Principles: Life and Work

by Ray Dalio

attain alignment consciously, continually, and systematically. We call this process of finding alignment “getting in sync,” and there are two primary ways it can go wrong: cases resulting from simple misunderstandings and those stemming from fundamental disagreements. Getting in sync is the process of open-mindedly and assertively rectifying both types.

Thoughtful disagreement is not a battle; its goal is not to convince the other party that he or she is wrong and you are right, but to find out what is true and what to do about it.

If your principles are aligned and you can work out your differences via a process of give-and-take, you will draw closer together. If not, you will move apart.

a. Spend lavishly on the time and energy you devote to getting in sync, because it’s the best investment you can make. In the long run, it saves time by increasing efficiency, but it’s important that you do it well. You will need to prioritize what you are going to get in sync about and who you are going to get in sync with because of time constraints. Your highest priority should be the most important issues with the most believable and most relevant parties.

Being effective at thoughtful disagreement requires one to be open-minded (seeing things through the other’s eyes) and assertive (communicating clearly how things look through your eyes)

a. Distinguish open-minded people from closed-minded people. Open-minded people seek to learn by asking questions; they realize how little they know in relation to what there is to know and recognize that they might be wrong; they are thrilled to be around people who know more than they do because it represents an opportunity to learn something. Closed-minded people always tell you what they know, even if they know hardly anything. They are typically uncomfortable being around those who know a lot more than they do.

closed-minded people will waste your time.

repeating what you’re hearing someone say to make sure you’re actually getting it—can be invaluable. Start by assuming you’re either not communicating or listening well instead of blaming the other party.

Make it clear who is directing the meeting and whom it is meant to serve. Every meeting should be aimed at achieving someone’s goals; that person is the one responsible for the meeting and decides what they want to get out of it and how they will do so. Meetings without someone clearly responsible run a high risk of being directionless and unproductive.

The worst way to pick people is based on whether their conclusions align with yours. Group-think (people not asserting independent views) and solo-think (people being unreceptive to the thoughts of others) are both dangerous.

What happens when someone inexperienced offers an opinion? If you’re running the conversation, you should be weighing the potential cost in the time that it takes to explore their opinion versus the potential gain in being able to assess their thinking and gain a better understanding of what they’re like. Exploring the views of people who are still building their track record can give you valuable insights into how they might handle various responsibilities. Time permitting, you should work through their reasoning with them so they can understand how they might be wrong. It’s also your obligation to open-mindedly consider whether they’re right.

When considering an issue or situation, there should be two levels of discussion: the case at hand and the relevant principles that help you decide how the machine should work.

Topic slip is random drifting from topic to topic without achieving completion on any of them. One way to avoid it is by tracking the conversation on a whiteboard so that everyone can see where you are.

Be careful not to lose personal responsibility via group decision making.

The symbiotic advantages of adding people to a group grow incrementally (2+1=4.25) up to a point; beyond that, adding people actually subtracts from effectiveness. That is because 1) the marginal benefits diminish as the group gets larger (two or three people might be able to cover most of the important perspectives, so adding more people doesn’t bring much more) and 2) larger group interactions are less efficient than smaller ones.

It is far better to weight the opinions of more capable decision makers more heavily than those of less capable decision makers. This is what we mean by “believability weighting.” So how do you determine who is capable at what? The most believable opinions are those of people who 1) have repeatedly and successfully accomplished the thing in question, and 2) have demonstrated that they can logically explain the cause-effect relationships behind their conclusions.

look down on yourself and your team when a decision needs to be made and consider who is most likely to be right.

Find the most believable people possible who disagree with you and try to understand their reasoning.

Be especially wary of those who comment from the stands without having played on the field themselves and who don’t have good logic,

Don’t pay as much attention to people’s conclusions as to the reasoning that led them to their conclusions.

Inexperienced people can have great ideas too, sometimes far better ones than more experienced people. That’s because experienced thinkers can get stuck in their old ways. If you’ve got a good ear, you will be able to tell when an inexperienced person is reasoning well.

If you are less believable, you are more of a student and should be more open-minded, primarily asking questions in order to understand the logic of the person who probably knows more. If you’re more believable, your role is more of a teacher, primarily conveying your understanding and answering questions. And if you are approximate peers, you should have a thoughtful exchange as equals.

All parties should remember that the purpose of debate is to get at truth, not to prove that someone is right or wrong, and that each party should be willing to change their mind based on the logic and evidence.

Once the student has taken in what the teacher has to offer, both student and teacher will be better prepared to untangle and explore the student’s perspective.

When you are less believable, start by taking on the role of a student in a student-teacher relationship—with appropriate humility and open-mindedness. While it is not necessarily you who doesn’t understand, you must assume this until you have seen the issue through the other’s eyes. If the issue still doesn’t make sense to you and you think that your teacher just doesn’t get it, appeal to other believable people.

