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Preview — Principles by Ray Dalio
Whatever success I’ve had in life has had more to do with my knowing how to deal with my not knowing than anything I know.
It’s up to you to decide how valuable they really are and what, if anything, you want to do with them. Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life. They can be applied again and again in similar situations to help you achieve your goals.
All successful people operate by principles that help them be successful, though what they choose to be successful at varies enormously, so their principles vary.
Too often in relationships, people’s principles aren’t clear. This is especially problematic in organizations where people need to have shared principles to be successful.
Think about them, weigh them, and decide how much, if at all, they apply to you and your own life circumstances—
we are simply a group of people who are striving to be excellent at what we do and who recognize that we don’t know much relative to what we need to know.
couldn’t, and still can’t, remember facts that don’t have reasons for being what they are (like phone numbers), and I don’t like following instructions.
In my early years the psychology of the 1960s U.S. was aspirational and inspirational—to achieve great and noble goals. It was like nothing I have seen since.
The United States was then at its peak relative to the rest of the world, accounting for 40 percent of its economy compared to about 20 percent today;
feared boredom and mediocrity much more than I feared failure.
majored in finance in college because of my love for the markets and because that major had no foreign language requirement—
Then, on Sunday, August 15, 1971, President Nixon went on television to announce that the U.S. would renege on its promise to allow dollars to be turned in for gold, which led the dollar to plummet.
My failure to anticipate this, I realized, was due to my being surprised by something that hadn’t happened in my lifetime, though it had happened many times before.
“You better make sense of what happened to other people in other times and other places because if you don’t you won’t know if these things can happen to you and, if they do, you won’t know how to deal with them.”
hired a stripper to drop her cloak while I was lecturing at a whiteboard at the California Grain & Feed Association’s annual convention. I also punched
meaningful work is being on a mission I become engrossed in, and meaningful relationships are those I have with people I care deeply about and who care deeply about me.
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?”
just want to be right—I don’t care if the right answer comes from me.
this experience led me to build Bridgewater as an idea meritocracy—not an autocracy in which I lead and others follow, and not a democracy in which everyone’s vote is equal—but a meritocracy that encourages thoughtful disagreements and explores and weighs people’s opinions in proportion to their merits.
saw that to do exceptionally well you have to push your limits and that, if you push your limits, you will crash and it will hurt a lot. You will think you have failed—but that won’t be true unless you give up.
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.
Rather than argue about our conclusions, my partners and I would argue about our different decision-making criteria. Then we resolved our disagreements by testing the criteria objectively.
learned that if you work hard and creatively, you can have just about anything you want, but not everything you want.
Maturity is the ability to reject good alternatives in order to pursue even better ones.
human greatness and terribleness are not correlated with wealth or other conventional measures of success.
the mid-1980s, Bridgewater had grown to about ten people, so I rented a big old farmhouse. Bridgewater occupied part of it and my family occupied the rest. It was extremely informal and family-like: Everyone parked in the driveway, we met around the kitchen table, and my kids would leave the door open while they sat on the toilet. The people I worked with would wave as they walked by.
never valued more traditional, antiseptic relationships where people put on a façade of politeness and don’t say what they really think.
When I thought someone did something stupid, I said so and I expected them to tell me when I did something stupid. Each of us would be better for it. To me, that was what strong and productive relationships looked like. Operating any other way would be unproductive and unethical.
Ross and I worked to build out an “error log” in the trading department. From then on, anytime there was any kind of bad outcome (a trade wasn’t executed, we paid significantly higher transaction costs than expected, etc.), the traders would make a record of it and we would follow up. As we consistently tracked and addressed those issues, our trade execution machine continually improved.
Having a process that ensures problems are brought to the surface, and their root causes diagnosed, assures that continual improvements occur.
reason I insisted that an issue log be adopted throughout Bridgewater. My rule was simple: If something went badly, you had to put it in the log, characterize its severity, and make clear who was responsible for it. If a mistake happened and you logged it, you were okay. If you didn’t log it, you would be in deep trouble. This way managers had problems brought to them, which was worlds better than having to seek them out. The error log (which we now call the issue log) was our first management tool. I learned subseque...
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Ray sometimes says or does things to employees which makes them feel incompetent, unnecessary, humiliated, overwhelmed, belittled, oppressed, or otherwise bad. The odds of this happening rise when Ray is under stress. At these times, his words and actions toward others create animosity toward him and leave a lasting impression. The impact of this is that people are demotivated rather than motivated. This reduces productivity and the quality of the environment. The effect reaches far beyond the single employee. The smallness of the company and the openness of communication means that everyone ...more
1) being radically truthful with each other including probing to bring our problems and weaknesses to the surface so we could deal with them forthrightly and 2) having happy and satisfied employees.
We agreed that being this way was essential, but since it was making some people feel bad, something had to change.
Put our honest thoughts out on the table, 2. Have thoughtful disagreements in which people are willing to shift their opinions as they learn, and 3. Have agreed-upon ways of deciding (e.g., voting, having clear authorities) if disagreements remain so that we can move beyond them without resentments.
radical truth and radical transparency—that led to our unique results is counterintuitive and emotionally challenging for some.
Trying to understand how we could get our meaningful work and meaningful relationships through this straightforwardness led me to speak with neuroscientists, psychologists, and educators over the decades that followed.
2006, I prepared a rough list of about sixty Work Principles and distributed them to Bridgewater’s managers so they could begin to evaluate them, debate them, and make sense of them for themselves. “It’s a rough draft,” I wrote in the covering memo, “but it is being put out now for comments.”
Over time, I encountered most everything there is to encounter in running a company, so I had a few hundred principles that covered most everything. That collection of principles, like our collection of investment principles, became a kind of decision-making library. Those principles are the basis of what you’ll find in Work Principles.
Over time, these tapes became part of a “boot camp” for new employees as well as a window into an ongoing stream of situations connected to the principles for handling them.
Getting a lot of attention for being successful is a bad position to be in. Australians call it the “tall poppy syndrome,”
My approach was to hire, train, test, and then fire or promote quickly, so that we could rapidly identify the excellent hires and get rid of the ordinary ones, repeating the process again and again until the percentage of those who were truly great was high enough to meet our needs.
seems to me that life consists of three phases. In the first, we are dependent on others and we learn. In the second, others depend on us and we work. And in the third and last, when others no longer depend on us and we no longer have to work, we are free to savor life.
Above all, they are passionate about what they are doing, intolerant of people who work for them who aren’t excellent at what they do, and want to have a big, beneficial impact on the world.
they experience the gap between what is and what could be as both a tragedy and a source of unending motivation.
On one of the personality assessments there is a category they all ranked low on called “Concern for Others.” But that doesn’t mean quite what it sounds like.
Bill Gates, who is devoting most of his wealth and energy to saving and improving lives, tested low as well.
In speaking with them and reviewing the questions that led to these ratings, it became clear: When faced with a choice between achieving their goal or pleasing (or not disappointing) others, they would choose achieving their goal every time.
Only true shapers consistently move from one success to another and sustain success over decades, and those are the people I want to bring to Bridgewater.
there are far fewer types of people in the world than there are people and far fewer different types of situations than there are situations, so matching the right types of people to the right types of situations is key.