Principles: Life and Work

by Ray Dalio

If you are open-minded enough and determined, you can get virtually anything you want.

I urge you to reflect on whether what you are going after is consistent with your nature.

Ultimately, it comes down to the following five decisions: 1. 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.

I’m sure Transcendental Meditation, which I have been practicing regularly for nearly half a century, helped provide me with the equanimity I needed to approach my challenges this way.

You shouldn’t assume that you are always the best person to make decisions for yourself because often you aren’t. While it is up to us to know what we want, others may know how to get it better than we do because they have strengths where we have weaknesses, or more relevant knowledge and experience.

Knowing when not to make your own decisions is one of the most important skills you can develop.

There are many things people consider “good” in the sense that they are kind or considerate but fail to deliver what’s desired (like communism’s “from each according to his ability, to each according to his needs”). Nature would appear to consider them “bad,” and I’d agree with nature.

To be clear, I am not saying people should not be helped. I believe that people should be helped by giving them opportunities and the coaching they need to become strong enough to take advantage of their opportunities. As the saying goes, “God helps those who help themselves.” But this isn’t easy, especially with people you care about.

If you can do those five things well, you will almost certainly be successful. Here they are in a nutshell: 1. Have clear goals. 2. Identify and don’t tolerate the problems that stand in the way of your achieving those goals. 3. Accurately diagnose the problems to get at their root causes. 4. Design plans that will get you around them. 5. Do what’s necessary to push these designs through to results.

when setting goals, just set goals. Don’t think about how you will achieve them or what you will do if something goes wrong.

When you are diagnosing problems, don’t think about how you will solve them—just diagnose them.

If your emotions are getting the better of you, step back and take time out until you can reflect clearly. If necessary, seek guidance from calm, thoughtful people.

Prioritize: While you can have virtually anything you want, you can’t have everything you want. Life is like

Choosing a goal often means rejecting some things you want in order to get other things that you want or need even more.

Afraid to reject a good alternative for a better one, they try to pursue too many goals at once, a...

Don’t confuse goals with desires. A proper goal is something that you really need to achieve. Desires are things that you want that can prevent you from reaching your goals.

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.

Don’t mistake the trappings of success for success itself. Achievement orientation is important, but people who obsess over a $1,200 pair of shoes or a fancy car are very rarely happy because they don’t know what it is that they really want and hence what will satisfy them.

Never rule out a goal because you think it’s unattainable. Be audacious. There is always a best possible path. Your job is to find it and have the courage to follow it. What you think is attainable is just a function of what you know at the moment.

Remember that great expectations create great capabilities. If you limit your goals to what you know you can achieve, you are setting the bar way too low.

Almost nothing can stop you from succeeding if you have a) flexibility and b) self-accountability.

Knowing how to deal well with your setbacks is as important as knowing how to move forward.

Identify and don’t tolerate problems.

View painful problems as potential improvements that are screaming at you.

Don’t avoid confronting problems because they are rooted in harsh realities that are unpleasant to look at.

Be specific in identifying your problems.

Don’t mistake a cause of a problem with the real problem.

Distinguish big problems from small ones.

Once you identify a problem, don’t tolerate it.

Tolerating a problem has the same consequences as failing to identify it. Whether you tolerate it because you believe it cannot be solved, because you don’t care enough to solve it, or because you can’t muster enough of whatever it takes to solve it, if you don’t have the will to succeed, then your situation is hopeless. You need to develop a fierce intolerance of badness of any kind, regardless of its severity.

Diagnose problems to get at their root causes.

Focus on the “what is” before deciding “what to do about it.”

A good diagnosis typically takes between fifteen minutes and an hour, depending on how well it’s done and how complex the issue is.

Like principles, root causes manifest themselves over and over again in seemingly different situations.

Distinguish proximate causes from root causes. Proximate causes are typically the actions (or lack of actions) that lead to problems, so they are described with verbs (I missed the train because I didn’t check the train schedule). Root causes run much deeper and they are typically described with adjectives (I didn’t check the train schedule because I am forgetful). You can only truly solve your problems by removing their root causes, and to do that, you must distinguish the symptoms from the disease.

Recognize that knowing what someone (including you) is like will tell you what you can expect from them.

That goes for yourself too. People almost always find it difficult to identify and accept their own mistakes and weaknesses. Sometimes it’s because they’re blind to them, but more often it’s because their egos get in the way. Most likely your associates are equally reluctant to point out your mistakes, because they don’t want to hurt you. You all need to get over this.

More than anything else, what differentiates people who live up to their potential from those who don’t is their willingness to look at themselves and others objectively and understand the root causes standing in their way.

Go back before you go forward. Replay the story of where you have been (or what you have done) that led up to where you are now, and then visualize what you and others must do in the future so you will reach your goals.

Write down your plan for everyone to see and to measure your progress against. This includes all the granular details about who needs to do what tasks and when.

Recognize that it doesn’t take a lot of time to design a good plan.

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

Push through to completion.

Great planners who don’t execute their plans go nowhere. You need to push through and that requires self-discipline to follow your script.

Good work habits are vastly underrated. People who push through successfully have to-do lists that are reasonably prioritized, and they make certain each item is ticked off in order.

Establish clear metrics to make certain that you are following your plan. Ideally, someone other than you should be objectively measuring and reporting on your progress.

There are many successful, creative people who aren’t good at execution. They succeed because they forge symbiotic relationships with highly reliable task-doers.

Remember that all 5 Steps proceed from your values. Your values determine what you want, i.e., your goals.

setting goals, identifying problems, and then diagnosing them—are synthesizing (by which I mean knowing where you want to go and what’s really going on). Designing solutions and making sure that the designs are implemented are shaping.

Remember that weaknesses don’t matter if you find solutions.