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.

discover your own principles from wherever you think is best and ideally write them down. Doing that will allow you and others to be clear about what your principles are and understand each other better.

you can think for yourself while being open-minded in a clearheaded way to find out what is best for you to do, and if you can summon up the courage to do it, you will make the most of your life.

For example, when you enter into relationships with others, your principles and their principles will determine how you interact. People who have shared values and principles get along.

long as they reflect your true character and values.

The worst thing you can be is a phony, because if you’re a phony you will lose people’s trust and your own self-respect.

Since I was a kid, I’ve been a curious, independent thinker who ran after audacious goals. I got excited about visualizing things to go after, had some painful failures going after them, learned principles

that would prevent me from making the same sort of mistakes again, and changed and improved, which allowed me to imagine and go after even more audacious goals and do that rapidly and repeatedly for a long time. So to me life looks like the sequence you see on the opposite page.

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.

I developed a healthy fear of being wrong and figured out an approach to decision making that would maximize my odds of being right.

The most important thing is that you develop your own principles and ideally write them down, especially if you are working with others.

They gave me and Bridgewater far more than I ever dreamed of.

We believe that thoughtful, unemotional disagreement by independent thinkers can be converted into believability-weighted decision making that is smarter and more effective than the sum of its parts.

As we get older, we begin to make our own choices. We choose what we are going after (our goals), and that influences our paths.

Ask yourself what you want, seek out examples of other people who got what they wanted, and try to discern the cause-and-effect patterns behind their achievements so you can apply them to help you achieve your own goals.

the only son of a professional jazz musician and a stay-at-home mom.

At the same time, I was very curious and loved to figure things out for myself, though that was less obvious at the time.

She died when I was nineteen. At the time, I couldn’t imagine ever laughing again. Now when I think of her I smile.

He was a responsible man dealing with an irresponsible kid.

He lived another decade after that, as sharp as ever mentally.

But I do know that having those jobs and having some money to handle independently in those early years taught me many valuable lessons I wouldn’t have learned in school or at play.

He and his ideas had

major effect on my thinking.

I might have been naive but I wasn’t alone.

I’ve always been an independent thinker inclined to take risks in search of rewards—not just in the markets, but in most everything.

boredom and mediocrity much more than I feared failure.

terrible at least gives l...

The more strongly they make those assurances, the more desperate the situation probably is, so the more likely it is that a devaluation will take place.

The message that reality was conveying to me was “You better make sense of what happened to other people in other

times and other places because if you don’t you won’t know if these things can happen to you and, if they do, you won’t know how to deal with them.”

I also learned that for every action (such as easy money and

credit) there is a consequence (in this case, higher inflation)

Of course, being able to both properly identify which ones of those are happening and to understand the cause-effect relationships behind them remained difficult.

and I saw again how politics and economics intertwine, usually with economics leading.

because I never wanted to experience that pain again. It enhanced my fear of being wrong and taught me to make sure that no single bet, or even multiple bets, could cause me to lose more than an acceptable amount. In trading you have to be defensive and aggressive at the same time.

what the planted acreage and typical yields were in each of the major growing areas; how to convert rainfall levels in different weeks of the growing season into yield estimates; how to project harvest sizes, carrying costs, and livestock inventories by weight group, location, and rates of weight gain; and how to project dressing yields, retailer margins, consumer preferences by cut of meat, and the amounts to be slaughtered in each season.

I could project the timing and quantity of corn and soybean production. To me it all looked like a beautiful machine with logical

I found it much more practical to measure demand as the amount spent (instead of as the quantity bought)

From that point on, whenever I looked at any market—commodities, stocks, bonds, currencies, whatever—I could see and understand imbalances that others who defined supply and demand in the traditional way (as units that equaled each other) missed.

and feeding them into a computer so the computer could “make decisions” for me all became standard practices.

The most painful lesson that was repeatedly hammered home is that you can never

be sure of anything:

There are always risks out there that can hurt you badly, even in the seemingly safest bets, so it’s always best to...

While making money was good, having meaningful work and meaningful relationships was far better.

Money will be one of the things you need, but it’s not the only one and certainly not the most important one once you get past having the amount you need to get what you really want.

I wanted meaningful work and meaningful relationships equally, and I valued money less—as long as I had enough to take care of my basic needs.

because there is no amount of money I would take in exchange for a meaningful relationship, because there is nothing I could buy with that money that would be more valuable.

Making money was an incidental consequence of that.

The third and largest wave came in 1979–82 and was one of the greatest economic/market crescendos

These big moves were exacerbated by the oil shock that followed the fall of the Shah of Iran.