Principles: Life and Work

by Ray Dalio

Our environment is one in which people understand that remarks such as “You handled that badly” are meant to be helpful rather than punitive.

If you don’t mind being wrong on the way to being right you’ll learn a lot—and increase your effectiveness.

You must not let your need to be right be more important than your need to find out what’s true.

a. Fail well. Everyone fails.

That is because failing is a painful experience while succeeding is a joyous one, so it requires much more character to fail, change, and then succeed than to just succeed.

3.2 Don’t worry about looking good—worry about achieving your goals.

a. Get over “blame” and “credit” and get on with “accurate” and “inaccurate.”

The fastest path to success starts with knowing what your weaknesses are and staring hard at them. Start by writing down your mistakes and connecting the dots between them. Then write down your “one big challenge,” the weakness that stands the most in the way of your getting what you want. Everyone has at least one big challenge. You may in fact have several, but don’t go beyond your “big three.” The first step to tackling these impediments is getting them out into the open.

a. Be self-reflective and make sure your people are self-reflective. When there is pain, the animal instinct is flight-or-fight. Calm yourself down and reflect instead. The pain you are feeling is due to things being in conflict—

Self-reflectiveness is the quality that most differentiates those who evolve quickly from those who don’t. Remember: Pain + Reflection = Progress.

For this reason, it is everyone’s responsibility to help others learn what is true about themselves by giving them honest feedback, holding them accountable, and working through disagreements in an open-minded way.

Remember that for an organization to be effective, the people who make it up must be aligned on many levels—from what their shared mission is, to how they will treat each other, to a more practical picture of who will do what when to achieve their goals.

By avoiding conflicts one avoids resolving differences. People who suppress minor conflicts tend to have much bigger conflicts later on, which can lead to separation, while people who address their mini-conflicts head on tend to have the best and the longest-lasting relationships.

If they’re not, the process of sorting through disagreements and knowing who has the authority to decide quickly becomes chaotic.

For these reasons, specific processes and procedures must be followed. Every party to the discussion must understand who has what rights and which procedures should be followed to move toward resolution. (We’ve also developed tools for helping do this, which you can review at the end of this book.) And everyone must understand the most fundamental principle for getting in sync, which is that people must be open-minded and assertive at the same time.

Thoughtful disagreement is not a battle; its goal is not to convince the other party that he or she is wrong and you are right, but to find out what is true and what to do about it. It must also be nonhierarchical, because in an idea meritocracy communication doesn’t just flow unquestioned from the top down. Criticisms must also come from the bottom up.

Everyone has his or her own principles and values, so all relationships entail a certain amount of negotiation or debate over how people should be with each other. What you learn about each other will either draw you together or drive you apart. If your principles are aligned and you can work out your differences via a process of give-and-take, you will draw closer together. If not, you will move apart.

Open discussion of differences ensures that there are no misunderstandings. If that doesn’t happen on an ongoing basis, gaps in perspective will widen until inevitably there is a major clash.

It is harder to run an idea meritocracy in which disagreements are encouraged than a top-down autocracy in which they are suppressed.

If you and others don’t raise your perspectives, there’s no way you will resolve your disputes.

Distinguish between idle complaints and complaints meant to lead to improvement. Many complaints either fail to take into account the full picture or reflect a closed-minded point of view. They are what I call “chirping,” and are generally best ignored. But constructive complaints may lead to important discoveries.

Remember that every story has another side. Wisdom is the ability to see both sides and weigh them appropriately.

Being effective at thoughtful disagreement requires one to be open-minded (seeing things through the other’s eyes) and assertive (communicating clearly how things look through your eyes) and to flexibly process this information to create learning and adaptation.

I have found that most people have problems being assertive and open-minded at the same time. Typically they are more inclined to be assertive than open-minded (because it’s easier to convey how they see things than to understand how others do, and also because people tend to have ego attachments to being right) though some people are too willing to accept others’ views at the expense of their own.

a. Distinguish open-minded people from closed-minded people.

they are thrilled to be around people who know more than they do because it represents an opportunity to learn something.

b. Don’t have anything to do with closed-minded people. Being open-minded is much more important than being bright or smart. No matter how much they know, closed-minded people will waste your time. If you must deal with them, recognize that there can be no helping them until they open their minds.

c. Watch out for people who think it’s embarrassing not to know. They’re likely to be more concerned with appearances than actually achieving the goal; this can lead to ruin over time.

Recognize that getting in sync is a two-way responsibility. In any conversation, there is a responsibility to express and a responsibility to listen.

difficulty in communication is due to people having different ways of thinking (e.g., left-brained thinkers talking to right-brained thinkers).

f. Worry more about substance than style.

I often see people react to constructive questions as if they were accusations. That is a mistake.

4.4 If it is your meeting to run, manage the conversation.

Group-think (people not asserting independent views) and solo-think (people being unreceptive to the thoughts of others) are both dangerous.

There is no reason to get angry because you still disagree. People can have a wonderful relationship and disagree about some things; you don’t have to agree on everything.

a. 1+1=3. Two people who collaborate well will be about three times as effective as each of them operating independently, because each will see what the other might miss—plus they can leverage each other’s strengths while holding each other accountable to higher standards.

b. 3 to 5 is more than 20. Three to five smart, conceptual people seeking the right answers in an open-minded way will generally lead to the best answers.

The symbiotic advantages of adding people to a group grow incrementally (2+1=4.25) up to a point; beyond that, adding people actually subtracts from effectiveness.

There are all kinds of different people in the world, many of whom value different kinds of things. If you find you can’t get in sync with someone on shared values, you should consider whether that person is worth keeping in your life. A lack of common values will lead to a lot of pain and other harmful consequences and may ultimately drive you apart. It might be better to head all that off as soon as you see it coming.

The most believable opinions are those of people who 1) have repeatedly and successfully accomplished the thing in question, and 2) have demonstrated that they can logically explain the cause-effect relationships behind their conclusions.

Having a hierarchy of merit is not only consistent with an idea meritocracy but essential for it. It’s simply not possible for everyone to debate everything all the time and still get their work done. Treating all people equally is more likely to lead away from truth than toward it.

If you can’t successfully do something, don’t think you can tell others how it should be done.

b. Remember that everyone has opinions and they are often bad. Opinions are easy to produce; everyone has plenty of them and most people are eager to share them—even to fight for them. Unfortunately many are worthless or even harmful, including a lot of your own.

Having open-minded conversations with believable people who disagree with you is the quickest way to get an education and to increase your probability of being right.

Remember that believable opinions are most likely to come from people 1) who have successfully accomplished the thing in question at least three times, and 2) who have great explanations of the cause-effect relationships that lead them to their conclusions.

Inexperienced people can have great ideas too, sometimes far better ones than more experienced people. That’s because experienced thinkers can get stuck in their old ways. If you’ve got a good ear, you will be able to tell when an inexperienced person is reasoning well. Like knowing whether someone can sing, it doesn’t take a lot of time. Sometimes a person only has to sing a few bars for you to hear how well they can sing. Reasoning is the same—it often doesn’t take a lot of time to figure out if someone can do it.

Every day is not a new day. Over time, a body of evidence builds up, showing which people can be relied on and which cannot. Track records matter, and at Bridgewater tools such as Baseball Cards and the Dot Collector make everyone’s track records available for scrutiny.

It’s more important to do big things well than to do the small things perfectly.

When the decision-making system is consistently well-managed and based on objective criteria, the idea meritocracy is more important than the happiness of any one of its members—even if that member is you.

Make sure people don’t confuse the right to complain, give advice, and openly debate with the right to make decisions.