Principles: Life and Work

by Ray Dalio

It requires you to replace your attachment to always being right with the joy of learning what’s true.

Sincerely believe that you might not know the best possible path and recognize that your ability to deal well with “not knowing” is more important than whatever it is you do know.

Open-mindedness doesn’t mean going along with what you don’t believe in; it means considering the reasoning of others instead of stubbornly and illogically holding on to your own point of view. To be radically open-minded, you need to be so open to the possibility that you could be wrong that you encourage others to tell you so.

g. Be clear on whether you are arguing or seeking to understand, and think about which is most appropriate based on your and others’ believability.

If you have a different view than someone who is believable on the topic at hand—or at least more believable than you are (if, say, you are in a discussion with your doctor about your health)—you should make it clear that you are asking questions because you are seeking to understand their perspective.

In thoughtful disagreement, your goal is not to convince the other party that you are right—it is to find out which view is true and decide what to do about it. In thoughtful disagreement, both parties are motivated by the genuine fear of missing important perspectives.

To do this well, approach the conversation in a way that conveys that you’re just trying to understand.26 Use questions rather than make statements.

You should be what I call open-minded and assertive at the same time—you should hold and explore conflicting possibilities in your mind while moving fluidly toward whatever is likely to be true based on what you learn.

A good exercise to make sure that you are doing this well is to describe back to the person you are disagreeing with their own perspective.

There are lots of people who will disagree with you, and it would be unproductive to consider all their views. It doesn’t pay to be open-minded with everyone. Instead, spend your time exploring ideas with the most believable people you have access to. If you find you’re at an impasse, agree on a person you both respect and enlist them to help moderate the discussion. What’s really counterproductive is spinning in your own head about what’s going on, which most people are prone to do—or wasting time disagreeing past the point of diminishing returns.

a. Plan for the worst-case scenario to make it as good as possible.

Closed-minded people don’t want their ideas challenged. They are typically frustrated that they can’t get the other person to agree with them instead of curious as to why the other person disagrees.

Regularly use pain as your guide toward quality reflection. Mental pain often comes from being too attached to an idea when a person or an event comes along to challenge it. This is especially true when what is being pointed out to you involves a weakness on your part. This kind of mental pain is a clue that you are potentially wrong and that you need to think about the question in a quality way.

If you consistently use feelings of anger/frustration as cues to calm down, slow down, and approach the subject at hand thoughtfully, over time you’ll experience negative emotions much less frequently and go directly to the open-minded practices

d. If a number of different believable people say you are doing something wrong and you are the only one who doesn’t see it that way, assume that you are probably biased.

a highly creative, goal-oriented person good at imagining new ideas might undervalue the minutiae of daily life, which is also important; he might be so driven in his pursuit of long-term goals that he might have disdain for people who focus on the details of daily life. Similarly, a task-oriented person who is great with details might undervalue creativity—and worse still, may squelch it in the interests of efficiency. These two people might make a great team, but are likely to have trouble taking advantage of the ways they’re complementary, because the ways their minds work make it difficult for them to see the value of each other’s ways of thinking.

In creating the attributes for our baseball cards, I used a combination of adjectives we already used to describe people, like “conceptual,” “reliable,” “creative,” and “determined”; the actions people took or didn’t take such as “holding others accountable” and “pushing through to results”; and terms from personality tests such as “extroverted” or “judging.” Once the cards were established, I created a process to have people evaluate each other, with the people rated highest in each dimension (e.g., “most creative”) having more weight on the ratings of other people in that dimension.

When something upsets us—and that something could be a sound, a sight, or just a gut feeling—the amygdala sends notice to our bodies to prepare to fight or flee: the heartbeat speeds up, the blood pressure rises, and breathing quickens. During an argument, you’ll often notice a physical response similar to how you react to fear (for instance, rapid heartbeats and tensing muscles). Recognizing that, your conscious mind (which resides in the prefrontal cortex) can refuse to obey its instructions.

Knowing how these hijackings work, you know that if you allow yourself to react spontaneously, you will be prone to overreact.

The most valuable habit I’ve acquired is using pain to trigger quality reflections.

e. Train your “lower-level you” with kindness and persistence to build the right habits. I used to think that the upper-level you needed to fight with the lower-level you to gain control, but over time I’ve learned that it is more effective to train that subconscious, emotional you the same way you would teach a child to behave the way you would like him or her to behave—with loving kindness and persistence so that the right habits are acquired.

accepting your weaknesses is contrary to the instincts of those parts of your brain that want to hold on to the illusion that you are perfect. Doing the things that will reduce your instinctual defensiveness takes practice, and requires operating in an environment that reinforces open-mindedness.

Instead of expecting yourself or others to change, I’ve found that it’s often most effective to acknowledge one’s weaknesses and create explicit guardrails against them.

