Principles: Life and Work

by Ray Dalio

Everyone does not report to everyone. Responsibilities and authorities are assigned to individuals based on assessments of their ability to handle them. People are given the authority that they need to achieve outcomes and are held accountable for their ability to produce them.

When challenging a decision and/or a decision maker, consider the broader context.

things. This phenomenon is called the narcissism of small differences. Take the Protestants and Catholics. Though both are followers of Christ, some of them have been fighting for hundreds of years, even though many of them are unable to articulate the differences that divide them, and most of those who can articulate the differences realize that they are insignificant relative to the big important things that should bind them together.

Don’t let this narcissism of small differences happen to you. Understand that nobody and nothing is perfect and that you are lucky to have by-and-large excellent relationships. See the big picture.

Once a decision is made, everyone should get behind it even though individuals may still disagree.

See things from the higher level. You are expected to go to the higher level and look down on yourself and others as part of a system. In other words, you must get out of your own head, consider your views as just some among many, and look down on the full array of points of view to assess them in an idea-meritocratic way rather than just in your own possessive way.

While we talked about an organization’s culture in the last section, its people are even more important because they can change the culture for better or for worse. A culture and its people are symbiotic—the culture attracts certain kinds of people and the people in turn either reinforce or evolve the culture based on their values and what they’re like. If you choose the right people with the right values and remain in sync with them, you will play beautiful jazz together. If you choose the wrong people, you will all go over the waterfall together.

You have to let them interview your organization and you have to honestly convey to them what it’s like, warts and all, and be crystal clear about what you can expect from each other.

Your goal should be to hire people who understand this, equip them with the tools and the information they need to flourish in their jobs, and not micromanage them.

Senior managers must be capable of higher-level thinking, and understand the difference between goals and tasks—

At the very beginning, we just hired people we liked. But too many of them turned out to be bad fits. Because we liked them, we were reluctant to give up on them, and things often went from bad to worse.

Eventually we learned from our mistakes and failures that we could improve our hiring results in two ways: 1) by always being crisp and clear on exactly what kind of person we were looking for, and 2) by developing our vocabulary for and means of evaluating people’s abilities at a much more granular level.

At a high level, we look for people who think independently, argue open-mindedly and assertively, and above all else value the intense pursuit of truth and excellence, and through it, the rapid improvement of themselves and the organization. Because we treat work as more than just what we do to make a living, we look at every potential hire not just as an employee but as someone we’d want share our lives with. We insist that the people we work with are considerate and have a high sense of personal accountability to do the difficult, right things. We look for people with generous natures and high standards of fairness. Most important, they must be able to put their egos aside and assess themselves candidly.

Because we treat work as more than just what we do to make a living, we look at every potential hire not just as an employee but as someone we’d want share our lives with. We insist that the people we work with are considerate and have a high sense of personal accountability to do the difficult, right things. We look for people with generous natures and high standards of fairness. Most important, they must be able to put their egos aside and assess themselves candidly.

So whenever you think you are ready to make someone an offer, think one last time about the important things that might go wrong and what else you can do to better assess those risks and raise your probability of being right.

Don’t design jobs to fit people; over time, this almost always turns out to be a mistake.

Values are the deep-seated beliefs that motivate behaviors and determine people’s compatibilities with each other. People will fight for their values, and they are likely to fight with people who don’t share them. Abilities are ways of thinking and behaving. Some people are great learners and fast processors; others possess the ability to see

things at a higher level. Some focus more on the particulars; still others think creatively or logically or with supreme organization.

Skills are learned tools, such as being able to speak a foreign language ...

While values and abilities are unlikely to change much, most skills can be acquired in a limited amount of time (e.g., software proficiency can be learned) and often change in worth (today’s most in-demand progr...

In picking people for long-term relationships, values are most important, abilities come next, and skills are the least important.

