Principles: Life and Work

by Ray Dalio

people should be helped by giving them opportunities and the coaching they need to become strong enough to take advantage of their opportunities.

BAD Avoid facing “harsh realities.” GOOD Face “harsh realities.”

BAD Worry about appearing good. GOOD Worry about achieving the goal.

BAD Make your decisions on the basis of first-order consequences. GOOD Make your decisions on the basis of first-, second-, and third-order consequences.

BAD Allow pain to stand in the way of progress. GOOD Understand how to manage pain to produce progress.

BAD Don’t hold yourself and others accountable. GOOD Hold yourself and others accountable.

The process is iterative: Doing each step thoroughly will provide you with the information you need to move on to the next step and do it well.

there’s no end to learning. You’ll soon realize that excuses like “that’s not easy” or “it doesn’t seem fair” or even “I can’t do that” are of no value and that it pays to push through.

try to pursue too many goals at once, achieving few or none of them.

If you limit your goals to what you know you can achieve, you are setting the bar way too low.

a problem stems from your own lack of talent or skill, most people feel shame. Get over it.

You need to be precise, because different problems have different solutions.

develop a fierce intolerance of badness of any kind, regardless of its severity.

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

The first three steps—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.

There are two paths to success: 1) to have what you need yourself or 2) to get it from others. The second path requires you to have humility.

mental map is (in other words, what they know) on the Y-axis and how humble/open-minded they are on the X-axis, as shown on the opposite page.

You can improve by either going up on the mental-maps axis (by learning how to do things better) or out on the open-mindedness axis. Either will provide you with better knowledge

“ego barrier,” I’m referring to your subliminal defense mechanisms that make it hard for you to accept your mistakes and weaknesses. Your deepest-seated needs and fears

lower-level selves are like attack dogs—they want to fight even when their higher-level selves want to figure things out.

If you are too proud of what you know or of how good you are at something you will learn less, make inferior decisions, and fall short of your potential.

When trying to figure things out, most people spin in their own heads instead of taking in all the wonderful thinking available to them.

adapt do so by a) teaching their brains to work in a way that doesn’t come naturally (the creative person learns to become organized through discipline and practice, for instance), b) using compensating mechanisms (such as programmed reminders), and/or c) relying on the help of others who are strong where they are weak.

considering the reasoning of others instead of stubbornly and illogically holding on to your own point

If you have a different view than someone who is believable on the topic at hand—or at least more believable than you are (if, say, you are in a discussion with your doctor about your health)—you should make it clear that you are asking questions because you are seeking to understand their perspective.

thoughtful disagreement, your goal is not to convince the other party that you are right—it is to find out which view is true and decide what to do about it.

Use questions rather than make statements. Conduct the discussion in a calm and dispassionate manner,

it’s pointless when people get angry with each other when they disagree because most disagreements aren’t threats as much as opportunities for learning.

There are lots of people who will disagree with you, and it would be unproductive to consider all their views. It doesn’t pay to be open-minded with everyone. Instead, spend your time exploring ideas with the most believable people you have access to.

assess their relative believability to determine whether their primary role should be as a student, a teacher, or a peer.

use feelings of anger/frustration as cues to calm down, slow down, and approach the subject at hand thoughtfully,

there is really only one big choice to make in life: Are you willing to fight to find out what’s true? Do you deeply believe that finding out what is true is essential to your well-being? Do you have a genuine need to find out if you or others are doing something wrong that is standing in the way of achieving your goals?

rewards of working together to make the pie bigger are greater than the rewards of self-interest, not only in terms of how much “pie” one gets but also in the psychic rewards

feel the creative thoughts coming from elsewhere and flowing into my conscious mind. It’s a kick to understand how that works.

Good habits are those that get you to do what your “upper-level you” wants, and bad habits are those that are controlled by your “lower-level you” and stand in the way of your getting what your “upper-level you” wants.

The left hemisphere reasons sequentially, analyzes details, and excels at linear analysis. “Left-brained” or “linear” thinkers who are analytically strong are often called “bright.” 2. The right hemisphere thinks across categories, recognizes themes, and synthesizes the big picture. “Right-brained” or “lateral” thinkers with more street smarts are often called “smart.”

physical exercise to studying to meditation—can lead to physical and physiological changes in our brains that affect our abilities to think and form memories.

Instead of expecting yourself or others to change, I’ve found that it’s often most effective to acknowledge one’s weaknesses and create explicit guardrails against them. This is typically a faster and higher-probability path to success.

Because of the biases with which we are wired, our self-assessments (and our assessments of others) tend to be highly inaccurate. Psychometric assessments are much more reliable.

Myers-Briggs Type Indicator (MBTI), the Workplace Personality Inventory, the Team Dimensions Profile, and Stratified Systems Theory.33 But we are constantly experimenting (for example, with the Big Five)

Intuiting vs. sensing. Some people see big pictures (forests) and others see details (trees).

planners work from the inside out, first figuring out what they want to achieve and then how things should unfold.

Creators generate new ideas and original concepts. They prefer unstructured and abstract activities and thrive on innovation and unconventional practices. • Advancers communicate these new ideas and carry them forward. They relish feelings and relationships and manage the human factors. They are excellent at generating enthusiasm for work. • Refiners challenge ideas. They analyze projects for flaws, then refine them with a focus on objectivity and analysis. They love facts and theories and working with a systematic approach. • Executors can also be thought of as Implementers. They ensure that important activities are carried out and goals accomplished; they are focused on details and the bottom line. • Flexors are a combination of all four types. They can adapt their styles to fit certain needs and are able to look at a problem from a variety of perspectives.

goal-oriented people can step back from the day-to-day and reflect on what and how they’re doing. They are the most suitable for creating new things (organizations, projects, etc.) and managing organizations that have lots of change. They typically make the most visionary leaders because of their ability to take a broad view

Shaper = Visionary + Practical Thinker + Determined.

everyone has strengths and weaknesses, and everyone has an important role to play in life. Nature made everything and everyone for a purpose. The courage that’s needed the most isn’t the kind that drives you to prevail over others, but the kind that allows you to be true to your truest self,

conductor makes sure each member of the orchestra knows what he or she is good at and what they’re not good at, and what their responsibilities are. Each must not only perform at their personal best but work together so the orchestra becomes more than the sum of its parts.

most of the processes that go into everyday decision making are subconscious and more complex than is widely understood.