Principles: Life and Work

by Ray Dalio

From very early on, whenever I took a position in the markets, I wrote down the criteria I used to make my decision. Then, when I closed out a trade, I could reflect on how well these criteria had worked. It

The computer was much better than my brain in “thinking” about many things at once, and it could do it more precisely, more rapidly, and less emotionally. And, because it had such a great memory, it could do a better job of compounding my knowledge and the knowledge of the people I worked with as Bridgewater grew.

If I didn’t have these systems, I’d probably be broke or dead from the stress of trying so hard. We

This approach to establishing a “risk-neutral” benchmark position and deviating from it with measured bets was the genesis of the style of investment management we would later call “alpha overlay,”

When the Australian dollar rallied, I advised them to put the hedges in place, but they didn’t because they believed the currency problem had gone

When our systems indicated that the pressures on interest rates would cause them to fall, we would hold twenty-year Treasury bonds, and when the system pointed to rates rising, we would stay in cash.

We went on to become the top-performing U.S. bond manager in the world.

I was setting up the first U.S.-based private equity firm in China.

Maturity is the ability to reject good alternatives in order to pursue even better ones.

urge you to be curious enough to want to understand how the people who see things differently from you came to see them that way.

I had always wanted to have—and to be around people who also wanted to have—a life full of meaningful work and meaningful relationships, and to me a meaningful relationship is one that’s open and honest in a way that lets people be straight with each other.

“Black Monday,” October 19, 1987, then

history of the stock market. We got a lot of attention

because we were up 22 percent when most others were down a lot. The media dubbed us as amo...

I didn’t value experience as much as character, creativity, and common sense, which I suppose was related to my having started Bridgewater two years out of school myself,

that proper diversification was the key to reducing risks without reducing returns. If I could build a portfolio filled with high-quality return streams3 that were properly diversified

I had a large collection of uncorrelated return streams.

life: Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside.

I insisted that an issue log be adopted throughout Bridgewater. My rule was simple: If something went badly, you had to put it in the log, characterize its severity, and make clear who was responsible for it. If a mistake happened and you logged it, you were okay.

1) being radically truthful with each other including probing to bring our problems and weaknesses to the surface so we could deal with them forthrightly and

2) having happy and satisfied employees. And it reminded me that when faced with the choice between two things you need that are seemingly at odds, go slowly to figure out how you can have as much of both as possible. There

Put our honest thoughts out on the table, 2. Have thoughtful disagreements in which people are willing to shift their opinions as they learn, and

Have agreed-upon ways of deciding (e.g., voting, having clear authorities) if disagreements remain so that we can move beyond them without resentments.

This included cash, which is the worst investment over time because it loses value after adjusting for inflation and taxes.

Myers-Briggs Type Indicator (MBTI) assessment

“a form of proof that the quest for business excellence and the search for personal realization need not be mutually exclusive—and can, in fact, be essential to each other.”

I learned that creative genius and insanity can be quite close to each other,

that we had literally switched from using slide rules to spreadsheet software to advanced artificial intelligence.

come. It wasn’t until six months later in September, when Lehman Brothers collapsed, that everyone else connected the dots.

because my global macroeconomic perspective as an investor was very different from theirs as policymakers.

the systems we had programmed to take in information and process it were doing it superbly.

It is the rare bird who has the right mix of common sense, creativity,

and character to shape change.

Greg and David created a log of my various responsibilities and the differences between the

A shaper is someone who comes up with unique and valuable visions and builds them out beautifully, typically over the doubts and opposition of others.

we were both rebellious, independent thinkers who worked relentlessly for innovation and excellence; we

common. They are all independent thinkers who do not let anything or anyone stand in the way of achieving their audacious goals.

better. They are extremely resilient,

When faced with a choice between achieving their goal or pleasing (or not disappointing) others, they would choose achieving their goal every time.

The Hero with a Thousand Faces, because he is a classic hero and I thought it might help him. I also gave him The Lessons of History, a 104-page distillation of the major forces through history by Will and Ariel Durant, and River Out of Eden by the insightful Richard Dawkins, which explains how evolution works.

he pointed to Julius Caesar’s overthrow of the Roman Senate and Republic as an illustration of how important it is to make sure no one person is more powerful than the system.

prompted, I could see that my life would be over in a relatively short time and that what I’d leave behind could be more important, last longer, and affect many more people than just those at Bridgewater and my family. That

by creating formalized principles and policies for our decision making. For

our culture of striving for excellence in work and excellence in relationships by being radically truthful and radically transparent

I began to see reality as a gorgeous perpetual motion machine, in which causes become effects that become causes of new effects, and so on.

overwhelmed, I saw pain as nature’s reminder that there is something important for me to learn.

I learned to love my struggles, which I suppose is a healthy perspective to have, like learning to love exercising (which I haven’t managed to do yet).

I realized that the satisfaction of success doesn’t come from achieving your goals, but from struggling well.

Having the basics—a good bed to sleep in, good relationships, good food, and good sex—is

most important, and those things don’t get much better when you have a lot of money or much worse when you have less.