Ray Dalio: The 5 Criteria for Success
Ray Dalio is the founder of Bridgewater, the world’s largest hedge fund. He has been ranked as one of the 50 most influential people in the world. He grew up in a middle class home as the only child of two Italian-American parents and started investing at age 12.
In short, he is a pretty badass dude who went from very humble background and has made it to the world elite.
The best advice I can give you is to ask yourself what you want, then ask ‘what is true’, and then ask yourself ‘what should be done about it’. If you honestly ask and answer these questions you will move much faster towards what you want to get out of life than if you don’t!
– RAY DALIO –
In the book Bridgewater Principles (included in the bottom) Dalio describes his own five main criteria for success in life; regardless of how one defines “success”.
Theoretically speaking all these five criteria are pretty easy to understand. But there’s a huge difference between theory and practice: it takes a long time to not only understand, but to fully embody all the five criteria.
The first of the five criteria for success is…
1. Letting Pain Stand in the Way vs Accepting and Managing Pain
Once you accept that playing the game will be uncomfortable, and you do it for a while, it will become much easier … When you think that it’s too hard, remember that in the long run, doing the things that will make you successful is a lot easier than being unsuccessful
– RAY DALIO –
People who fail to overcome the initial pain, effort, or boredom that is required to execute on a long-term goal tend to not make it that far.
On the other hand, those who accept that they will have to go through some tedious work at first in order to accomplish epic things will look upon the pain as temporary and see it as a necessary evil while focusing on the light in the end of the tunnel.
To illustrate this Dalio uses the example of how there is good pain and there is bad pain. Good pain comes from pushing through towards one’s goals, bad pain is what we will end up with if we don’t go after that which we desire.
When we accept the temporary pain that comes from overcoming challenges we are in what Dalio refers to as the stretch-zone. It’s similar to conducting strenuous physical exercise; positive pain is the pain that comes from growing.
2. Avoid Facing Harsh Realities vs Facing Harsh Realities
Remember that identifying problems is like finding gems embedded in puzzles; if you solve the puzzles you will get the gems that will make your life much better.
For every mistake that you learn from you will save thousands of similar mistakes in the future, so if you treat mistakes as learning opportunities that yield rapid improvements you should be excited by them.
– RAY DALIO –
Surely you have some friend who is pretty mediocre in all aspects of his life, but still sees himself as an übermensch despite having NOTHING to back that belief up.
It’s like this friend of yours is blind to reality – and not in a positive Steve-Jobs-kind-of-way of distorting reality to his advantage.
It’s a lot better to face harsh realities RIGHT NOW rather than avoiding them. Ray Dalio meditates every day in order to better face reality and prescribes the same to others. (I concur.)
People who don’t face harsh realities overstay their visit in the comfort zone while gradually becoming more and more passive until the comfort zone eventually turns into anxiety mixed with pain and eventually swallows them whole.
People who face harsh realities understand that they are not perfect, nor will they ever be, but yet they consistently try to adjust to the feedback given to them and they strive to become better by acting in alignment with reality.
The sooner you can face a harsh reality, the sooner you can start to change it.
In the case of your friend it would be better to face the harsh reality that he currently sucks at life and needs to correct to the feedback that reality is giving him. Only then can he work on his weaknesses in a sincere effort to improve.
The bottom line is this: you cannot wipe reality out, but reality can wipe you out.
3. Worrying about Looking Good vs Accomplishing the Goal
People who worry about looking good typically hide what they don’t know and hide their weaknesses, so they never learn how to properly deal with them and these weaknesses remain impediments in the future.
T o test if you are worrying too much about looking good, observe how you feel when you find out you’ve made a mistake or don’t know something
– RAY DALIO –
Are you playing not to lose or are you playing to win?
If you are playing not to lose you are valuing your social image above the accomplishment of the goal.
If you are playing to win you accept that you’re going to fall face down and make a fool of out yourself every once in a while and it’s going to be embarrassing or painful in the short-term, but in the long-term it is going to be A LOT more satisfying.
If you are playing to win temporary setbacks will not deter you because you know and accept the fact that it’s impossible to win big without failing first.
People who cling to the idea of thinking that they know everything are scared to ask questions because they are afraid it might make them seem ignorant. People who think that they are perfect are afraid to do anything that is socially questionable and might make them lose face.
