Principles: Life and Work

by Ray Dalio

Goals, tasks, and assigned responsibilities should be reviewed at department meetings at least once a quarter, perhaps as often as once a month.

Escalating means saying you don’t believe you can successfully handle a situation and that you are passing the Responsible Party job to someone else.

Every problem you find is an opportunity to improve your machine.

Identifying and not tolerating problems is one of the most important and disliked things people can do.

Thinking about problems that are difficult to solve may make you anxious, but not thinking about them (and therefore not dealing with them) should make you even more anxious.

Having this kind of anxiety about what can go wrong is extremely useful. It is what drives one to develop systems and metrics for monitoring the outcomes your machine is producing and motivates those who manage well to constantly taste-test the outputs of the system and to look for problems in its nooks and crannies.

This initial failure to perceive and not tolerate problems did not happen for lack of caring; it happened because most of the people in the process paid more attention to getting the tasks done than assessing whether the goals were being achieved.

Watch out for the “Frog in the Boiling Water Syndrome.” Apparently, if you throw a frog into a pot of boiling water it will jump out immediately, but if you put it in room-temperature water and gradually bring it to a boil, it will stay in the pot until it dies. Whether or not that’s true of frogs, I see something similar happen to managers all the time. People have a strong tendency to slowly get used to unacceptable things that would shock them if they saw them with fresh eyes.

The most common mistake I see people make is dealing with their problems as one-offs rather than using them to diagnose how their machine is working so that they can improve it.

The second most common mistake people make is to depersonalize the diagnosis.

The third biggest reason for failure is to not connect what one is learning in one diagnosis to what was learned in prior ones.

Try to tie the failure to the 5-Step Process. Which step was not done well? Everything ultimately fits into those five steps. But you may need to get more specific, so:

I have always described Bridgewater as being “terrible and terrific at the same time.” For nearly forty years, we have consistently produced extraordinary results while struggling with lots of problems. It is easy to look at messy circumstances, think things must be terrible, and get frustrated.

Keep in mind that managers usually fail or fall short of their goals for one (or more) of five reasons. 1. They are too distant. 2. They have problems perceiving bad quality. 3. They have lost sight of how bad things have become because they have gotten used to it. 4. They have such high pride in their work (or such large egos) that they can’t bear to admit they are unable to solve their own problems. 5. They fear adverse consequences from admitting failure.

Remember that if you have the same people doing the same things, you should expect the same results. Einstein defined insanity as doing the same thing over and over and expecting different results. Don’t fall into this trap because you’ll have a hard time getting out of it.

At the same time, remember that people tend to be more defensive than self-critical. It is your job as a manager to get at truth and excellence, not to make people happy.

Remember that everyone must be overseen by a believable person who has high standards. Without strong oversight, there is potential for inadequate quality control, inadequate training, and inadequate appreciation of excellent work. Never just trust people to do their jobs well.

If you’re trying to guardrail someone who is missing the core abilities required for their job, you should probably just fire them and look for someone else who will be a better click.

Don’t expect people to recognize and compensate for their own blind spots.

Bridgewater’s values and strategic goals have been the same since the beginning (to produce excellent results, meaningful work, and meaningful relationships through radical truth and transparency)

Have good controls so that you are not exposed to the dishonesty of others.

Don’t assume that people are operating in your interest rather than their own. A higher percentage of the population than you might imagine will cheat if given the opportunity. When offered the choice of being fair with you or taking more for themselves, most people will take more for themselves. Even a tiny amount of cheating is intolerable, so your happiness and success will depend on your controls. I have repeatedly learned this lesson the hard way.

Recognize that it is far better to find a few smart people and give them the best technology than to have a greater number of ordinary people who are less well equipped. Great people and great technology both enhance productivity. Put them together in a well-designed machine and they improve it exponentially.

Use leveragers. Leveragers are people who can go from conceptual to practical effectively and do the most to get your concepts implemented. Conceptualizing and managing takes only about 10 percent of the time needed for implementing, so if you have good leveragers, you can devote a lot more of your time to what’s most important to you.

Remember that almost everything will take more time and cost more money than you expect. Virtually nothing goes according to plan because one doesn’t plan for the things that go wrong. I personally assume things will take about one and a half times as long and cost about one and a half times as much because that’s what I’ve typically experienced. How well you and the people working with you manage will determine your expectations.

The way one brings people together to do this is key. This is what most people call “leadership.” What are the most important things that a leader needs to do in order to get their organizations to push through to results? Most importantly, they must recruit individuals who are willing to do the work that success requires. While there might be more glamour in coming up with the brilliant new ideas, most of success comes from doing the mundane and often distasteful stuff, like identifying and dealing with problems and pushing hard over a long time.

coordinated and consistent in motivating others. Managing groups to push through to results can be done emotionally or intellectually, and by carrots or by sticks.

How to do more than we think we can is a puzzle we all struggle with. Other than working harder for longer hours, there are three ways to fix the problem: 1) having fewer things to do by prioritizing and saying no, 2) finding the right people to delegate to, and 3) improving your productivity.

Some people spend a lot of time and effort accomplishing very little while others do a lot in the same amount of time.

What differentiates people who can do a lot from those who can’t is creativity...

“Success consists of going from failure to failure without loss of enthusiasm.”

there’s a big difference between wanting to do something and actually being able to do it. Assuming people will do what they intellectually want to do is like assuming that people will lose weight simply because they understand why it’s beneficial for them to do it. It won’t happen until the proper habits are developed. In organizations, that happens with the help of tools and protocols.

Make sure that no one is more powerful than the system or so important that they are irreplaceable.