Principles: Life and Work

by Ray Dalio

Whatever success I’ve had in life has had more to do with my knowing how to deal with my not knowing than anything I know.

The most important thing I learned is an approach to life based on principles that helps me find out what’s true and what to do about it.

Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life.

To be principled means to consistently operate with principles that can be clearly explained.

If you can think for yourself while being open-minded in a clearheaded way to find out what is best for you to do, and if you can summon up the courage to do it, you will make the most of your life.

and do that with humility and open-mindedness so that you consider the best thinking available to you. Being

I believe that the key to success lies in knowing how to both strive for a lot and fail well.

To make money in the markets, one needs to be an independent thinker who bets against the consensus and is right. That’s because the consensus view is baked into the price. One

My painful mistakes shifted me from having a perspective of “I know I’m right” to having one of “How do I know I’m right?”

prompted me to look at things through the eyes of others as well as my own.

talk. Experience taught me how invaluable it is to reflect on and write down my decision-making criteria whenever I made a decision, so I got in the habit of doing that.

I discovered that such decision-making systems—especially when believability weighted—are incredibly powerful and will soon profoundly change how people around the world make all kinds of decisions.

strives to deliver meaningful work and meaningful relationships through radical truth and radical transparency.

When I didn’t want to do something, I would fight it, but when I was excited about something, nothing could hold me back.

I’ve always been an independent thinker inclined to take risks in search of rewards—not just in the markets, but in most everything.

“If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away.”

I gradually learned that prices reflect people’s expectations, so they go up when actual results are better than expected

Meditation has benefited me hugely throughout my life because it produces a calm open-mindedness that allows me to think more clearly and creatively.

Steve Jobs, whom I came to empathize with and admire. Like me, he took up meditation and wasn’t interested in being taught as much as he loved visualizing and building out amazing new things. The

severely. The lesson? When everybody thinks the same thing—such as what a sure bet the Nifty 50 is—it is almost certainly reflected in the price, and

betting on it is probably going to be a mistake.

In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money,

But the brokers, their clients, and even the ones who fired me liked me and wanted to keep getting my advice. Even better, they were willing to pay me for it, so in 1975 I started Bridgewater Associates.

Pursuing a mission with friends to help clients beat the markets was much more fun than having a real job. As long as my basic living expenses were covered, I knew I’d be happy.

relationships. By understanding these relationships, I could come up with decision rules (or principles) I could model.

The most painful lesson that was repeatedly hammered home is that you can never be sure of anything:

I showed Lane how to use a mix of corn and soymeal futures to lock in costs so they could quote a fixed price to McDonald’s.

Timing is everything. I was relieved that I was out of that market, but watching the richest man in the world—who was also someone I empathized with—go broke was jarring. Yet it was nothing compared to what was to come.

But I had studied debt and depressions back to 1800, done my calculations, and was confident that the debt crisis led by emerging countries was coming.

was holding both gold (which performs well in accelerating inflation) and bonds (which perform well in deflationary depressions).

By the fall of 1981, the tight Fed policies were having a devastating effect, my bond bets were beginning to pay off, and my kooky views were starting to look right on.

Because I was one of the few people who had seen these things coming, I started to get a lot of attention. Congress

was dead wrong. After

As money poured out of these borrower countries and into the U.S., it changed everything.

Bridgewater was now down to just one employee: me.

obvious. First, I had been wildly overconfident and had let my emotions get the better of me.

As in 1971, I had failed to recognize the lessons of history.

Imagine that in order to have a great life you have to cross a dangerous jungle. You can stay safe where you are and have an ordinary life, or you can risk crossing the jungle to have a terrific life. How would you approach that choice? Take a moment to think about it because it is the sort of choice that, in one form or another, we all have

my mind-set from thinking “I’m right” to asking myself “How do I know I’m right?”

just want to be right—I don’t care if the right answer comes from me. So I learned to be radically open-minded to allow others to point out what I might be missing.

Seek out the smartest people who disagreed with me so I could try to understand their reasoning.

Know when not to have an opinion.

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Balance risks in ways that keep the big upside while redu...

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Over the years that followed, I found that most of the extraordinarily successful people I’ve met had similar big painful failures that taught them the lessons that ultimately helped them succeed.

You will think you have failed—but that won’t be true unless you give up.

Still, I gradually added clients, revenue, and a new team.

realize that what was most important wasn’t knowing the future—it was knowing how to react appropriately to the information available at each point in time.