Principles: Life and Work

by Ray Dalio

those who work to be part of a mission,

and those who work for a...

To me, that was what strong and productive relationships looked like. Operating any other way would be unproductive and unethical.

We got a lot of attention because we were up 22 percent when most others were down a lot. The media dubbed us as among the “Heroes of October.”

we would flip from a fully long position to a fully short one when we crossed a predetermined threshold

we’d also get killed paying transaction costs when we crossed back and forth.

losing faith in them at such times is as common a mistake as getting too enamored of them when they do well.

have come to realize that bad times coupled with good reflections provide some of the best lessons,

because most people like to be with winners and shun losers. True friends are the opposite.

Some painful lessons that you’ll read about later taught me that it can be a mistake to undervalue experience.

I saw that with fifteen to twenty good, uncorrelated return streams,

I called it the “Holy Grail of Investing” because it showed the path to making a fortune. This was another key moment in our education.

and it wouldn’t provide much more diversification than if they’d picked only five. It

Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside.

Because Pure Alpha didn’t have any betas, it didn’t have any bias to go up or down along with any market. Its returns depended only on how good we were in outperforming others.

believed strongly that we should bring problems and disagreements to the surface to learn what should be done to make things better.

And it reminded me that when faced with the choice between two things you need that are seemingly at odds, go slowly to figure out how you can have as much of both as possible.

There is almost always a good path that you just haven’t figured out yet, so look for it until you find it rather than settle for the choice that is then apparent to you.

those who had less contact with me were offended by my directness.

Those principles were both agreements for how we would be with each other and my reflections on how we should handle every situation that came up.

choice the way I felt about most others—that whether or not we could have our cake and eat it too was merely a test of our creativity and character.

Then, whenever something new came along that required me to make a decision, I would reflect on my criteria for making that decision and write it down as a principle so people

could make the connections between the situation, my principle for handling these situations, and my actions.

6 Over time, these tapes became part of a “boot camp” for new employees as well as a window

worked. If nothing else, I could better appreciate people I’d once wanted to strangle! Moreover, I recognized that managers who do not understand people’s different thinking styles cannot understand how the people working for them will handle different situations,

We needed a way to make the data that showed what people were like even clearer and more explicit, so I began making “Baseball Cards” for employees that listed their “stats.”

He had loads of creativity but lacked discipline.

an accomplished filmmaker, and a crusader helping those who struggle with bipolar disorder.

Touched with Fire,

differently. I learned that much of how we think is physiological and can be changed.

orchestrate others to do things well without you. A step below that is doing things well yourself, and worst of all is doing things poorly yourself.

But I had no regrets because I had learned that it wasn’t smart to bet that way.

I enjoyed reflecting back on my painful mistakes and the value of the principles they gave me.

come as a surprise and cause a lot of pain unless those principles are properly encoded in algorithms put into our computers.

Investors

think independently, anticipate things that haven’t happened yet, and put real money at stake with their bets. Policymakers come from environments that nurture consensus, not dissent, that train them to react to things that have already occurred, and that prepare them for negotiations, not placing bets.

them. It is the rare bird who has the right mix of common sense, creativity, and character to shape change.

This was because their habits and emotional barriers remained stronger than their reasoning.

repeating the process again and again until the percentage of those who were truly great was high enough to meet our needs.

Many new employees (and some older ones) still were reluctant to probe hard at what people were like, which made things worse. It’s tough to be tough on people.

but they embrace the risk because the upside of succeeding is huge relative to the downside of having it not work out.

I’ve been told that joining Bridgewater is a bit like joining an intellectual Navy SEALs; others describe it as going to a school of self-discovery run by someone like the Dalai Lama.

I wanted to spend more time with my family and friends, to help policymakers, and to pursue a few growing passions (like ocean exploration and philanthropy)

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.

time. Bill Gates’s transition out of the CEO role at Microsoft in 2008 was the most recent example of that but there have been many others.

I knew that Lee Kuan Yew, the wise founder and leader of Singapore for forty-one years, had transitioned out of his leadership

responsibilities to be a mentor, and I had seen how well that went.

A shaper is someone who comes up with unique and valuable visions and builds them out beautifully, typically over the doubts and opposition of others.

They are extremely resilient, because their need to achieve what they envision is stronger than the pain they experience as

they struggle to achieve it.