Principles: Life and Work

by Ray Dalio

my personal circumstances at the time also drew me to psychology and neurology.

For example, technology had changed so quickly during the years we’d built the company that we had literally switched from using slide rules to spreadsheet software to advanced artificial intelligence.

To me, the greatest success you can have as the person in charge is to orchestrate others to do things well without you.

As a result, back in the early 2000s, we had included a “depression gauge” in our systems that specified the actions we should take if a certain configuration of events began to play out in a way indicating a heightened risk of a debt crisis and depression.

Because interest rates were so close to 0 percent, I knew that central banks could not ease monetary policy enough to reverse the downturn the way they had in prior recessions. This was the exact configuration that had led to past depressions.

we prepared our clients’ portfolios by balancing our positions in a way that there would be considerable upside and limited downside in the portfolios if we were right and putting in a backup plan in case we were wrong.

Policymakers come from environments that nurture consensus, not dissent, that train them to react to things that have already occurred, and that prepare them for negotiations, not placing bets.

While the economic machine is more powerful than any political system in the long run (ineffective politicians will be replaced and incapable political systems will change), the interaction between the two is what drives economic cycles in the here and now—and it’s often not pretty to watch.

We were always careful to stay safely short of being too big, lest we kill the goose that lays the golden eggs.

Australians call it the “tall poppy syndrome,” because the tallest poppies in a field are the ones most likely to have their heads whacked off.

It is the rare bird who has the right mix of common sense, creativity, and character to shape change. Almost everyone needs help before they can get there.

New hires typically go through an acclimation period of about eighteen to twenty-four months before becoming comfortable with the truthfulness and transparency that is such an essential part of the Bridgewater culture—especially accepting one’s mistakes and figuring out how to deal with them.

whenever we create a team we seek to “engineer” the right mix of attributes and people to achieve our goals.

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.

that I, like Jobs, started my businesses from scratch (his from a garage, mine from the second bedroom of my apartment), that we both came up with innovative products that reshaped how our industries did things, and that we had unique management styles.

I wanted to know about the qualities and principles of all shapers, so I could better understand the likenesses and differences between them and form an archetype of the typical shaper.

I had made an exhaustive study of recessions so that I could form a timeless picture of an archetypal recession and then understand the differences among them.

David Kelley (of IDEO),

❤ this dude!

They had all visualized remarkable concepts and built organizations to actualize them, and done that repeatedly and over long periods of time.

They are all independent thinkers who do not let anything or anyone stand in the way of achieving their audacious goals. They have very strong mental maps of how things should be done, and at the same time a willingness to test those mental maps in the world of reality and change the ways they do things to make them work better.

They are extremely resilient, because their need to achieve what they envision is stronger than the pain they experience as they struggle to achieve it.

they have a wider range of vision than most people, either because they have that vision themselves or because they know how to get it fr...

he had as much to say about the key fob that opened the doors as he did about his overarching vision for how Tesla fits into the broader future of transportation and how important that is to our planet.

“I had gotten $180 million when my partners and I sold PayPal,” he continued, “and it occurred to me that if I spent $90 million and used it to acquire some ICBMs from the former USSR and sent one to Mars, I could inspire the exploration of Mars.”

nobody sees the full range of what they need to see in order to be exceptionally successful, though some see a wider range than others. Those that do best both see a wide range themselves while triangulating well with other brilliant people who see things in different, complementary ways.

there are far fewer types of people in the world than there are people and far fewer different types of situations than there are situations, so matching the right types of people to the right types of situations is key.

The more I did the research on people, the clearer it became that there are different types of people and that, by and large, the same types of people in the same types of circumstances are going to produce the same types of results.

I realized that, by using big data analytics and other algorithms, our computers could connect those dots more efficiently than any of us could, just as they had helped us make connections in the markets.

Think about how different management is. While we have principles, we don’t have decision-making systems. In other words, I believe that the investment decision-making process is effective because the investment principles have been put into decision rules that make decisions that people then follow while the management decision-making process is less effective because the management principles have not been put into decision rules that people can follow to make management decisions.

One of the great things about algorithmic decision making is that it focuses people on cause-effect relationships and, in that way, helps foster a real idea meritocracy.

the “Dot Collector” (an app that gathers information about people in real time described in detail in the Work Principles), have already made an incredible difference in the way we work.

The good habits come from thinking repeatedly in a principled way, like learning to speak a language. The good thinking comes from exploring the reasoning behind the principles.

The ultimate goal of all this was to help the people I cared about be more successful without me, which was becoming increasingly pressing as life’s milestones...

they looked at investors as a single thing they called “the market,” rather than an amalgam of different players who bought and sold for different reasons.

figuring that if they built confidence the money would come and the problems would disappear. They didn’t see that whether they were confident or not, specific buyers didn’t have enough money and credit to buy all the debt that had to be sold.

Those power struggles tested the nerves of everyone involved. I can’t possibly convey the amount of bad behavior these policymakers had to endure for the benefit of the people they represented.

He never got the praise he deserved, but he didn’t care because his satisfaction came from seeing the results he produced.

I shared our calculations as well as the important cause-effect relationships as I saw them,

it occurred to me that the world needed a simple explanation of how the economic machine works, because if everyone understood the basics, then economic policymakers would be able to do the right things a lot faster and with less angst in the future.

it provides a template that helps people assess their economies and gives them guidance about what to do and what to expect during a crisis.

A number of policymakers told me in private that they found it helpful for their own understanding, for dealing with their constituents, and for finding better paths forward. This was very rewarding to me.

dramatic stories and gossip draw more readers and viewers than does clinical objectivity.

“journalists” have their own ideological biases that they are trying to advance.

As a result, most people who see the world through the lens of the media tend to look for who is good and who is evil rather than what the vested interests and relative...

The best behaviors one can hope for come from leaders who can weigh the benefits of cooperation, and who have long enough time frames that they can see how the gifts they give this year may bring them benefits in the future.

It’s hard to get everyone to even try to look at the whole picture objectively, let alone to operate in the interests of the whole.

I gave Wang a copy of Joseph Campbell’s great book 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.

On the Role of the Individual in History. All these books showed how the same things happened over and over again throughout history.

“Unattainable goals appeal to heroes,” he once told me. “Capable people are those who sit there worrying about the future. The unwise are those who worry about nothing. If conflicts got resolved before they became acute, there wouldn’t be any heroes.”

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.