Principles: Life and Work

by Ray Dalio

I believe that great cultures, like great people, recognize that making mistakes is part of the process of learning, and that continuous learning is what allows an organization to evolve successfully over time.

If an idea meritocracy doesn’t work well, the fault doesn’t lie in the concept; it lies in people not valuing it enough to make sure that it works.

To have an Idea Meritocracy: 1) Put your honest thoughts on the table 2) Have thoughtful disagreement 3) Abide by agreed-upon ways of getting past disagreement

It is a fundamental law of nature that you get stronger only by doing difficult things. While our idea meritocracy is not for everyone, for those who do adapt to it—which is about two-thirds of those who try it—it is so liberating and effective that it’s hard for them to imagine any other way to be. What most people like best is knowing there is no spin.

Our back office provides the services we need to support our trading in the markets, including trade confirmations, settlements, record maintenance, and accounting.

In the way typical of leaders at Bridgewater, she explained that there was a lot she didn’t know and there were a lot of questions that she wouldn’t be able to answer.

Never say anything about someone that you wouldn’t say to them directly and don’t try people without accusing them to their faces.

Managers should not talk about people who work for them if they are not in the room.

Don’t let loyalty to people stand in the way of truth and the well-being of the organization.

Create an environment in which everyone has the right to understand what makes sense and no one has the right to hold a critical opinion without speaking up.

Be extremely open. Discuss your issues until you are in sync with each other or until you understand each other’s positions and can determine what should be done.

As someone I worked with once explained, “It’s simple—just don’t filter.”

giving people the right to see things for themselves is better than forcing them to rely on information processed for them by others.

reporters know that salacious and controversial stories draw more eyeballs than balanced ones.

There are exceptions to every rule, and in very rare cases, it is better not to be radically transparent. In those unusual cases, you will need to figure out a way that preserves the culture of radical transparency without exposing you and those you care about to undue risks.

When weighing an exception, approach it as an expected value calculation, taking into consideration the second- and third-order consequences. Ask yourself whether the costs of making the case transparent and managing the risks of that transparency outweigh the benefits.

Where the information is of a private, personal, or confidential nature and doesn’t meaningfully impact the community at large.

Where sharing and managing such information puts the long-term interests of the Bridgewater community, its clients, and our ability to uphold our principles at risk (for instance, our proprietary investment logic or a legal dispute).

Where the value of sharing the information broadly with the community is very low and the distraction it would cause would be sign...

Make sure those who are given radical transparency recognize their responsibilities to handle it well and to weigh things intelligently. People cannot be given the privilege of receiving information and then use the information to harm the company, so rules and procedures must be in place to ensure that doesn’t happen.

Provide transparency to people who handle it well and either deny it to people who don’t handle it well or remove those people from the organization.

Meaningful relationships and meaningful work are mutually reinforcing, especially when supported by radical truth and radical transparency.

When you have such relationships with those you work with, you pull each other through challenging times; at the same time, sharing challenging work draws you closer and strengthens your relationships. This self-reinforcing cycle creates the success that allows you to pursue more and more ambitious goals.

Meaningful relationships are invaluable for building and sustaining a culture of excellence, because they create the trust and support that people need to push each other to do great things.

Relationships have to be genuine, not forced;

To me, a meaningful relationship is one in which people care enough about each other to be there whenever someone needs support and they enjoy each other’s company so much that they can have great times together both inside and outside of work. I literally love many of the people I work with, and I respect them deeply.

When I treated my employees like extended family, I found that they typically behaved the same way with each other and our community as a whole, which was much more special than having a strictly quid pro quo relationship. I can’t tell you how many people would do anything in their power to help our community/company and wouldn’t want to work anywhere else. This is invaluable.

we paid for food and drink for those who hosted potluck dinners at their houses; and we bought a house that employees can use for events and celebrations.

Eventually, others who valued this kind of relationship took responsibility for it and it spread to become a cultural norm so that I could just sit back and watch beauty happen.

What about the person who doesn’t give a damn about all of this meaningful relationship stuff, who just wants to go into work, do a good job, and receive fair compensation? Is that okay? Sure it is, and it’s common for a significant percentage of employees.

We have all sorts of people and respect whatever they want to do on their own time, as long as they abide by the law and are considerate.

No matter how much one tries to create a culture of meaningful relationships, the organization is bound to have some bad (intentionally harmful) people in it. Being there isn’t good for them or the company so it’s best to find out who they are and remove them.

Be loyal to the common mission and not to anyone who is not operating consistently with it.

Be crystal clear on what the deal is.

I’ve made a lot of money through my work, but I see my job as much more than as a way to make money—it’s how I choose to live out my values around excellence, meaningful work, and meaningful relationships. If the people I worked with were primarily interested in making money, we would have conflicts whenever we had to choose between upholding our values and making an easy buck.

Make sure people give more consideration to others than they demand for themselves.

Make sure that people understand the difference between fairness and generosity.

Fairness and generosity are different things. If you bought two birthday gifts for two of your closest friends, and one cost more than the other, what would you say if the friend who got the cheaper gift accused you of being unfair? Probably something like, “I didn’t have to get you any gift, so stop complaining.” At Bridgewater, we are generous with people (and I am personally generous), but we feel no obligation to be measured and equal in our generosity.

Generosity is good and entitlement is bad, and they can easily be confused, so be crystal clear on which is which.

If you want to have a community of people who have both high-quality, long-term relationships and a high sense of personal responsibility, you can’t allow a sense of entitlement to creep in.

Know where the line is and be on the far side of fair.

you should expect people to behave in a manner consistent with how people in high-quality, long-term relationships behave—with a high level of mutual consideration for each other’s interests and a clear understanding of who is responsible for what.

Recognize that the size of the organization can pose a threat to meaningful relationships.

Remember that most people will pretend to operate in your interest while operating in their own.

Treasure honorable people who are capable and will treat you well even when you’re not looking.

Create a Culture in Which It Is Okay to Make Mistakes and Unacceptable Not to Learn from Them

Recognize that mistakes are a natural part of the evolutionary process.

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

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

Imagine how silly and unproductive it would be to respond to your ski instructor as if he were blaming you when he told you that you fell because you didn’t shift your weight properly. It’s no different if a supervisor points out a flaw in your work process. Fix it and move on.