Principles: Life and Work

by Ray Dalio

But to do that, I needed to get the people and culture right first.

And, to inspire me to do what I did, I needed to have meaningful work and meaningful relationships.

I treasured thoughtful disagreement with them as a way of learning and raising our odds of making good decisions, and I wanted all the people I worked with to be my “partners” rather than my “employees.” In a nutshell, I was looking for meaningful work and meaningful relationships.

The main test of a great partnership is not whether the partners ever disagree—people in all healthy relationships disagree—but whether they can bring their disagreements to the surface and get through them well.

Tough love is effective for achieving both great work and great relationships.

a. In order to be great, one can’t compromise the uncompromisable.

For most people, being part of a great community on a shared mission is even more rewarding than money.

Numerous studies have shown there is little to no correlation between one’s happiness and the amount of money one accumulates, yet there is a strong correlation between one’s happiness and the quality of one’s relationships.

Power should lie in the reasoning, not the position, of the individual.

Criticism (by oneself and by others) is an essential ingredient in the improvement process, yet, if handled incorrectly, can be destructive. It should be handled objectively. There should be no hierarchy in the giving or receiving of criticism.

A believability-weighted idea meritocracy is the best system for making effective decisions.

By radical truth, I mean not filtering one’s thoughts and one’s questions, especially the critical ones. If we don’t talk openly about our issues and have paths for working through them, we won’t have partners who collectively own our outcomes.

By radical transparency, I mean giving most everyone the ability to see most everything. To give people anything less than total transparency would make them vulnerable to others’ spin and deny them the ability to figure things out for themselves. Radical transparency reduces harmful office politics and the risks of bad behavior because bad behavior is more likely to take place behind closed doors than out in the open.

Some people have called this way of operating radical st...

To me, a pervasive Idea Meritocracy = Radical Truth + Radical Transparency + Believability-Weighted Decision Making.

By being radically truthful and radically transparent, we could see that we all have terribly incomplete and/or distorted perspectives.

As explained in Understand That People Are Wired Very Differently, people tend to see the same situations in dramatically different ways, depending on how their brains are wired.

in most companies people are doing two jobs: their actual job and the job of managing others’ impressions of how they’re doing their job.

The essential difference between a culture of people with shared values (which is a great thing) and a cult (which is a terrible thing) is the extent to which there is independent thinking.

my most fundamental principle is that you have to think for yourself.

Like a parent with adult children, I want you all to be strong, independent thinkers who will do well without me.

To make this easier, at Bridgewater we created a tool called the “Coach” that allows people to

type in their particular issue and find the appropriate principles to help them with it.37 I will soon be making that available to the public, along with many of the other management tools you’ll read about in the final section of the book.

idea meritocracy.

As a leader, you will get the feedback essential for your learning and for the continual improvement of the organization’s decision-making rules.

Understand That People Are Wired Very Differently.

Some people tell me it’s inconsistent with human nature to operate this way—that people need to be protected from harsh truths and that such a system could never work in practice.

unnatural. It is a fundamental law of nature that you get stronger only by doing difficult things.

As Winston Churchill said, “There is no worse course in leadership than to hold out false hopes soon to be swept away.”

Realize that you have nothing to fear from knowing the truth.

Have integrity and demand it from others.

People who are one way on the inside and another on the outside become conflicted and often lose touch with their own values. It’s difficult for them to be happy and almost impossible for them to be their best.

Don’t let loyalty to people stand in the way of truth and the well-being of the organization.

Judging one person by a different set of rules than another is an insidious form of corruption that undermines the meritocracy.

When everyone is held to the same principles and decision making is done publicly, it is difficult for people to pursue their own interests at the expense of the organization’s.

Speak up, own it, or get out.

In an idea meritocracy, openness is a responsibility; you not only have the privilege to speak up and “fight for right” but are obliged to do so.

What you’re not allowed to do is complain and criticize privately—either to others or in your own head. If you can’t fulfill this obligation, then you must go.

Radical transparency isn’t the same as total transparency. It just means much more transparency than is typical.

I’ve found that the most common reasons to limit broad transparency are: 1. Where the information is of a private, personal, or confidential nature and doesn’t meaningfully impact the community at large. 2. Where sharing and managing such information puts the long-term interests of the Bridgewater community, its clients, and our ability to uphold our principles at risk (for instance, our proprietary investment logic or a legal dispute). 3. Where the value of sharing the information broadly with the community is very low and the distraction it would cause would be significant (compensation, for instance).

To have a good relationship, you must be clear with each other about what the quid pro quo is—what is generous, what is fair, and what is just plain taking advantage—and how you will be with each other.

At Bridgewater, we expect people to behave in a manner that is consistent with how people in high-quality, long-term relationships behave—that is, with a high level of mutual consideration for each other’s interests and a clear understanding of who is responsible for what.

Make sure people give more consideration to others than they demand for themselves. This is a requirement.

Make sure that people understand the difference between fairness and generosity. Sometimes people mistake generosity for not being fair. For example, when Bridgewater arranged for a bus to shuttle people who live in New York City to our Connecticut office, one employee asked, “It seems it would be fair to also compensate those of us who spend hundreds of dollars on gas each month, particularly in light of the New York City bus.” This line of thinking mistakes an act of generosity for some for an entitlement for everyone.

Generosity is good and entitlement is bad, and they can easily be confused, so be crystal clear on which is which.

Know where the line is and be on the far side of fair.

While you should by and large stick to the arrangement, you should also recognize that there are rare, special times when employees will need a bit of extra time off and there are times that the company will require employees to give it extra hours. The company should pay for above-normal work one way or another, and employees should be docked for below-normal work. The give-and-take should roughly equal out over time. Within reasonable boundaries, nobody should worry about the exact ebbs and flows.

Recognize that the size of the organization can pose a threat to meaningful relationships.

2.5 Treasure honorable people who are capable and will treat you well even when you’re not looking. They are rare. Such relationships take time to build and can only be built if you treat such people well.

Everyone makes mistakes. The main difference is that successful people learn from them and unsuccessful people don’t.