The four main assessments we use are the Myers-Briggs Type Indicator (MBTI), the Workplace Personality Inventory, the Team Dimensions Profile, and Stratified Systems Theory.

c. Thinking vs. feeling. Some people make decisions based on logical analysis of objective facts, considering all the known, provable factors important to a given situation and using logic to determine the best course of action. This approach is an indicator of a preference for thinking and is how you’d hope your doctor thinks when he makes a diagnosis. Other people—who prefer feeling—focus on harmony between people. They are better suited to roles that require lots of empathy, interpersonal contact, and relationship building, for example HR and customer service.

Planners (or “Judgers” in Myers-Briggs terms) like to focus on a plan and stick with it, while perceivers are prone to focus on what’s happening around them and adapt to it.

Planners and perceivers have trouble appreciating each other. Perceivers see new things and change direction often. This is discomforting to planners, who weigh precedent much more heavily in their decision making, and assume if it was done in a certain way before, it should be done in the same way again. Similarly, planners can discomfort perceivers by being seemingly rigid and slow to adapt.

when people’s MBTI results suggest a preference for “S” (focus on details) and “J” (planful), and they come out as executors on the Team Dimension assessment, there is a very good chance that they are more detail-focused than right-brained and imaginative, which means that they would likely fit better in jobs that have less ambiguity and more structure and clarity.

Those who tend to focus on goals and “visualize” best can see the big pictures over time and are also more likely to make meaningful changes and anticipate future events. These goal-oriented people can step back from the day-to-day and reflect on what and how they’re doing. They are the most suitable for creating new things (organizations, projects, etc.) and managing organizations that have lots of change. They typically make the most visionary leaders because of their ability to take a broad view and see the whole picture. In contrast, those who tend to focus on daily tasks are better at managing things that don’t change much or that require processes to be completed reliably. Task-oriented people tend to make incremental changes that reference what already exists. They are slower to depart from the status quo and more likely to be blindsided by sudden events. On the other hand, they’re typically more reliable.

everyone has strengths and weaknesses, and everyone has an important role to play in life. Nature made everything and everyone for a purpose. The courage that’s needed the most isn’t the kind that drives you to prevail over others, but the kind that allows you to be true to your truest self, no matter what other people want you to be.

4.5 Getting the right people in the right roles in support of your goal is the key to succeeding at whatever you choose to accomplish.

each person is matched up with other complementary people to create the best mix of attributes for their tasks.

the biggest threat to good decision making is harmful emotions, and 2) decision making is a two-step process (first learning and then deciding).

Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored. To prevent myself from falling into this trap, I used to literally ask myself questions: Am I learning? Have I learned enough yet that it’s time for deciding? After a while, you will just naturally and open-mindedly gather all the relevant info, but in doing so you will have avoided the first pitfall of bad decision making, which is to subconsciously make the decision first and then cherry-pick the data that supports it.

Synthesis is the process of converting a lot of data into an accurate picture. The quality of your synthesis will determine the quality of your decision making.

The key is having the higher-level perspective to make fast and accurate judgments on what the real risks are without getting bogged down in details.

One of the most important decisions you can make is who you ask questions of. Make sure they’re fully informed and believable. Find out who is responsible for whatever you are seeking to understand and then ask them. Listening to uninformed people is worse than having no answers at all.

Don’t mistake opinions for facts.

Everything looks bigger up close. In all aspects of life, what’s happening today seems like a much bigger deal than it will appear in retrospect. That’s why it helps to step back to gain perspective and sometimes defer a decision until some time passes.

Everything important in your life needs to be on a trajectory to be above the bar and headed toward excellent at an appropriate pace.

“By-and-large” is the level at which you need to understand most things in order to make effective decisions. Whenever a big-picture “by-and-large” statement is made and someone replies “Not always,” my instinctual reaction is that we are probably about to dive into the weeds—i.e., into a discussion of the exceptions rather than the rule, and in the process we will lose sight of the rule.

Remember the 80/20 Rule and know what the key 20 percent is.

b. Remember that decisions need to be made at the appropriate level, but they should also be consistent across levels.

Remember that multiple levels exist for all subjects. 2. Be aware on what level you’re examining a given subject. 3. Consciously navigate levels rather than see subjects as undifferentiated piles of facts that can be browsed randomly.

It’s even more important that decision making be evidence-based and logical when groups of people are working together. If it’s not, the process will inevitably be dominated by the most powerful rather than the most insightful participants, which is not only unfair but suboptimal.

Think of every decision as a bet with a probability and a reward for being right and a probability and a penalty for being wrong.

suppose something that has only a one-in-five chance (20 percent) of succeeding will return ten times (e.g., $1,000) the amount that it will cost you if it fails ($100). Its expected value is positive ($120), so it’s probably a smart decision, even though the odds are against you, as long as you can also cover the loss. Play these probabilities over and over again and they will surely give you winning results over time.

Sometimes it’s smart to take a chance even when the odds are overwhelmingly against you if the cost of being wrong is negligible relative to the reward that comes with the slim chance of being right.

(you can almost always improve your odds of being right by doing things that will give you more information).

Prioritize by weighing the value of additional information against the cost of not deciding. Some decisions are best made after acquiring more information; some are best made immediately.