The result in both of the cases above is that these people will end up spending their time and focus on maintaining current appearances rather than to actually make forward progress.
To prevent this from happening to you, constantly ask yourself this one question:
Am I currently trying to keep up my appearance so that I look good, cool, or socially correct, or am I disregarding that in priority of accomplishing my goals?
Play. To. Win.
4. Short-Term Thinking vs Long-Term Thinking.
It is important not to confuse ‘goals’ and ‘desires’. Goals are the things that you really want to achieve, while desires are things you want that can prevent you from reaching your goals.
– RAY DALIO –
One of the major differences between people who are successful at accomplishing their goals vs those who are not is whether they are able to defer immediate gratification, develop their long-term thinking, and keep track of their goals.
People with good work habits have to-do lists that are reasonably
prioritized, and they make themselves do what needs to be done. By contrast, people with poor work habits almost randomly react to the stuff that comes at them, or they can’t bring themselves to do the
things they need to do but don’t like to do (or are unable to do).
– RAY DALIO –
People who regularly give into their desires for instant gratification haven’t really learned to think in terms of second-, third, or fourth-order consequences. They don’t see how the actions they’re about to take might induce a downward spiral. They don’t realize how small things accumulate into big things – or as I call it, the cumulative effect.
5. Blaming others vs Taking Responsibility
By and large, life will give you what you deserve and it doesn’t give a damn what you ‘like’. So it is up to you to take full responsibility to connect what you want with what you need to do to get it, and then to do those things — which often are difficult but produce good results — so that you’ll then deserve to get what you want.
– RAY DALIO –
To avoid taking personal responsibility is an indicator that you’re being run by your brain’s inherent mechanism to conserve energy. I refer to this state as being deeply in homeostasis. This is how the brain keeps you from changing.
Why would the brain do such a thing, you wonder?
Because change requires the expenditure of lots and lots of energy and the brain is a lazy bastard that wants to stay the same.
People who are stuck playing the blame game will avoid taking personal responsibility at all costs. That is the safe thing to do, and that way they don’t have to change because if something goes wrong it’s not their fault because they never assumed responsibility to begin with so they cannot be blamed, and if they aren’t blamed then they don’t have to change!
Sounds like a really shrewd strategy for long-term success, wouldn’t you say?
Or not.
The fact is that success – including wealth – stems from elevating your mindset and building your character over a long period of time. That was why Henry Ford said that even if they took away everything he owned he would still be able to replicate his entire organization in a matter of years.
Ultimately you will never build character unless you take personal responsibility. It’s really that simple.
I really recommend reading the book Atlas Shrugged by Ayn Rand. The book is a 1200 page long leviathan that really hammers into you the importance of taking personal responsibility for achieving the things you want out of life. I suspect Ray Dalio has read it a couple of times.
Conclusion and Study Resources:
In summary, I believe that you can probably get what you want out of life if you can suspend your ego and take a no-excuses approach to achieving your goals with open-mindedness, determination, and courage, especially if you rely on the help of people who are strong in areas that you are weak.
–RAY DALIO –
Conclusion
The five criteria for success are:
Letting Pain Stand in the Way vs Accepting and Managing Pain
Avoid Facing Harsh Realities vs Facing Harsh Realities
Worrying about Looking Good vs Accomplishing the Goal
Short-Term Thinking vs Long-Term Thinking.
Blaming others vs Taking Responsibility:
Also, some advice to people my age:
The main difference between school and business is that not only can you break the rules, but in many cases you should.
In school you are usually not allowed to enlist the help of others to work in a symbiotic way that makes up for each other’s weaknesses, in the real world you have to do that in order to achieve maximum leverage of your time.
It is often better to work smarter – I.E in a way and in a business area that gives rise to less competition than it is to work harder in a way and in a business area where competition is plentisome.
This is something that the average Joe or the corporate guy sitting in his cubical does not understand. They think that if they just work harder they will eventually get rich or be successful.
Study Resources:
Bridgewater Principles: Here you can read the entire book. It is 123 pages in total, the first 38 pages are about Ray Dalio’s personal opinions about life, success, and self-development. The rest of the book is dedicated to management and organizational strategies. I warmly recommend it. It is on my list of books to re-read.
Short video of Ray Dalio giving tips on various things.
Question: which of five criteria for success are you most focused on right now, and how is that going?
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