Principles: Life and Work

by Ray Dalio

2 Use the 5-Step Process to Get What You Want Out of Life

1. Have clear goals. 2. Identify and don’t tolerate the problems that stand in the way of your achieving those goals. 3. Accurately diagnose the problems to get at their root causes. 4. Design plans that will get you around them. 5. Do what’s necessary to push these designs through to results.

2.1 Have clear goals. a. Prioritize: While you can have virtually anything you want, you can’t have everything you want.

b. Don’t confuse goals with desires.

c. Decide what you really want in life by reconciling your goals and your desires.

Take passion, for example. Without passion, life would be dull; you wouldn’t want to live without it. But what’s key is what you do with your passion. Do you let it consume you and drive you to irrational acts, or do you harness it to motivate and drive you while you pursue your real goals? What will ultimately fulfill you are things that feel right at both levels, as both desires and goals.

d. Don’t mistake the trappings of success for...

e. Never rule out a goal because you think it’s unattainable.

f. Remember that great expectations create great capabilities.

g. Almost nothing can stop you from succeeding if you have a) flexibility and b) self-accountability.

h. Knowing how to deal well with your setbacks is as important as knowing how to move forward.

2.2 Identify and don’t tolerate problems.

a. View painful problems as potential improvements that are screaming at you.

b. Don’t avoid confronting problems because they are rooted in harsh realities that are unpleasant to look at.

When a problem stems from your own lack of talent or skill, most people feel shame. Get over it. I cannot emphasize this enough: Acknowledging your weaknesses is not the same as surrendering to them. It’s the first step toward overcoming them. The pains you are feeling are “growing pains” that will test your character and reward you as you push through them.

c. Be specific in identifying your problems.

d. Don’t mistake a cause of a problem with the real problem.

e. Distinguish big problems from small ones.

But at the same time, make sure you spend enough time with the small problems to make sure they’re not symptoms of larger ones.

f. Once you identify a problem, don’t tolerate

2.3 Diagnose problems to get at their root causes.

a. Focus on the “what is” before deciding “what to do about it.”

b. Distinguish proximate causes from root causes.

c. Recognize that knowing what someone (including you) is like will tell you what you can expect from them.

People almost always find it difficult to identify and accept their own mistakes and weaknesses. Sometimes it’s because they’re blind to them, but more often it’s because their egos get in the way.

2.4 Design a plan.

a. Go back before you go forward.

b. Think about your problem as a set of outcomes produced by a machine.

c. Remember that there are typically many paths to achieving your goals.

d. Think of your plan as being like a movie script in that you visualize who will do what through time.

e. Write down your plan for everyone to see and to measure your progress against.

f. Recognize that it doesn’t take a lot of time to design a good plan.

2.5 Push through to completion.

a. Great planners who don’t execute their plans go nowhere.

b. Good work habits are vastly underrated.

c. Establish clear metrics to make certain that you are following your plan.

2.6 Remember that weaknesses don’t matter if you find solutions.

a. Look at the patterns of your mistakes and identify at which step in the 5-Step Process you typically fail.

b. Everyone has at least one big thing that stands in the way of their success; find yours and deal with it. Write down what your one big thing is (such as identifying problems, designing solutions, pushing through to results) and why it exists (your emotions trip you up, you can’t visualize adequate possibilities).

You can either fix it or you can get the help of others to deal with it well. There are two paths to success: 1) to have what you need yourself or 2) to get it from others. The second path requires you to have humility. Humility is as important, or even more important, as having the strengths yourself. Having both is best. On the following page is a template that some people find helpful.

2.7 Understand your own and others’ mental maps and humility.

3 Be Radically Open-Minded

3.1 Recognize your two barriers.

a. Understand your ego barrier.

When I refer to your “ego barrier,” I’m referring to your subliminal defense mechanisms that make it hard for you to accept your mistakes and weaknesses. Your deepest-seated needs and fears—such as the need to be loved and the fear of losing love, the need to survive and the fear of not surviving, the need to be important and the fear of not mattering—reside in primitive parts of your brain such as the amygdala, which are structures in your temporal lobe that process emotions. Because these areas of your brain are not accessible to your conscious awareness, it is virtually impossible for you to understand what they want and how they control you. They oversimplify things and react instinctively. They crave praise and respond to criticism as an attack, even when the higher-level parts of the brain understand that constructive criticism is good for you. They make you defensive, especially when it comes to the subject of how good you are. At the same time, higher-level consciousness resides in your neocortex, more specifically in the part called the prefrontal cortex. This is the most distinctively human feature of your brain; relative to the rest of the brain, it’s larger in humans than in most other species. This is where you experience the conscious awareness of decision making (the so-called “executive function”), as well as the application of logic and reasoning.

Once you understand how your a) logical/conscious you and b) emotional/subconscious you fight with each other, you can imagine what it’s like when your two yous deal with other people and their own two “thems.” It’s

c. Understand your blind spot barrier.

3.2 Practice radical open-mindedness.