Our brains work like computers: They input data and process it in accordance with their wiring and programming. Any opinion you have is made up of these two things: the data and your processing or reasoning. When someone says, “I believe X,” ask them: What data are you looking at? What reasoning are you using to draw your conclusion? Dealing with raw opinions will get you and everyone else confused;

If you ask someone a question, they will probably give you an answer, so think through to whom you should address your questions. I regularly see people ask totally uninformed or nonbelievable people questions and get answers that they believe. This is often worse than having no answers at all. Don’t make that mistake. You need to think through who the right people are. If you’re in doubt about someone’s believability, find out. The same is true for you: If someone asks you a question, think first whether you’re the right person to answer it.

If you are about to make a decision that the believability-weighted consensus thinks is wrong, think very carefully before you proceed. It’s likely that you’re wrong, but even if you’re right, there’s a good chance that you’ll lose respect by overruling the process.

Pay more attention to whether the decision-making system is fair than whether you get your way.

If you don’t think the principles provide the right way to resolve a problem or disagreement, you need to fight to change the principles, not just do what you want to do.

The challenging and probing that we encourage is not meant to second-guess their every decision but to improve the quality of their work over time. The ultimate goal of independent thinking and open debate is to provide the decision maker with alternative perspectives. It doesn’t mean that decision-making authority is transitioned to those who are probing them.

if the Responsible Party being challenged has a vision, and the decision being disputed involves a small detail of that overall vision, the decision needs to be debated and evaluated within the context of that larger vision.

Don’t let the little things divide you when your agreement on the big things should bind you. Almost every group that agrees on the big things ends up fighting about less important things and becoming enemies even though they should be bound by the big things. This phenomenon is called the narcissism of small differences.

Don’t get stuck in disagreement—escalate or vote! By practicing open-mindedness and assertiveness, you should be able to resolve most disagreements. If not, and if your dispute is one-on-one, you should escalate to a mutually agreed-upon believable other.

Once a decision is made, everyone should get behind it even though individuals may still disagree.

all groups that work together have to operate with protocols that allow time for disagreements to be explored, but in which dissenting minority parties recognize that group cohesion supersedes their individual desires once they have been overruled.

the power supporting the principles must be given only to people who value the principled way of operating more than their individual interests

I believe that the ability to objectively self-assess, including one’s own weaknesses, is the most influential factor in whether a person succeeds, and that a healthy organization is one in which people compete not so much against each other as against the ways in which their lower-level selves get in the way.

1. Remember the goal. 2. Give the goal to people who can achieve it (which is best) or tell them what to do to achieve it (which is micromanaging and therefore less good). 3. Hold them accountable. 4. If they still can’t do the job after you’ve trained them and given them time to learn, get rid of them.

If your designer/manager-you doesn’t have a good reason to be confident that your worker-you is up to a given task, it would be crazy to let yourself do the task without seeking the supervision of believable parties. You know that there are a lot of incompetent people in the world trying to do things they’re not good at, so the chances are good that you are one of them.

As you design, create a clear mental image of the attributes required for each person to do their job well. It is futile to give responsibilities to people who do not have the qualities required to succeed. It frustrates, and inevitably angers, all parties, which is damaging to the environment.

start by creating a spec sheet so that there will be a consistent set of criteria that can be applied from recruiting through performance reviews.

Think through which values, abilities, and skills you are looking for (in that order). Values are the deep-seated beliefs that motivate behaviors and determine people’s compatibilities with each other. People will fight for their values, and they are likely to fight with people who don’t share them. Abilities are ways of thinking and behaving. Some people are great learners and fast processors; others possess the ability to see things at a higher level. Some focus more on the particulars; still others think creatively or logically or with supreme organization. Skills are learned tools, such as being able to speak a foreign language or write computer code. While values and abilities are unlikely to change much, most skills can be acquired in a limited amount of time

In picking people for long-term relationships, values are most important, abilities come next, and skills are the least important. Yet most people make the mistake of choosing skills and abilities first and overlooking values.

You need to have a people-hiring machine in which the goals are clearly stated so that the outcomes can be compared with them and the machine (the design and the people) producing the outcomes can evolve to improve.

you should think through what questions are asked and how the different answers candidates give differentiate them in the ways that you are seeking to differentiate them. You should also save all of those answers so you can learn about how indicative they might be of subsequent behaviors and performance.

First understand the responsibilities of the role and the qualities needed to fulfill them, then ascertain whether an individual has them.

the difference between an ordinary plumber versus an outstanding one is huge. When reviewing any candidate’s background, you must identify whether they have demonstrated themselves to be extraordinary in some way. The most obvious demonstration is outstanding performance within an outstanding peer group. If you’re less than excited to hire someone for a particular job, don’t do it.

If you’re not naturally good at one type of thinking, it doesn’t mean you’re precluded from paths that require it. It does, however, require that you either work with someone who has that required way of thinking (which works best) or learn to think differently (which is difficult or even impossible).

Remember that people tend to pick people like themselves, so choose interviewers who can identify what you are looking for. If you’re looking for a visionary, pick a visionary to do the interview in which you probe for vision. If you are looking for a mix of qualities, assemble a group of interviewers who embody those qualities collectively.