the right players to developing his coaching style and philosophy to advancing the full-court-press style of play. No one quite understood or appreciate what Wooden was doing until, “suddenly,” the humble coach and his team started trouncing every competitor.

So my point is this: While clearly and properly formulating goals is an important aspect of successful living, effective systems are ultimately what produce achievements. And I believe that too many people focus far too much time and energy on formulating goals and far too little on building and refining systems.

How do we build better systems, though? Systems that will enable us to do all the things that we want to do? Fully answering those questions would require an entire book in itself, but that doesn’t mean that we can’t benefit from a brief discussion of some of the more important insights.

Let’s begin by first answering a simpler question: what is a system?

In her incisive 2008 book Thinking in Systems, MIT scientist and pioneer Donella Meadows defines a system as “an interconnected set of elements that is coherently organized in a way that achieves something.”

By definition, then, a system consists of elements (parts), interconnections (how the parts affect each other), and a function or a purpose (the effect produced).

In systems theory lingo, an element that you can see, feel, count, or measure at any given time is referred to as a stock. Examples are the food in your pantry, the people in a town, the nutrients in a plant, the money in your bank account, and your happiness.

Interactions (interconnections) can be harder to spot and learn about, but boil down to entities that make stocks increase or decrease, like a faucet or drain that changes the stock of water in a bathtub. Technically speaking, this movement of material is known as a flow.

In many cases, flows involve the transfer of information, like the concepts you’re learning through my use of the system of language, but they can also involve physical flows, such as the blood moving through your veins.

When viewed this way, a basketball team is a system. Its elements include players, coaches, a court, and a ball; its interconnections include the game’s rules, the coaching strategies, the communication between players, and even the laws of physics that govern how the ball and players move; and its purpose can vary by team and player, including winning games, having fun, getting exercise, or making money, or all or none of these and something else altogether.

Diet and exercise regimens are systems that can create muscle, strength, and vitality. Curiosity, education, experimentation, and refinement are part of a system that can create professional advancement and success. Admiration, affection, respect, gratitude, compromise, and communication can be combined into a powerful system for developing deeply satisfying romantic relationships.

We can find systems everywhere we look. Schools, cities, countries, companies, economies, animals, plants, forests, planets, solar systems, and galaxies are all systems with concrete structures, interactions, and functions.

You may be wondering what isn’t a system. Any collection of things without any meaningful mutual connections or function is not a system. A mass of people walking in a park is not a system per se. You can add or subtract people and you still just have people walking in a park. Remove the point guard from a basketball team or a piece of your cardiovascular system, however, and the desired outcome may no longer be possible.

There are also a number of ways to improve systems, and as far as personal achievement goes, two of my favorite methods are quantification and ritualization.

By quantification I’m referring to measuring and paying attention to things that are important, and by ritualization I’m referring to developing and maintaining the right habits.

Let’s review each in more detail.

Quantification and the Power of Counting

In his bestselling 2008 book Better: A Surgeon’s Notes on Performance, Atul Gawande wrote the following:

Count something. Regardless of what one ultimately does in medicine—or outside of medicine, for that matter—one should be a scientist in this world. In the simplest terms, this means one should count something. … It doesn’t really matter what you count. You don’t need a research grant. The only requirement is that what you count should be interesting to you.

Counting is crucial because it’s a powerful way to determine whether a system is fulfilling its stated purpose or not.

If your goal is to gain muscle and strength and you don’t record your workouts or body measurements, you won’t have the raw data required to know with certainty whether your diet and exercise systems are working.

You might have intuitions or educated guesses, but these can be faulty and you can never be certain. This uncertainty can slowly or quickly sap your motivation and willingness to continue dieting and training.

By quantifying and tracking at least one thing that’s important, however, you’re installing in your system what’s known as a feedback loop, which is a significant component of all complex systems.

By definition, a feedback loop is formed when the change in a stock of a system affects the flows into or out of that same stock. In other words, it’s a mechanism whereby an output can “loop” back to and affect the thing that produced it.

When you assess the balance of your bank account (stock), if you feel the level is too low, you may adjust your work hours upward to bring in more cash (flow in) or curtail spending (flow out) or both. On the other hand, if you’re feeling flush, you may decide to work less and bring in less money or spend more freely or both. Without such an assessment, however, you may change nothing in the system until outside factors come into play, like a check bouncing or a desire to make a large purchase like a home. Thus, a simple bank statement can help form a feedback loop.

Similarly, by tracking your workouts and body measurements, you can assess the changes occurring in your whole-body strength and muscle (stocks) and know whether something in your system needs to change or not.

The same goes for any goal and accompanying system. A cardinal rule of good systems is you should always be tracking something, and ideally, the thing that best measures the fulfillment of the function or purpose.

Sometimes this can be hard to do because what matters most isn’t always easily quantifiable. If the purpose of a system is to increase your happiness, that’s harder to measure than let’s say, improving your golf game.

That doesn’t mean it can’t be done, however. For example, The Oxford Happiness Questionnaire is a comprehensive and evidence-based quiz that can help you quantify your subjective sense of wellbeing. As of this writing, you can take it online for free.

Whatever you do, don’t fall into the trap of setting goals around things that are easily measured instead of what’s truly important. Our culture is obsessed with numbers and tends to pay the most attention to things that can be clearly defined and counted and disregard those that can’t be readily gauged, which are often qualitative in nature. Sometimes quality should be the focus, though, not quantity.

