Principles: Life and Work

by Ray Dalio

I learned is an approach to life based on principles that helps me find out what’s true and what to do about it.

To be principled means to consistently operate with principles that can be clearly explained.

Unfortunately, most people can’t do that. And it’s very rare for people to write their principles down and share them.

My hope is that reading this book will prompt you and others to discover your own principles from wherever you think is best and ideally write them down.

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 . . .

People who have shared values and principles get along. People who don’t will suffer through constant misunderstandings and conflicts.

To make money in the markets, one needs to be an independent thinker who bets against the consensus and is right.

To be a successful entrepreneur, the same is true: One also has to be an independent thinker who correctly bets against the consensus, which means being painfully wrong a fair amount.

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.

I learned the computer could make better decisions than me because it could process vastly more information than I could, and it could do it faster and unemotionally.

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

They led me to a perch from which I got to see success and life very differently than I had imagined, and they gave me the meaningful work and meaningful relationships I value even more than my conventional successes.

Life and Work Principles in one book, and Economic and Investment Principles in the other.

I will explain how we’ve coalesced our principles into an idea meritocracy that strives to deliver meaningful work and meaningful relationships through radical truth and radical transparency

1) What do you want? 2) What is true? 3) What are you going to do about it?

Ask yourself what you want, seek out examples of other people who got what they wanted, and try to discern the cause-and-effect patterns behind their achievements so you can apply them to help you achieve your own goals.

I also feared boredom and mediocrity much more than I feared failure.

Use the 5-Step Process to Get What You Want Out of Life 2.1 Have clear goals.

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

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

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

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

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

b. Everyone has at least one big thing that stands in the way of their success; find yours and deal with it.

c. Don’t worry about looking good; worry about achieving your goal.

f. Remember that you’re looking for the best answer, not simply the best answer that you can come up with yourself.

i. Know when it’s best to stop fighting and have faith in your decision-making process.

a. Realize that the conscious mind is in a battle with the subconscious mind. b. Know that the most constant struggle is between feeling and thinking.

a. A great organization has both great people and a great culture.

c. Great cultures bring problems and disagreements to the surface and solve them well,

TO GET THE CULTURE RIGHT . . . 1 Trust in Radical Truth and Radical Transparency

a. Never say anything about someone that you wouldn’t say to them directly

a. Speak up, own it, or get out.

e. Provide transparency to people who handle it well and either deny it to people who don’t handle it well or remove those people from the organization.

b. Make sure that people understand the difference between fairness and generosity.

4.1 Recognize that conflicts are essential for great relationships because they are how people determine whether their principles are aligned and resolve their differences.

a. Spend lavishly on the time and energy you devote to getting in sync, because

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

c. Recognize that you don’t need to make judgments about everything.

6.3 Don’t leave important conflicts unresolved. a. Don’t let the little things divide you when your agreement on the big things should bind you. b. Don’t get stuck in disagreement—escalate or vote!

c. Don’t allow lynch mobs or mob rule.

a. Make sure that everyone has someone they report to.

b. Make finding the right people systematic and scientific.

b. Recognize that performance in school doesn’t tell you much about whether a person has the values and abilities you are looking for.

hire people you want to share your life with.

a. Pay for the person, not the job.

d. Focus more on making the pie bigger

9.4 Recognize that tough love is both the hardest and the most important type of love to give (because it is so rarely welcomed).

Don’t hide your observations about people.