Principles: Life and Work

by Ray Dalio

Meditate. I practice Transcendental Meditation and believe that it has enhanced my open-mindedness, higher-level perspective, equanimity, and creativity.

One way to do this is by asking questions like “Would you rather I be open with my thoughts and questions or keep them to myself?”; “Are we going to try to convince each other that we are right or are we going to open-mindedly hear each other’s perspectives to try to figure out what’s true and what to do about it?”; or “Are you arguing with me or seeking to understand my perspective?”

The better we know ourselves, the better we can recognize both what can be changed and how to change it, and what can’t be changed and what we can do about that.

Many seemed as if they were more interested in making people feel good (or not feel bad) than they were at getting at the truth.

Our differences weren’t a product of poor communication; it was the other way around. Our different ways of thinking led to our poor communications.

our brains are innately different in ways that set the parameters of what we are able to do mentally.

Once I understood that it’s all physiological, many things became clearer to me. While I used to get angry and frustrated at people because of the choices they made, I came to realize that they weren’t intentionally acting in a way that seemed counterproductive; they were just living out things as they saw them, based on how their brains worked.

We are born with attributes that can both help us and hurt us, depending on their application. Most attributes are a double-edged sword that bring potential benefits and potential harm. The more extreme the attribute, the more extreme the potential good or bad outcomes it is likely to produce. For example, a highly creative, goal-oriented person good at imagining new ideas might undervalue the minutiae of daily life, which is also important; he might be so driven in his pursuit of long-term goals that he might have disdain for people who focus on the details of daily life.

Similarly, a task-oriented person who is great with details might undervalue creativity—and worse still, may squelch it in the interests of efficiency. These two people might make a great team, but are likely to have trouble taking advantage of the ways they’re complementary, because the ways their minds work make it difficult for them to see the value of each other’s ways of thinking.

When we are born our brains are preprogrammed with learning accumulated over hundreds of millions of years. For example, researchers at the University of Virginia have shown that while many people have an instinctual fear of snakes, no one has an instinctual fear of flowers. The brains that we were born with had learned that snakes are dangerous and flowers are not. There’s a reason for that.

Meaningful work and meaningful relationships aren’t just nice things we chose for ourselves—they are genetically programmed into us.

The meaningful relationships we get from social cooperation make us happier, healthier, and more productive; social cooperation is also integral to effective work. It is one of the defining characteristics of being human.

“Individual selection [which] prompted sin and group selection [which] promoted virtue.”

Which of these forces (self-interest or collective interest) wins out in any organization is a function of that organization’s culture, which is a function of the people who shape it. But it’s clear that collective interest is what’s best, not just for the organization but for the individuals who make it up.

As I’ll explain in Work Principles, the rewards of working together to make the pie bigger are greater than the rewards of self-interest, not only in terms of how much “pie” one gets but also in the psychic rewards...

Our greatest moments of inspiration often “pop” up from our subconscious. We experience these creative breakthroughs when we are relaxed and not trying to access the part of the brain in which they reside, which is generally the neocortex.

Many people only see the conscious mind and aren’t aware of the benefits of connecting it to the subconscious. They believe that the way to accomplish more is to cram more into the conscious mind and make it work harder, but this is often counterproductive. While it may seem counterintuitive, clearing your head can be the best way to make progress.

Knowing this, I now understand why creativity comes to me when I relax (like when I’m in the shower) and how meditation helps open this connection. Because it is physiological, I can actually feel the creative thoughts coming from elsewhere and flowing into my conscious mind. It’s a kick to understand how that works.

Know that the most constant struggle is between feeling and thinking. There are no greater battles than those between our feelings (most importantly controlled by our amygdala, which operates subconsciously) and our rational thinking (most importantly controlled by our prefrontal cortex, which operates consciously). If you understand how those battles occur you will understand why it is so important to reconcile what you get from your subconscious with what you get from your conscious mind.

Research suggests that if you stick with a behavior for approximately eighteen months, you will build a strong tendency to stick to it nearly forever.

Most people tend to get more of their instructions from one side than the other and they have trouble understanding people who get theirs from the opposite side. Our experience has been that left-brained folks tend to see right-brained folks as “spacey” or “abstract,” while right-brained thinkers tend to find left-brained thinkers “literal” or “narrow.” I have seen wonderful results occur when people know where their own and others’ inclinations lie, realize that both ways of thinking are invaluable, and assign responsibilities accordingly.

Because of the biases with which we are wired, our self-assessments (and our assessments of others) tend to be highly inaccurate.

The four main assessments we use are the Myers-Briggs Type Indicator (MBTI), the Workplace Personality Inventory, the Team Dimensions Profile, and Stratified Systems Theory.

Focusing on tasks vs. focusing on goals. Some people are focused on daily tasks while others are focused on their goals and how to achieve them. I’ve found these differences to be quite similar to the differences between people who are intuitive vs. sensing.

Those who tend to focus on goals and “visualize” best can see the big pictures over time and are also more likely to make meaningful changes and anticipate future events. These goal-oriented people can step back from the day-to-day and reflect on what and how they’re doing. They are the most suitable for creating new things (organizations, projects, etc.) and managing organizations that have lots of change.

Although it may seem that their focus is narrower than higher-level thinkers, the roles they play are no less critical.