We value people most who have what I call the three C’s: character, common sense, and creativity.

the key shared values that maintain our culture are meaningful work and meaningful relationships, radical truth and radical transparency, an open-minded willingness to explore harsh realities including one’s own weaknesses, a sense of ownership, a drive for excellence, and the willingness to do the good but difficult things, we look for highly capable people who deeply want all of those things.

The process for choosing people should be systematically built out and evidence-based. You need to have a people-hiring machine in which the goals are clearly stated so that the outcomes can be compared with them and the machine (the design and the people) producing the outcomes can evolve to improve.

You need to make sure that each one of those steps is done more systematically and purposefully.

If you’re not naturally good at one type of thinking, it doesn’t mean you’re precluded from paths that require it. It does, however, require that you either work with someone who has that required way of thinking (which works best) or learn to think differently (which is difficult or even impossible).

Have they done the thing you want them to do successfully at least three times?

when it comes to assessing a candidate’s common sense, vision, creativity, or decision-making abilities, school records are of limited value.

Idealistic people who have moralistic notions about how people should behave without understanding how people really do behave do more harm than good.

Don’t assume that a person who has been successful elsewhere will be successful in the job you’re giving them. No matter how good you are at hiring, some of your hires won’t work out.

Don’t get me wrong, I’m not saying that you should compromise capabilities for character. The person with good character and poor abilities also creates problems. While likable, he or she won’t get the job done and is painfully difficult to fire because doing so feels like shooting the loyal dog you can’t afford to keep anymore—but he must go.

Look for people who have lots of great questions. Smart people are the ones who ask the most thoughtful questions, as opposed to thinking they have all the answers. Great questions are a much better indicator of future success than great answers.

Play jazz with people with whom you are compatible but who will also challenge you. You need people who share your tastes and style but who can also push and challenge each other. The best teams, whether in music, in sports, or in business, do all those things at the same time.

You don’t want people to accept a job for the security of making a lot more money—you want them to come for the opportunity to earn it through hard and creative work.

Pay north of fair. By being generous or at least a little north of fair with others I have enhanced both our work and our relationships and most people have responded in kind. As a result, we have gained something even more special than money in the form of mutual caring, respect, and commitment.

Remember that the only purpose of money is to get you what you want, so think hard about what you value and put it above money. How much would you sell a good relationship for? There’s not enough money in the world to get you to part with a valued relationship.

Be generous and expect generosity from others. If you’re not generous with others and others aren’t generous with you, you won’t have a quality relationship.

Most importantly, you have to encourage people to speak up about how things are going for them. Ensuring that their personal development is proceeding appropriately is important too. Close advice from an active mentor should last at least one year.

Remember that most people are happiest when they are improving and doing the things that suit them naturally and help them advance.

Helping people acquire skills is easy—it’s typically a matter of providing them with appropriate training.

Improvements in abilities are more difficult but essential to expanding what a person can be responsible for over time.

And changing someone’s values is something you should never count on. In every relationship, there comes a point when you must decide whether you are meant for each other—that’s common in private l...

Typically it takes from six to twelve months to get to know a new employee in a by-and-large sort of way, and about eighteen months for them to internalize and adapt to the culture.

During this time there should be periodic mini-reviews and several major ones. Following each of these assessments, new assignments should be made that are tailored to their likes and dislikes and strengths and weaknesses.

Nobody ever said radical honesty was easy. Sometimes, especially with new employees who have not yet gotten used to it, an honest assessment feels like an attack. Rise to a higher level and keep your eye on the bigger picture and counsel the person you are evaluating to do the same.

a. In the end, accuracy and kindness are the same thing. What might seem kind but isn’t accurate is harmful to the person and often to others in the organization as well.

9.4 Recognize that tough love is both the hardest and the most important type of love to give (because it is so rarely welcomed).

The greatest gift you can give someone is the power to be successful. Giving people the opportunity to struggle rather than giving them the things they are struggling for will make them stronger.

Recognize that while most people prefer compliments, accurate criticism is more valuable.

Problems require more time than things that are going well.