Principles: Life and Work

by Ray Dalio

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.

I believe that the key to success lies in knowing how to both strive for a lot and fail well. By failing well, I mean being able to experience painful failures that provide big learnings without failing badly enough to get knocked out of the game.

My painful mistakes shifted me from having a perspective of “I know I’m right” to having one of “How do I know I’m right?”

Experience taught me how invaluable it is to reflect on and write down my decision-making criteria whenever I made a decision, so I got in the habit of doing that.

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

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.

a. 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’s important not to let our biases stand in the way of our objectivity. To get good results, we need to be analytical rather than emotional. Whenever I observe something in nature that I (or mankind) think is wrong, I assume that I’m wrong and try to figure out why what nature is doing makes sense. That has taught me a lot. It has changed my thinking about 1) what’s good and what’s bad, 2) what my purpose in life is, and 3) what I should do when faced with my most important choices. To help explain why, I will give you a simple example.

This is key essential. Let assume that I'm wrong and try to figure out why others are doing make sense

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.

b. 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.

Evolution is good because it is the process of adaptation that generally moves things toward improvement.

The key is to fail, learn, and improve quickly. If you’re constantly learning and improving, your evolutionary process will look like the one that’s ascending.

Adaptation through rapid trial and error is invaluable. Natural

There are at least three kinds of learning that foster evolution: memory-based learning (storing the information that comes in through one’s conscious mind so that we can recall it later); subconscious learning (the knowledge we take away from our experiences that never enters our conscious minds, though it affects our decision making); and “learning” that occurs without thinking at all, such as the changes in DNA that encode a species’ adaptations.

What you will be will depend on the perspective you have.

everything that nature made has a purpose, so nature gave us pain for a purpose. So what is its purpose? It alerts us and helps direct us.

The irony is that if you choose the healthy route, the pain will soon turn into pleasure. The pain is the signal! 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.”

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.

The quality of your life will depend on the choices you make at those painful moments. The

Weigh second- and third-order consequences.

First thouhgt are most likely wrong.

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.

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,

If you are disappointed because you can’t be the best person to do everything yourself, you are terribly naive.

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;

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.

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

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.

Very Important points

The two biggest barriers to good decision making are your ego and your blind spots.

Let’s look at what tends to happen when someone disagrees with you and asks you to explain your thinking. 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.

This failure to benefit from others’ thinking doesn’t just occur when disagreements arise; it occurs when people encounter problems that they are trying to solve. When trying to figure things out, most people spin in their own heads instead of taking in all the wonderful thinking available to them. As a result, they continually run toward what they see and keep crashing into what they are blind to until the crashing

leads them to adapt.

In my opinion, these two barriers—ego and blind spots—are the fatal flaws that keep intelligent, hardworking people from living up to their potential.

Sincerely believe that you might not know the best possible path and recognize that your ability to deal well with “not knowing”

The latest state of misunderstanding

Recognize that decision making is a two-step process: First take in all the relevant information, then decide.

Realize that you can’t put out without taking in.

Listen

Recognize that to gain the perspective that comes from seeing things through another’s eyes, you must suspend judgment for a time—only by empathizing can you properly evaluate another point of view.

Recognize the signs of closed-mindedness and open-mindedness that you should watch out for.

Closed-minded people don’t want their ideas challenged.

Open-minded people are more curious about why there is disagreement. They are not angry when someone disagrees.They

Closed-minded people are more likely to make statements than ask questions.

Open-minded people genuinely believe they could be wrong; the questions that they ask are genuine. They also assess their relative believability

Closed-minded people focus much more on being understood than on understanding others.

Open-minded people always feel compelled to see things through others’ eyes.

4. Closed-minded people say things like “I could be wrong . . . but here’s my opinion.” This is a classic cue I hear all the time.

Open-minded people approach everything with a deep-seated fear that they may be wrong.

Once I understood that it’s all physiological, many things became clearer to me. While I used to get angry and frustrated at people because of the choices they made, I came to realize that they weren’t intentionally acting in a way that seemed counterproductive; they were just living out things as they saw them, based on how their brains worked. I also realized that as off-base as they seemed to me, they saw me the same way.

Yet I see people doing it all the time, usually to avoid making others or themselves feel uncomfortable, which is not just backward but counterproductive.