Principles: Life and Work

by Ray Dalio

Never pay based on the job title alone.

Some people respond to the generosity while others respond to the money. You want the first type with you, and you always want to treat them generously.

Remember that the only purpose of money is to get you what you want, so think hard about what you value and put it above money. How much would you sell a good relationship for? There’s not enough money in the world to get you to part with a valued relationship.

Be generous and expect generosity from others. If you’re not generous with others and others aren’t generous with you, you won’t have a quality relationship.

Close advice from an active mentor should last at least one year.

Helping people acquire skills is easy—it’s typically a matter of providing them with appropriate training. Improvements in abilities are more difficult but essential to expanding what a person can be responsible for over time. And changing someone’s values is something you should never count on.

Understand that training guides the process of personal evolution.Trainees must be open-minded; the process requires them to suspend their egos while they discover what they are doing well and what they are doing poorly and decide what to do about it.

Give people your thoughts on how they might approach their decisions, but don’t dictate to them. The most useful thing you can do is to get in sync with them, exploring how they are doing things and why.

Recognize that experience creates internalized learning that book learning can’t replace.

People who have internalized their learning use the thoughts flowing from their subconscious without thinking, in the same way they walk down

9.3 Evaluate accurately, not kindly. Nobody ever said radical honesty was easy. Sometimes, especially with new employees who have not yet gotten used to it, an honest assessment feels like an attack. Rise to a higher level and keep your eye on the bigger picture and counsel the person you are evaluating to do the same.

d. Make accurate assessments. People are your most important resource and truth is the foundation of excellence, so make your personnel evaluations as precise and accurate as possible. This takes time and considerable back-and-forth. Your assessment of how Responsible Parties are performing should be based not on whether they’re doing it your way but on whether they’re doing it in a good way. Speak frankly, listen with an open mind, consider the views of other believable and honest people, and try to get in sync about what’s going on with the person and why. Remember not to be overconfident in your assessments, as it’s possible you are wrong.

Recognize that while most people prefer compliments, accurate criticism is more valuable. You’ve heard the expression “no pain no gain.” Psychologists have shown that the most powerful personal transformations come from experiencing the pain from mistakes that a person never wants to have again—known as “hitting bottom.” So don’t be hesitant to give people those experiences or have them yourself. While it is important to be clear to people about what they are doing well, it is even more important to point out their weaknesses and have them reflect on them. Problems require more time than things that are going well. They must be identified and understood and addressed, while things that are running smoothly require less attention. Instead of celebrating how great we are, we focus on where

9.5 Don’t hide your observations about people.

Squeeze the dots. Every observation of a person potentially tells you something valuable about how they operate. As I explained earlier, I call these observations “dots.” A dot is a piece of data that’s paired with your inference about what it means—a judgment about what someone might have decided, said, or thought. Most of the time we make these inferences and judgments implicitly and keep them to ourselves, but I believe that if they are collected systematically and put into perspective over time, they can be extremely valuable when it’s time to step back and synthesize the picture of a person.

Articulate your assessment of a person’s values, abilities, and skills up front and share it; listen to their and others’ responses to your description; organize

Recognize that change is difficult. Anything that requires change can be difficult. Yet in order to learn and grow and make progress, you must change. When facing a change, ask yourself: Am I being open-minded? Or am I being resistant? Confront your difficulties head-on, force yourself to explore where they come from, and you’ll find that you’ll learn a lot.

Help people through the pain that comes with exploring their weaknesses.

Ultimately, to help people succeed you have to do two things: First let them see their failures so clearly that they are motivated to change them, and then show them how to either change what they are doing or rely on others who are strong where they are weak. While doing the first without the second can be demoralizing to the people you are trying to help, doing them both should be invigorating,

Be willing to “shoot the people you love.”

“love the people you shoot”—do it with consideration and in a way that helps them.

Once you understand how to build and run your machine, your next objective is to figure out how to improve it.

Remember that almost everything will take more time and cost more money than you expect.

Don’t get frustrated. If nothing bad is happening to you now, wait a bit and it will. That is just reality. My approach to life is that it is what it is and the important thing is for me to figure out what to do about it and not spend time moaning about how I wish it were different. Winston Churchill hit the nail on the head when he said, “Success consists of going from failure to failure without loss of enthusiasm.”

Good metrics come about by first thinking of what information you need to answer your pressing questions and then figuring out how to get it. They do not come about by gathering information and putting it together to see what it tells you. At Bridgewater, we talk about four helpful steps to creating good metrics: 1) know what goal your business is achieving, 2) understand the process for getting to the goal (your “machine” with its people and design), 3) identify the key parts in the process that are the best places to measure, so you know how your machine is working to achieve that goal, and 4) explore how to create levers, tied to those key metrics, that allow you to adjust your process and change your outcomes.