Principles: Life and Work

by Ray Dalio

Because we each have our own goals and our own natures, each of us must choose our own principles to match them.

If 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.

That brings me to my first principle: • Think for yourself to decide 1) what you want, 2) what is true, and 3) what you should do to achieve #1 in light of #2 .

Being clear on your principles is important because they will affect all aspects of your life, many times a day. For example, when you enter into relationships with others, your principles and their principles will determine how you interact.

Think about the people you are closest to: Are their values aligned with yours?

Do

you even know what their values or pr...

The principles you choose can be anything you want them to be as long as they are authentic—i.e.,

if you’re a phony you will lose people’s trust and your own self-respect. So you must be clear about your principles and then you must “walk the talk.”

If inconsistencies seem to exist, you should explain them. It’s best to do that in writing because by doing so, you will refine your written principles.

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. This way

To make money in the markets, one needs to be an independent thinker who bets against the consensus and is right. That’s because the consensus view is baked into the price.

is critical to one’s success. To be a successful entrepreneur, the same is true:

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

could be painfully wrong and curiosity about why other smart people saw things differently prompted me to look at things through the eyes of others as well as my own. That allowed me to see many more dimensions than if I saw things just through my own eyes.

believability weighted my decision making—increased my chances of being right and was thrilling. At the same time, I learned to:

Experience taught me how invaluable it is to reflect on and write down my decision-making criteria whenever I made a decision,

With time,

my collection of principles became like a collection of recipes ...

I continually refined and evolved them.

Systemize your decision making.

learned the computer could make better decisions than me because it could process vastly more information than I could, and it could

do it faster and unemotionally.

Doing that allowed me and the people I worked with to compound our understanding over time and improve the quality o...

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.

I will give them to you in two books—Life and Work Principles in one book, and Economic and Investment Principles in the other. HOW THESE BOOKS ARE ORGANIZED

Because the power of a group is so much greater than the power of an individual, I believe these work principles are even more important than the life principles

on which they’re based.

Time is like a river that carries us forward into encounters with reality that require us to make decisions. We can’t stop our movement down

this river and we can’t avoid those encounters. We can only approach them in the best possible way.

We are all born with different thinking abilities but we aren’t born with decision-making skills. We learn them from our encounters with reality.

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.

sharp as ever mentally. When I didn’t want to do something, I would fight it, but when I was excited about something, nothing could hold me back.

together. I’ve always been an independent thinker inclined to take risks in search of rewards—

came into this period with the biases I had picked up from my experiences and the people around me. In 1966, asset prices reflected investors’ optimism about the future. But between 1967 and 1979, bad economic surprises led to big and unexpected price declines.

wrong and how to deal with it. I gradually learned that prices reflect people’s expectations, so they go up when actual results are better than expected and they go down when they are worse

than expected. And most people tend to be biased by their recent experiences.

Meditation has benefited me hugely throughout my life because it produces a calm open-mindedness that allows me to think more clearly and creatively.

learned that other currencies were fixed against the dollar, that the dollar was fixed against gold,

own gold (though I wasn’t sure why), and that other central banks could convert their paper dollars into gold, which was how they were assured that they wouldn’t be hurt if the U.S. printed too many dollars.

Back then, I still assumed that government officials were honest.

so I learned not to believe government policymakers when they assure you that they won’t let a currency devaluation happen.

The more strongly they make those assurances, the more desperate the situation probably is, so the more likely it is that

a devaluation will ta...

I learned that everything that was going on—the currency breaking its link to gold and devaluing, the stock market soaring in response—had happened before, and that logical cause-effect relationships made

those developments inevitable. My failure to anticipate this, I realized, was due to my being surprised by something that hadn’t happened in my lifetime, though it had happened many times before. 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.”

Enrolling at Harvard Business School that fall, I was excited about meeting the ex...

people from all over the planet who would be my classmates. And high as my expectations were, the...