Principles: Life and Work

by Ray Dalio

In trying to create a culture that values excellence, constantly reinforcing the need to point out and stare at problems—no matter how small—is essential (otherwise you risk setting an example of tolerating mediocrity).

if you don’t experience the consequences of your actions, you’ll take less ownership of them.

When people recognize that their own well-being is directly connected to that of their community, the ownership relationship becomes reciprocal.

b. Force yourself and the people who work for you to do difficult things. It’s a basic law of nature: You must stretch yourself if you want to get strong.

Every key person should have at least one person who can replace him or her.

What I worry about is doing the right thing and not about what people think about me.

Personal contact at times of personal difficulty is a must.

This traditional relationship between “leaders” and “followers” is the opposite of what I believe is needed to be most effective, and being maximally effective is the most important thing a “leader” must do.

It is also more important to have good challengers than good followers.

Thoughtful discussion and disagreement is practical because it stress-tests leaders and brings what they are missing to their attention.

The most effective leaders work to 1) open-mindedly seek out the best answers and 2) bring others along as part of that discovery process.

A truly great leader is appropriately uncertain but well equipped to deal with that uncertainty through open-minded exploration.

Be weak and strong at the same time. Sometimes asking questions to gain perspective can be misperceived as being weak and indecisive. Of course it’s not. It’s necessary in order to become wise and it is a prerequisite for being strong and decisive.

Be open-minded and assertive at the same time and get in tight sync with those who work with you,

So, if you’re leading well, you shouldn’t be surprised if people disagree with you.

It is not illogical or arrogant to believe that you know better than the average person, so long as you are appropriately open-minded.

Have the open disagreement and be happy to either win or lose the thought battles, as long as the best ideas win out.

Authoritarian managers don’t develop their subordinates, which means those who report to them stay dependent.

People will often subconsciously gravitate toward activities they like rather than what’s required. If they lose sight of their priorities, you need to redirect them.

Watch out for people who confuse goals and tasks, because if they can’t make that distinction, you can’t trust them with responsibilities.

Watch out for the unfocused and unproductive “theoretical should.” A

Goals, tasks, and assigned responsibilities should be reviewed at department meetings at least once a quarter, perhaps as often as once a month.

Put things in perspective by going back before going forward. Before moving forward with a new plan, take the time to reflect on how the machine has been working up till now.

It’s critical that escalation not be seen as a failure but as a responsibility.

Problems are like coal thrown into a locomotive engine because burning them up—inventing and implementing solutions for them—propels us forward.

Identifying and not tolerating problems is one of the most important and disliked things people can do.

Don’t undermine your progress in pursuit of a pat on the back; celebrate finding out what is not going well so you can make it go better.

Acknowledging a weakness isn’t the same thing as accepting it.

Assign people the job of perceiving problems, give them time to investigate, and make sure they have independent reporting lines so that they can convey problems without any fear of recrimination.Without

To perceive problems, compare how the outcomes are lining up with your goals.

It’s your responsibility to make sure communications from your people flow freely, so encourage it by giving them plenty of opportunities to speak up. Don’t just expect them to provide you with regular and honest feedback—explicitly ask them for it.

Avoid the anonymous “we” and “they,” because they mask personal responsibility.

Unidentified problems are the worst; identified problems without planned solutions are better, but worse for morale; identified problems with a good planned solution are better still; and solved problems are best.

Think of the problems you perceive in a machinelike way. There are three steps to doing this well: First, note the problem; then determine who the RPs to raise it to are; and finally decide when the right time to discuss it is. In other words: what, who, when. Then follow through.

The most common mistake I see people make is dealing with their problems as one-offs rather than using them to diagnose how their machine is working so that they can improve it. They move on to fix problems without getting at their root causes, which is a recipe for continued failure.

Bad outcomes don’t just happen; they occur because specific people make, or fail to make, specific decisions.

To diagnose well, ask the following questions: 1. Is the outcome good or bad? 2. Who is responsible for the outcome? 3. If the outcome is bad, is the Responsible Party incapable and/or is the design bad?

Keep it simple! At this stage, a common pitfall is to delve into a granular examination of procedural details rather than stay at the level of the machine (the level of who was responsible for doing what).

Remember: It’s your job to guide the conversation toward an accurate and clear synthesis.

Importantly, ask yourself this question: If X attribute is done well next time, will the bad outcome still occur? This is a good way of making sure you are logically connecting the outcome back to the case.

I often hear people complaining about a particular outcome without attempting to understand the machine that caused it.

If a person is chronically failing, it is due to a lack of training or a lack of ability.

Identifying the fact that someone else doesn’t know what to do doesn’t mean that you know what to do. It’s one thing to point out a problem; it’s another to have an accurate diagnosis and a quality solution.

Remember that a root cause is not an action but a reason. Root causes are described in adjectives, not verbs, so keep asking “why” to get at them.

You must go deeper in order to understand what about the people and/or the design led to the failure. This is difficult for both the diagnoser and the RPs, and it often results in people bringing up all kinds of irrelevant details.

Keep in mind that managers usually fail or fall short of their goals for one (or more) of five reasons.

They are too distant.

They have problems perceiving ...

They have lost sight of how bad things have become because they ha...

They have such high pride in their work (or such large egos) that they can’t bear to admit they are unabl...