Principles: Life and Work

by Ray Dalio

Embracing radical truth and radical transparency will bring more meaningful work and more meaningful relationships. My experience, based on watching thousands of people try this approach, is that with practice the vast majority find it so rewarding and pleasurable that they have a hard time operating any other way.

Look to nature to learn how reality works.

By looking at nature from the top down, we can see that much of what we call human nature is really animal nature.

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

I now realize that nature optimizes for the whole, not for the individual, but most people judge good and bad based only on how it affects them.

Most people call something bad if it is bad for them or bad for those they empathize with, ignoring the greater good.

While I could understand people liking something that helps them and disliking things that hurt them, it doesn’t make sense to call something good or bad in an absolute sense based only on how it affects individuals.

To be “good” something must operate consistently with the laws of reality and contribute to the evolution of the whole; that is what is most rewarded.

So rather than getting stuck hiding our mistakes and pretending we’re perfect, it makes sense to find our imperfections and deal with them. You will either learn valuable lessons from your mistakes and press on, better equipped to succeed—or you won’t and you will fail.

The individual’s incentives must be aligned with the group’s goals.To

Reality is optimizing for the whole—not for you.

Contribute to the whole and you will likely be rewarded.

Through our own eyes, we are everything—e.g., when we die, the whole world disappears. So to most people (and to other species) dying is the worst thing possible, and it is of paramount importance that we have the best life possible. However, when we look down on ourselves through the eyes of nature we are of absolutely no significance.

What you will be will depend on the perspective you have. Where you go in life will depend on how you see things and who and what you feel connected to (your family, your community, your country, mankind, the whole ecosystem, everything). You will have to decide to what extent you will put the interests of others above your own, and which others you will choose to do so for.

When I began to look at reality through the perspective of figuring out how it really works, instead of thinking things should be different, I realized that most everything that at first seemed “bad” to me—like rainy days, weaknesses, and even death—was because I held preconceived notions of what I personally wanted.

most people think that they are striving to get the things (toys, bigger houses, money, status, etc.) that will make them happy, for most people those things don’t supply anywhere near the long-term satisfaction that getting better at something does.

The things are just the bait. Chasing after them forces us to evolve, and it is the evolution and not the rewards themselves that matters to us and to those around us.

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. If they are intellectually healthy, they will begin seeking something new or seeking new depths in something old—and they will get stronger in the process.

The work doesn’t necessarily have to be a job, though I believe it’s generally better if it is a job. It can be any kind of long-term challenge that leads to personal improvement.

It is a fundamental law of nature that in order to gain strength one has to push one’s limits, which is painful.

Pain + Reflection = Progress.

If you can develop a reflexive reaction to psychic pain that causes you to reflect on it rather than avoid it, it will lead to your rapid learning/evolving.

The challenges you face will test and strengthen you. If you’re not failing, you’re not pushing your limits, and if you’re not pushing your limits, you’re not maximizing your potential.

Though this process of pushing your limits, of sometimes failing and sometimes breaking through—and deriving benefits from both your failures and your successes—is not for everyone, if it is for you, it can be so thrilling that it becomes addictive. Life will inevitably bring you such moments, and it’ll be up to you to decide whether you want to go back for more.

Go to the pain rather than avoid it. If you don’t let up on yourself and instead become comfortable always operating with some level of pain, you will evolve at a faster pace. That’s just the way it is.

Every time you confront something painful, you are at a potentially important juncture in your life—you have the opportunity to choose healthy and painful truth or unhealthy but comfortable delusion.

Like switching from not exercising to exercising, developing the habit of embracing the pain and learning from it will “get you to the other side.”

Our upbringings and our experiences in the world have conditioned us to be embarrassed by our weaknesses and hide them.

But people are happiest when they can be themselves. If you can be open with your weaknesses it will make you freer and will help you deal with them better.

At some point in your life you will crash in a big way. You might fail at your job or with your family, lose a loved one, suffer a serious accident or illness, or discover the life you imagined is out of reach forever. There are a whole host of ways that something will get you. 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.

No matter what you want out of life, your ability to adapt and move quickly and efficiently through the process of personal evolution will determine your success and your happiness.

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.

Own your outcomes.

for the most part even the worst circumstances can be made better with the right approach.

a friend of mine dove into a swimming pool, hit his head, and became a quadriplegic. But he approached his situation well and became as happy as anybody else, because there are many paths to happiness.

Whatever circumstances life brings you, you will be more likely to succeed and find happiness if you take responsibility for making your decisions well instead of compl...

Life doesn’t give a damn about what you like. It’s up to you to connect what you want with what you need to do to get it and then find the courage to carry it through.

Look at the machine from the higher level.

By comparing your outcomes with your goals, you can determine how to modify your machine.

Distinguish between you as the designer of your machine and you as a worker with your machine.

Most people remain stuck in the perspective of being a worker within the machine.

If you can recognize the differences between those roles and that it is much more important that you are a good designer/manager of your life than a good worker in it, you will be on the right path.

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.

Successful people are those who can go above themselves to see things objectively and manage those things to shape change.

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.

Watching people struggle and having others watch you struggle can elicit all kinds of ego-driven emotions such as sympathy, pity, embarrassment, anger, or defensiveness. You need to get over all that and stop seeing struggling as something negative. Most of life’s greatest opportunities come out of moments of struggle; it’s up to you to make the most of these tests of creativity and character.

The best single clue as to whether you should go down this path is whether the thing you are trying to do is consistent with your nature (i.e., your natural abilities).

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. All successful people are good at this.

Because it is difficult to see oneself objectively, you need to rely on the input of others and the whole body of evidence.