Principles: Life and Work

by Ray Dalio

pointillist

Finding out what’s true and trying to do what’s in everyone’s best interests is rare, though most policymakers pretend that’s what they’re doing.

came to respect most of the policymakers I worked with and to feel sorry for them because of the terrible positions they were in. Most are highly principled people who are forced to operate in unprincipled environments.

A community in which you always have the right and obligation to make sense of things and a process for working yourselves through disagreements—i.e., a real, functioning idea meritocracy. I want you to think, not follow—while recognizing that you can be wrong and that you have weaknesses—and I want to help you get the most likely best answers, even if you personally don’t believe that they’re the best answers. I want to give you radical open-mindedness and an idea meritocracy that will take you from being trapped in your own heads to having access to the best minds in the world to help you make the best decisions for you and for our community. I want to help you all struggle well and evolve to get the most out of life.

In time, I realized that the satisfaction of success doesn’t come from achieving your goals, but from struggling well.

my assessment is that the incremental benefits of having a lot and being on top are not nearly as great as most people think. Having the basics—a good bed to sleep in, good relationships, good food, and good sex—is most important, and those things don’t get much better when you have a lot of money or much worse when you have less.

Good principles are effective ways of dealing with reality. To learn my own, I spend a lot of time reflecting. So rather than just giving you my principles, I will share the reflections behind them.

I believe that with practice you can change your habits and experience the same “mistake learner’s high.”

Truth—or, more precisely, an accurate understanding of reality—is the essential foundation for any good outcome.

Most people fight seeing what’s true when it’s not what they want it to be.

Don’t let fears of what others think of you stand in your way.

most people struggle to reconcile their emotions and their instincts (which come from the animal parts of their brains) with their reasoning (which comes from parts of the brain more developed in humans). This struggle causes people to confuse what they want to be true with what actually is true.

Don’t get hung up on your views of how things “should” be because you will miss out on learning how they really are.

It is a reality that each one of us is only one of about seven billion of our species alive today and that our species is only one of about ten million species on our planet. Earth is just one of about 100 billion planets in our galaxy, which is just one of about two trillion galaxies in the universe. And our lifetimes are only about 1/3,000 of humanity’s existence, which itself is only 1/20,000 of the Earth’s existence. In other words, we are unbelievably tiny and short-lived and no matter what we accomplish, our impact will be insignificant.

People who earn so much that they derive little or no marginal gains from it will experience negative consequences, as with any other form of excess, like gluttony.

Identifying, accepting, and learning how to deal with your weaknesses, • Preferring that the people around you be honest with you rather than keep their negative thoughts about you to themselves, and • Being yourself rather than having to pretend to be strong where you are weak.

At such times, you will be in pain and might think that you don’t have the strength to go on. You almost always do, however; your ultimate success will depend on you realizing that fact, even though it might not seem that way at the moment.

Weigh second- and third-order consequences.

For example, the first-order consequences of exercise (pain and time spent) are commonly considered undesirable, while the second-order consequences (better health and more attractive appearance) are desirable.

if you take responsibility for making your decisions well instead of complaining about things being beyond your control. Psychologists call this having an “internal locus of control,” and studies consistently show that people who have it outperform those who don’t.

don’t worry about whether you like your situation or not. Life doesn’t give a damn about what you like.

Think of yourself as a machine operating within a machine and know that you have the ability to alter your machines to produce better outcomes.

To be successful, the “designer/manager you” has to be objective about what the “worker you” is really like, not believing in him more than he deserves, or putting him in jobs he shouldn’t be in. Instead of having this strategic perspective, most people operate emotionally and in the moment; their lives are a series of undirected emotional experiences, going from one thing to the next. If you want to look back on your life and feel you’ve achieved what you wanted to, you can’t operate that way.

The biggest mistake most people make is to not see themselves and others objectively, which leads them to bump into their own and others’ weaknesses again and again.

For example, if you as the designer/manager discover that you as the worker can’t do something well, you need to fire yourself as the worker and get a good replacement, while staying in the role of designer/manager of your own life. You shouldn’t be upset if you find out that you’re bad at something—you should be happy that you found out, because knowing that and dealing with it will improve your chances of getting what you want.

Imagine all the areas in which Einstein was incompetent,

When encountering your weaknesses you have four choices: 1. You can deny them (which is what most people do). 2. You can accept them and work at them in order to try to convert them into strengths (which might or might not work depending on your ability to change). 3. You can accept your weaknesses and find ways around them. 4. Or, you can change what you are going after.

Asking others who are strong in areas where you are weak to help you is a great skill that you should develop no matter what, as it will help you develop guardrails that will prevent you from doing what you shouldn’t be doing.

Don’t confuse what you wish were true with what is really true. 2. Don’t worry about looking good—worry instead about achieving your goals. 3. Don’t overweight first-order consequences relative to second- and third-order ones. 4. Don’t let pain stand in the way of progress. 5. Don’t blame bad outcomes on anyone but yourself.

equanimity

especially others who have opposing views but who share your interest in finding the truth rather than being proven right.

BAD Make your decisions on the basis of first-order consequences. GOOD Make your decisions on the basis of first-, second-, and third-order consequences.

While you can have virtually anything you want, you can’t have everything you want. Life is like a giant smorgasbord with more delicious

Decide what you really want in life by reconciling your goals and your desires. Take passion, for example. Without passion, life would be dull; you wouldn’t want to live without it. But what’s key is what you do with your passion. Do you let it consume you and drive you to irrational acts, or do you harness it to motivate and drive you while you pursue your real goals? What will ultimately fulfill you are things that feel right at both levels, as both desires and goals.

What you think is attainable is just a function of what you know at the moment.

When a problem stems from your own lack of talent or skill, most people feel shame. Get over it. I cannot emphasize this enough:

Distinguish proximate causes from root causes.

Most likely your associates are equally reluctant to point out your mistakes, because they don’t want to hurt you.

Too many people make the mistake of spending virtually no time on designing because they are preoccupied with execution. Remember: Designing precedes doing!

Understand your ego barrier. When I refer to your “ego barrier,” I’m referring to your subliminal defense mechanisms that make it hard for you to accept your mistakes and weaknesses.

Because you are programmed to view such challenges as attacks, you get angry, even though it would be more logical for you to be interested in the other person’s perspective, especially if they are intelligent.

When you try to explain your behavior, your explanations don’t make any sense. That’s because your lower-level you is trying to speak through your upper-level you. Your deep-seated, hidden motivations are in control, so it is impossible for you to logically explain what “you” are doing.

Even the most intelligent people generally behave this wa...

To be effective you must not let your need to be right be more important than your nee...

you are too proud of what you know or of how good you are at something you will learn less, make inferior decisions, ...

Color-blind people eventually find out that they are color-blind, whereas most people never see or understand the ways in which their ways of thinking make them blind.

when two people reach opposite conclusions, someone must be wrong.

replace your attachment to always being right with the joy of learning what’s true.

Sincerely believe that you might not know the best possible path and recognize that your ability to deal well with “not knowing” is more important than whatever it is you do know.

People interested in making the best possible decisions are rarely confident that they have the best answers.