Principles: Life and Work

by Ray Dalio

If you can think for yourself while being open-minded in a clearheaded way to find out what is best for you to do, and if you can summon up the courage to do it, you will make the most of your life.

Think for yourself to decide 1) what you want, 2) what is true, and 3) what you should do to achieve #1 in light of #2 . . . . . . and do that with humility and open-mindedness so that you consider the best thinking available to you.

I believe that the key to success lies in knowing how to both strive for a lot and fail well. By failing well, I mean being able to experience painful failures that provide big learnings without failing badly enough to get knocked out of the game.

One also has to be an independent thinker who correctly bets against the consensus, which means being painfully wrong a fair amount.

Make believability-weighted decisions.

My painful mistakes shifted me from having a perspective of “I know I’m right” to having one of “How do I know I’m right?”

Experience taught me how invaluable it is to reflect on and write down my decision-making criteria whenever I made a decision, so I got in the habit of doing that.

Systemize your decision making.

The most important thing is that you develop your own principles and ideally write them down, especially if you are working with others.

Time is like a river that carries us forward into encounters with reality that require us to make decisions. We can’t stop our movement down this river and we can’t avoid those encounters. We can only approach them in the best possible way.

“If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away.”

I learned that everything that was going on—the currency breaking its link to gold and devaluing, the stock market soaring in response—had happened before, and that logical cause-effect relationships made those developments inevitable.

When everybody thinks the same thing—such as what a sure bet the Nifty 50 is—it is almost certainly reflected in the price, and betting on it is probably going to be a mistake.

found it much more practical to measure demand as the amount spent (instead of as the quantity bought) and to look at who the buyers and sellers were and why they bought and sold.

The most painful lesson that was repeatedly hammered home is that you can never be sure of anything: There are always risks out there that can hurt you badly, even in the seemingly safest bets, so it’s always best to assume you’re missing something.

But at least, by being out, I didn’t lose money. There are anxious times in every investor’s career when your expectations of what should be happening aren’t aligned with what is happening and you don’t know if you’re looking at great opportunities or catastrophic mistakes.

Timing is everything.

Because my views were so controversial I asked others to track my reasoning and point out to me where it was bad. No one could find any flaws in my logic, though they were all reluctant to endorse my conclusion.

Being so wrong—and especially so publicly wrong—was incredibly humbling and cost me just about everything I had built at Bridgewater. I saw that I had been an arrogant jerk who was totally confident in a totally incorrect view.

First, I had been wildly overconfident and had let my emotions get the better of me.

I learned (again) that no matter how much I knew and how hard I worked, I could never be certain enough to proclaim things like what I’d said on Wall $treet Week: “There’ll be no soft landing. I can say that with absolute certainty, because I know how markets work.” I am still shocked and embarrassed by how arrogant I was.

I learned a great fear of being wrong that shifted my mind-set from thinking “I’m right” to asking myself “How do I know I’m right?”

the best way to answer this question is by finding other independent thinkers who are on the same mission as me and who see things differently from me.

I saw that the only way I could succeed would be to: 1. Seek out the smartest people who disagreed with me so I could try to understand their reasoning. 2. Know when not to have an opinion. 3. Develop, test, and systemize timeless and universal principles. 4. Balance risks in ways that keep the big upside while reducing the downside.

Typically, by doing what comes naturally to us, we fail to account for our weaknesses, which leads us to crash.

is that beneficial change begins when you can acknowledge and even embrace your weaknesses.

There is almost always a good path that you just haven’t discovered yet, so look for it until you find it rather than settle for the choice that is then apparent to you.