Principles: Life and Work

by Ray Dalio

Because everything we saw lined up and we couldn’t find anyone who could refute our views, we prepared our clients’ portfolios by balancing our positions in a way that there would be considerable upside and limited downside in the portfolios if we were right and putting in a backup plan in case we were wrong.

how to maximize our capacity without hurting our performance.

We programmed this new approach into our computers, back-tested it to see how it worked in all countries and time frames, and explained it to our clients in detail so they could thoroughly understand the logic behind it. As much as I love and have benefited from artificial intelligence, I believe that only people can discover such things and then program computers to do them.

Getting a lot of attention for being successful is a bad position to be in. Australians call it the “tall poppy syndrome,” because the tallest poppies in a field are the ones most likely to have their heads whacked off. I

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.

New hires typically go through an acclimation period of about eighteen to twenty-four months before becoming comfortable with the truthfulness and transparency that is such an essential part of the Bridgewater culture—especially accepting one’s mistakes and figuring out how to deal with them.

People who run companies are faced with important choices every day. How they make those choices determines the character of the company, the quality of its relationships, and the outcomes it produces.

It 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.

The rarest cases were people like Jobs, Musk, Gates, and Bezos, who were inventive visionaries and managed big organizations to build those visions out.

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.

people tend to embrace stories about how their own country is moral and the rival country is not, when most of the time these countries have different interests that they are trying to maximize.

The best behaviors one can hope for come from leaders who can weigh the benefits of cooperation, and who have long enough time frames that they can see how the gifts they give this year may bring them benefits in the future.

gave Wang a copy of Joseph Campbell’s great book The Hero with a Thousand Faces, because he is a classic hero and I thought it might help him. I also gave him The Lessons of History, a 104-page distillation of the major forces through history by Will and Ariel Durant, and River Out of Eden by the insightful Richard Dawkins, which explains how evolution works. He gave me Georgi Plekhanov’s classic On the Role of the Individual in History.

“to transition well, there are only two things that you need to do: Put capable CEOs in place and have a capable governance system to replace the CEOs if they’re not capable.”

When I started out, each and every twist and turn I encountered, whether in the markets or in my life in general, looked really big and dramatic up close, like unique life-or-death experiences that were coming at me fast. With time and experience, I came to see each encounter as “another one of those” that I could approach more calmly and analytically, like a biologist might approach an encounter with a threatening creature in the jungle: first identifying its species and then, drawing on his prior knowledge about its expected behaviors, reacting appropriately. When

Watching the same things happen again and again, I began to see reality as a gorgeous perpetual motion machine, in which causes become effects that become causes of new effects, and so on.

I realized that reality was, if not perfect, at least what we are given to deal with, so that any problems or frustrations I had with it were more productively directed to dealing with them effectively than complaining about them.

I came to understand that my encounters were tests of my character and creativity. Over time, I came to appreciate what a tiny and short-lived part of that remarkable system I am, and how it’s both good for me and good ...

Encountering pains and figuring out the lessons they were trying to give me became sort of a game to me.

I learned to love my struggles, which I suppose is a healthy perspective to have, like learning to love exercising (which I haven’t managed to do yet).

In my early years, I looked up to extraordinarily successful people, thinking that they were successful because they were extraordinary. After I got to know such people personally, I realized that all of them—like me, like everyone—make mistakes, struggle with their weaknesses, and don’t feel that they are particularly special or great. They are no happier than the rest of us, and they struggle just as much or more than average folks. Even after they surpass their wildest dreams, they still experience more struggle than glory.

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

imagine instantaneously achieving it. You’d be happy at first, but not for long. You would soon find yourself needing something else to struggle for.

Since life brings both ups and downs, struggling well doesn’t just make your ups better; it makes your downs less bad.

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.

And the people one meets at the top aren’t necessarily more special than those one meets a...

The marginal benefits of having more fall off pretty quickly. In fact, having a lot more is worse than having a moderate amount more...

For all those reasons, I cannot say that having an intense life filled with accomplishments is better than having a relaxed life filled with savoring, though I can say that being strong is better than being weak, and that struggling gives one strength.

What I have seen is that the happiest people discover their own nature and match their life to it.

passing on knowledge is like passing on DNA—it is more important than the individual, because it lives way beyond the individual’s life.

Reality, in turn, will send you loud signals about how well your principles are working by rewarding or punishing you, so you will learn to fine-tune them accordingly.

I have found it helpful to think of my life as if it were a game in which each problem I face is a puzzle I need to solve. By solving the puzzle, I get a gem in the form of a principle that helps me avoid the same sort of problem in the future.

Collecting these gems continually improves my decision making, so I am able to ascend to higher and higher levels of play in which the game gets harder and the stakes become ever greater.

Just as long-distance runners push through pain to experience the pleasure of “runner’s high,” I have largely gotten past the pain of my mistake making and instead enjoy the pleasure that comes with learning from it.

Dreams + Reality + Determination = A Successful Life.

Idealists who are not well grounded in reality create problems, not progress.

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. That’s bad, because it is more important to understand and deal with the bad stuff since the good stuff will take care of itself.

Be radically open-minded and radically transparent.

transparency are invaluable for rapid learning and effective change. Learning is the product of a continuous real-time feedback loop in which we make decisions, see their outcomes, and improve our understanding of reality as a result.

Being radically open-minded enhances the efficiency of those feedback loops, because it makes what you are doing, and why, so clear to yourself and others that there can’t be any misunderstandings.

The more open-minded you are, the less likely you are to deceive yourself—and the more likely it is that other...

It can also be difficult because being radically transparent rather than more guarded exposes one to criticism.

Don’t let fears of what others think of you stand in your way. You must be willing to do things in the unique ways you think are best—

Learning to be radically transparent is like learning to speak in public: While it’s initially awkward, the more you do it, the more comfortable you will be with it.

I still instinctively find being as radically transparent in the ways that I am in this book uncomfortable because I am exposing personal material to the public that will attract attention and criticism.

I have experienced the positive effects of radical transparency for so long that it’s now uncomfortable for me not to be that way.

Imagine how many fewer misunderstandings we would have and how much more efficient the world would be—and how much closer we all would be to knowing what’s true—if instead of hiding what they think, people shared it openly. I’m not talking about everyone’s very personal inner secrets; I’m talking about people’s opinions of each other and of how the world works.

whenever I’m faced with the choice, my instinct is to be transparent. I practice it as a discipline and I recommend you do the same.