Principles: Life and Work

by Ray Dalio

without consulting others, understand that you’re taking a big risk and that it would be illogical to expect that you’ll get the results you think you will.

d. If a number of different believable people say you are doing something wrong and you are the only one who doesn’t see it that way,...

e. Meditate. I practice Transcendental Meditation and believe that it has enhanced my open-mindedness, higher-level perspective, equanimity, and creativity. It helps slow things down so that I can act calmly even in the face of chaos, just like a ninja in a street fight. I’m not saying that you have to meditate in order to develop this perspective; I’m just passing along that it has helped me and many other people and I recommend that you seriously consider exploring it.

f. Be evidence-based and encourage others to be the same.

Do everything in your power to help others also be open-minded.

h. Use evidence-based decision-making tools.

What if you could unplug that lower part of your brain entirely and instead connect with a decision-making computer that gives you logically derived instructions, as we do with our investment systems?

I have no doubt that in the years ahead such “machine-thinking” tools will continue to develop and that smart decision makers will learn how to integrate them into their thinking.

i. Know when it’s best to stop fighting and have faith in your decision-making process.

that the consensus of believable others is better than whatever you think. If you can’t understand their view, you’re probably just blind to their way of thinking.

this typically takes about eighteen months, which in the course of a lifetime is nothing.

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? If your answer to any of these questions is no, accept that you will never live up to your potential.

27 Psychologist and science journalist Daniel Goleman originally coined this term in Emotional Intelligence. 28 Some of this may be a result of what is called the Dunning-Kruger effect, a cognitive bias in which low-ability individuals believe that they are in fact superior.

4 Understand That People Are Wired Very Differently

discovered that though it is obvious to all of us that we are born with different strengths and weaknesses in areas such as common sense, creativity, memory, synthesis, attention to detail, and so forth,

As a result, I have learned a lot that helped me and that I believe can help you. In fact, I attribute as much of my success to what I’ve learned about the brain as I do to my understanding of economics and investing. In this chapter, I will share some of the amazing things I’ve learned.

At first I thought that hiring smart people—for instance, the top students out of the top schools—should get me capable employees, but as often as not, those people didn’t turn out well. “Book smarts” didn’t typically equate to the type of smarts I needed.

I wanted to work with independent thinkers who were creative, conceptual, and had a lot of common sense.

“conceptual” and imprecise spoke one language while those who were literal and precise spoke another. At the time, we chalked this up to “communication problems,” but the differences were much deeper than that—and they were painful for all of us, particularly when we were trying to achieve big things together.

understanding of the bond markets—that took place years ago. Bob Prince was running it, and while we agreed conceptually on what we were trying to do, the project didn’t get pushed through to results. We’d meet with Bob and his team to agree on the goal and lay out how to get there. But when they’d go off to work on it, they’d make no progress. The problem was that conceptual people who visualized what should be done in vague ways expected more literal people to figure out for themselves how to do it. When they didn’t, the more conceptual people thought the more literal people had no imagination, and the more literal people thought the more conceptual people had their heads in the clouds. To make matters worse, none of them knew which were which—the more literal people thought that they were as conceptual as the conceptual people and vice versa.

Those meetings were painful for everyone. Because no one was clear about what they were good or bad at, everybody expressed opinions about everything and there wasn’t any sensible way of sorting through them. We discussed why the group was failing, which led us to see that the individuals Bob had chosen for his team reflected his own strengths and weaknesses in their own roles. While that took frankness and open-mindedness and was a big step forward, it wasn’t recorded and systematically converted into adequate changes, so the same people kept making the same sort of mistakes, over and over again.

Isn’t it obvious that our different ways of thinking, our emotional responses, and our not having ways of dealing with them is crippling us? What are we supposed to do, not deal with them?

Most companies avoid this by suppressing open debate and having those with the most authority simply make the calls. I didn’t want that kind of company.

Organizing people to complement their strengths and compensate for their weaknesses is like conducting an orchestra. It can be magnificent if done well and terrible if done poorly.

4.1 Understand the power that comes from knowing how you and others are wired.

Because he tested well in mathematical reasoning, she correctly told him that if he pushed through the boredom of rote memorization required in elementary school, he would love the higher-level concepts he would be exposed to when he got older.

As with our bodies, some parts of our brains cannot be materially affected by external experience (in the same way that your skeleton isn’t changed much through working out),

a. We are born with attributes that can both help us and hurt us, depending on their application.

This led to one of my most valuable management tools: Baseball Cards, which I mentioned in the first part of this book. Just as a baseball card compiles the relevant data on a baseball player, helping fans know what that player is good and bad at, I decided that it would be similarly helpful for us to have cards for all of our players at Bridgewater.

combination of adjectives we already used to describe people, like “conceptual,” “reliable,” “creative,” and “determined”; the actions people took or

could expect of them. Naturally when I introduced this tool, people were skeptical or scared of it for various reasons.

his book An Everyone Culture, “from the individual experience of probing in every one-on-one meeting, to the technologically integrated processes for discussing . . .

4.2 Meaningful work

and meaningful relationships aren’t just nice things we chose for ourselves—they are genetically programmed into us.

Neuroscientists, psychologists, and evolutionists agree the human brain comes pre-programmed with the need for and...

Leonard Mlodinow, in his excellent book Subliminal, writes, “We usually assume that what distinguishes us [from other species] is IQ. But it is our social IQ that ought to be the principal quality that differentiates us.” He points out that humans have a unique ability to understand what other people are like and how they are likely to behave.

In his book The Meaning of Human Existence, Pulitzer

I’d read on the subject called The Spiritual Brain (which I also recommend to you).

His view was that prayer and meditation seemed to have similar effects on the brain in producing feelings of spirituality (the rising above oneself to feel a greater connection to the whole)

I’ll simply recommend the Dalai Lama’s book, Beyond Religion,

4.3 Understand the great brain battles and how to control them to get what “you” want.

a. Realize that the conscious mind is in a battle with the subconscious mind.

For example, I learned that when people refer to their “feelings”—such as saying “I feel that you were unfair with me”—

Our greatest moments of inspiration often “pop” up from our subconscious. We experience these creative breakthroughs when we are relaxed and not trying to access the part of the brain in which they reside, which is generally the neocortex.

Many people only see the conscious mind and aren’t aware of the benefits of connecting it to the subconscious. They believe that the way to accomplish more is to cram more into the conscious mind and make it work harder, but this is often counterproductive. While it may seem counterintuitive, clearing your head can be the best way to make progress.

b. Know that the most constant struggle is between feeling and thinking.

Knowing how these hijackings work, you know that if you allow yourself to react spontaneously, you will be prone to overreact. You can also comfort yourself with the knowledge that whatever psychological pain you are experiencing will go away before very long.

c. Reconcile your feelings and your thinking.

While the amygdala’s reactions come in spurts and then subside, reactions from the prefrontal cortex are more gradual and constant. The biggest difference between people who guide their own personal evolution and achieve their goals and those who don’t is that tho...