Shapers get both the big picture and the details right. To me, it seems that Shaper = Visionary + Practical Thinker + Determined. I’ve found that shapers tend to share attributes such as intense curiosity and a compulsive need to make sense of things, independent thinking that verges on rebelliousness, a need to dream big and unconventionally, a practicality and determination to push through all obstacles to achieve their goals, and a knowledge of their own and others’ weaknesses and strengths so they can orchestrate teams to achieve them. Perhaps even more importantly, they can hold conflicting thoughts simultaneously and look at them from different angles. They typically love to knock things around with other really smart people and can easily navigate back and forth between the big picture and the granular details, counting both as equally important. People wired with enough of these ways of thinking that they can operate in the world as shapers are very rare. But they could never succeed without working with others who are more naturally suited for other things and whose ways of thinking and acting are also essential.

The courage that’s needed the most isn’t the kind that drives you to prevail over others, but the kind that allows you to be true to your truest self, no matter what other people want you to be.

One of the most important decisions you can make is who you ask questions of. Make sure they’re fully informed and believable. Find out who is responsible for whatever you are seeking to understand and then ask them. Listening to uninformed people is worse than having no answers at all.

Don’t believe everything you hear. Opinions are a dime a dozen and nearly everyone will share theirs with you. Many will state them as if they are facts. Don’t mistake opinions for facts.

Because our educational system is hung up on precision, the art of being good at approximations is insufficiently valued. This impedes conceptual thinking.

“By-and-large” is the level at which you need to understand most things in order to make effective decisions. Whenever a big-picture “by-and-large” statement is made and someone replies “Not always,” my instinctual reaction is that we are probably about to dive into the weeds—i.e., into a discussion of the exceptions rather than the rule, and in the process we will lose sight of the rule.

Be an imperfectionist. Perfectionists spend too much time on little differences at the margins at the expense of the important things. There are typically just five to ten important factors to consider when making a decision. It is important to understand these really well, though the marginal gains of studying even the important things past a certain point are limited.

As previously explained, there are two broad approaches to decision making: evidence/logic-based (which comes from the higher- level brain) and subconscious/emotion-based (which comes from the lower-level animal brain).

Successful organizations have cultures in which evidence-based decision making is the norm rather than the exception.

c. The best choices are the ones that have more pros than cons, not those that don’t have any cons at all. Watch out for people who argue against something whenever they can find something—anything—wrong with it, without properly weighing all the pluses and minuses. Such people tend to be poor decision makers.

Get rid of irrelevant details so that the essential things and the relationships between them stand out. As the saying goes, “Any damn fool can make it complex. It takes a genius to make it simple.”

The key to doing this well is to: 1. Slow down your thinking so you can note the criteria you are using to make your decision. 2. Write the criteria down as a principle. 3. Think about those criteria when you have an outcome to assess, and refine them before the next “one of those” comes along.

To acquire principles that work, it’s essential that you embrace reality and deal with it well.

Your evolutionary process can be described as a 5-Step Process for getting what you want. It consists of setting goals, identifying and not tolerating problems, diagnosing problems, coming up with designs to get around them, and then doing the tasks required.

you must be radically open-minded. Our biggest barriers for doing this well are our ego barrier and our blind spot barrier. The ego barrier is our innate desire to be capable and have others recognize us as such. The blind spot barrier is the result of our seeing things through our own subjective lenses; both barriers can prevent us from seeing how things really are. The most important antidote for them is radical open-mindedness, which is motivated by the genuine worry that one might not be seeing one’s choices optimally. It is the ability to effectively explore different points of view and different possibilities without letting your ego or your blind spots get in your way.

I don’t mean that they must be aligned on everything, but I do mean that they have to be aligned on the most important things, like the mission they’re on and how they will be with each other. If people in an organization feel that alignment, they will treasure their relationships and work together harmoniously; its culture will permeate everything they do. If they don’t, they will work for different, often conflicting, goals and will be confused about how they should be with each other. For that reason, it pays for all organizations—companies, governments, foundations, schools, hospitals, and so on—to spell out their principles and values clearly and explicitly and to operate by them consistently.

An organization is a machine consisting of two major parts: culture and people.

A great organization has both great people and a great culture. Companies that get progressively better over time have both. Nothing is more important or more difficult than to get the culture and people right.

b. Great people have both great character and great capabilities. By great character, I mean they are radically truthful, radically transparent, and deeply committed to the mission of the organization. By great capabilities, I mean they have the abilities and skills to do their jobs excellently. People who have one without the other are dangerous and should be removed from the organization. People who have both are rare and should be treasured.

Great cultures bring problems and disagreements to the surface and solve them well, and they love imagining and building great things that haven’t been built before.

By meaningful work, I mean work that people are excited to get their heads into, and by meaningful relationships I mean those in which there is genuine caring for each other (like an extended family).

By constantly looking down on the machine, its managers can objectively compare the outcomes it produces with their goals. If those outcomes are consistent with those goals, then the machine is working effectively; if the outcomes are inconsistent with the goals, then something is wrong with either the design of the machine or the people who are a part of it and the problem needs to be diagnosed so the machine can be modified.

The rare few that have been able to evolve well over the decades have been successful at that evolutionary/looping process, which also is the process that has made Bridgewater progressively more successful for forty years. That is the process I want to pass along to you.

nothing is more important or more difficult than to get the culture and the people right.