Ritualization and the Power of Habit

If you look over the most common New Year’s resolutions for the last decade or so, it’s clear that many of us are struggling to do many of the same things.

Year after year, millions of people resolve to eat healthier, lose weight, exercise more, save more money, focus more on self care, and read more, only to fall well short of the mark again and again.

When viewed through the lens of systems theory, none of these goals should strike us as particularly complex undertakings. Moreover, thanks to the staggering amount of high-quality information available on how to do any of these things, they don’t require much in the way of creativity, either.

One of the primary reasons these ambitions are so thorny is the systems that produce them often require major deviations from people’s habitual behavior patterns. And all of us know how difficult it can be to stop doing the things we know we shouldn’t be doing and start doing the things we should be doing.

The result is oftentimes the new routines (systems) we adopt or develop to improve our diets, shrink our waistlines, and swell our savings accounts lack resilience, or the ability to survive or persist in an ever-changing environment.

It can take a tremendous amount of thrust to escape the gravity well of what’s familiar, and once we have, it can be frustratingly easy to fall back into it due to stress, temptation, or malaise. Thus, the better we can ingrain the right habits and avoid the wrong ones, the better our systems will operate.

Here’s how Charles Duhigg explains it in his blockbuster 2012 book The Power of Habit:

Habits are powerful, but delicate. They can emerge outside our consciousness, or can be deliberately designed. Habits often occur without our permission, but can be reshaped by fiddling with their parts. They shape our lives far more than we realize—they are so strong, in fact, that they cause our brains to cling to them at the exclusion of all else, including common sense.

Indeed, according to research conducted by scientists at Duke University, as much as 40 percent of our daily actions are dictated by habits. Biologically speaking, this makes sense. By “habitualizing” activities, our brains are able to conserve energy and perform common tasks more efficiently.

How, then, can we get better at wielding the power of habit and thereby increase the resilience of our systems for positive change? The following three strategies can help:

  1. Start easy and small
  2. Improve gradually
  3. Expect failure

Let’s discuss each.

Start Easy and Small

When it comes to building and breaking habits, consistency is the name of the game. The more often you do or don’t do things, the easier it becomes to continue doing or not doing them.

This is why you want to avoid biting off more than you can comfortably chew in the beginning of any new endeavor. Instead, you should start with something that’s so easy and small that you simply can’t say no to it.

Want to get more and better sleep? Start with going to bed 15 minutes earlier than usual each night. Want to eat a healthier diet? Start with eating one additional healthy meal per week. Want to increase your net worth? Start with saving just 1% more of your income each week.

Remember that in the beginning, the goal is simply to get in motion, not go for radical transformation. That comes later, through consistent and enduring effort.

Improve Gradually

Once an easy, simple habit has taken root, you can improve it by adding difficulty or complexity.

Don’t try to do too much too fast, though, lest you trip yourself up. Be patient and strive for small, incremental improvements that in and of themselves seem almost trivial, but that can add up to significant changes over time.

Think of it this way: If you were to improve something, anything, by just 1 percent per day for a year, it would be nearly 38 times better than when you started. Just 1 percent better per day for a month yields a 135 percent improvement. This is the power of compound interest applied to our lives and explains why making regular small refinements to our habits is a surefire path to stellar outcomes.

Let’s take another look at the habit of going to bed 15 minutes early mentioned above. Once that’s on automatic, you could slightly increase the difficulty and complexity by pushing your bedtime forward another 15 minutes and ending screen exposure 15 minutes earlier than usual.

By repeating this process of acclimating to conditions and then adding difficulty or complexity, you can eventually have a powerful system in place for being maximally rested.

For the purpose of eating a healthier diet, you could increase the number of healthy meals per week, have fewer servings of sugar, start taking a high-quality multivitamin supplement, and so on.

As for increasing your net worth, you could start diverting a portion of your savings to a retirement account, and then increase contributions accordingly. Then you could begin building a fund for buying a home.

You get the idea.

Many people mistakenly view successes as distinct events—as things that suddenly materialize, like lightning flashes in a thunderstorm. This is almost never the case.

Instead, most wins are the natural and inevitable result of the slow and steady accumulation of marginal progress—the raindrops that slowly fill the reservoir until it finally overflows.

Expect Failure

Dan John, an author and record-holding strength and conditioning coach, often tells his new athletes that they’re “not good enough to be disappointed.”

This goes for any of us starting anything new and challenging. What is there to be disappointed about? That we didn’t experience immediate breakthroughs? That we made the same kinds of mistakes that everyone makes at first?

Instead of expecting perfection and scolding ourselves as soft, stupid, or unskilled when we fail to live up to that standard, we should cut ourselves some slack and focus our energies on moving in the right direction again instead.

We haven’t earned the right to be disappointed yet, so why get ahead of ourselves?

The fact is failing in an attempt doesn’t make us a failure. It makes us normal. Every system has its flaws and falters from time to time. What matters more is how quickly you can bounce back and resume normalcy.


If you’re reading this article, I think it’s fair to assume that you want to get better. And not just in the gym, but in many other ways as well.

You probably also realize that you’re going to have to make meaningful changes in your life to get better—that doing the same things you’ve been doing, even more vigorously, probably won’t get you to where you want to be.

This means that you’re going have to be more than a good worker—you’re going to have to be a good designer as well. You’re going to need better and better systems that can transform your energy and effort into better and better outcomes.

What’s your take on this topic? Have anything else to share? Let me know in the comments below!