Principles: Life and Work

by Ray Dalio

I didn’t like the attention and I especially didn’t like the mischaracterizations of Bridgewater as a cult, because I felt it was hurting our ability to recruit great people.

If I changed fast enough to become sustainable at whatever I was doing, then I would build on that to flourish.

tended to hire people who were the same way—who would dive right into challenges, figure out what to do about them, and then do it. I figured that if they had great character, common sense, and creativity, and were driven to achieve our shared mission, they would discover what it took to be successful if I gave them the freedom to figure out how to make the right decisions.

But while almost all of us quickly agreed on the principles intellectually, many still struggled to convert what they had agreed to intellectually into effective action. This was because their habits and emotional barriers remained stronger than their reasoning.

I was beginning my transition from my second to my third phase. Both intellectually and emotionally, I was no longer as excited about being successful as I was excited about having the people I cared about be successful without me.

I do things through trial and error—making mistakes, figuring out what I did wrong, coming up with new principles, and finally succeeding—

So we looked at my attributes relative to others to see what was missing, which we called the “Ray gap.”

been studying the gaps they left. Greg and David created a log of my various responsibilities and the differences between the qualities they and I brought to handling them.

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.

Elon Musk (of Tesla, SpaceX, and SolarCity), Jeff Bezos (of Amazon), and Reed Hastings (of Netflix) are other great shapers from the business world.

In philanthropy, Muhammad Yunus (of Grameen), Geoffrey Canada (of Harlem Children’s Zone), and Wendy Kopp (of Teach for America) come to mind; and in government, Winston Churchill, Dr. Martin Luther King, Jr., Lee Kuan Yew, and Deng Xiaoping. Bill Gates has been a shaper in both business and philanthropy, as was Andrew Carnegie.

Mike Bloomberg has been a shaper in business, philanthropy, and government. Einstein, Freud, Darwin, and Newton were giant shapers in t...

Buddha were religious shapers. They all had original visions and succes...

Jobs. Isaacson’s book and the article pointed to other parallels in our backgrounds, goals, and approaches to shaping—for example, we were both rebellious, independent thinkers who worked relentlessly for innovation and excellence;

I wished Jobs had shared the principles he had used to achieve his goals.

I asked them to take an hour’s worth of personality assessments to discover their values, abilities, and approaches.

They are

all independent thinkers who do not let anything or anyone stand in the way of achieving their audacious goals. They have very strong mental maps of how things should be done, and at the same time a willingness to test those mental maps in the world of reality and change the ways they do things to make them work better. 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. Perhaps most interesting, they have a wider range of vision than most people, either because they have that vision themselves or because they know how to get it from others who can see what they can’t. All are able to see both big pictures and granular details (and levels in between) and synthesize the perspectives they gain at those different levels, whereas most people see just one or the other. They are simultaneously creative, systematic, and practical. They are assertive and open-minded at the same time. Above all, they are passionate about what they are doing,

intolerant of people who work for them who aren’t excellent at what they do, and want to have a big, beneficial impact on the world. Take Elon Musk. When he had just come out with the Tesla and showed me his own car for the first time, he had as much to say about the key fob that opened the doors as he did about his overarching vision for how Tesla fits into the broader future of transportation and how impor-tant that is to our planet. Later on, when I asked him how he came to start his company SpaceX, the audacity of his answer startled me. “For a long time,” he answered, “I’ve thought that it’s inevitable that something bad is going to happen on a planetary scale—a plague, a meteor—that will require humanity to start over somewhere else, like Mars. One day I went to t...

and I sold PayPal,” he continued, “and it occurred to me that if I spent $90 million and used it to acquire some ICBMs from the former USSR and sent one to Mars, I could inspire the exploration of Mars.” When I asked him about his background in rocketry, he told me he didn’t have one....

At times, their extreme determination to achieve their goals can make them appear abrasive or inconsiderate, which was reflected in their test results. Nothing is ever good enough, and they experience the gap between what is and what could be as both a tragedy and a source of unending motivation. No one can stand in the way of their achieving what they’re going after. On one of the personality assessments there is a category they all ranked low on called “Concern for Others.” But that doesn’t mean quite what it sounds like. Consider Muhammad Yunus, for example. A great philanthropist, he has devoted his life to helping others. He received the Nobel Peace Prize for pioneering the ideas of microcredit and microfinance and has won the Congressional Gold Medal, the Presidential Medal of Freedom, the Gandhi Peace Prize, and more. Yet he tested low on “Concern for Others.” Geoffrey Canada, who has devoted most of his adult life to taking ...

The rarest cases were people like Jobs, Musk, Gates, and Bezos, who were inventive visionaries and managed big organizations to build those visions out.

Only true shapers consistently move from one success to another

and sustain success over decades, and those are the people I want to bring to Bridgewater.

different, complementary ways. This realization has been important in making my transition out of management go well. While in the past I would encounter problems, figure out their causes, and design my own ways to get around them, others who think differently than I do will make different diagnoses and designs. My job as mentor was to help them be successful at that.

Said differently, by

knowing what someone is like we can have a pretty good idea of what we can expect from them. So I was more motivated than ever to continue gathering lots of data on what people are like to build pointillist pictures of them to help us match people to responsibilities well. Doing this in an evidence-based way would enhance the idea-meritocratic process of aligning people’s responsibilities with their merits.

the decision-making processes for investment management have been so systemized that it’s hard for people to screw them up (because they are largely following the systems’ instructions) while the other areas of Bridgewater are much more dependent on the quality of the people and their decision making.

In other words, I believe that the investment decision-making process is effective because the investment principles have been put into decision rules that make decisions that people then follow while the management decision-making process is less effective because the management principles have not been put into decision rules that people can follow to make management decisions.

One of the great things about algorithmic decision making is that it focuses people on cause-effect relationships and, in that way, helps foster a real idea meritocracy.

basis. While our management system has a long way to go before it is as well automated as our investment system, the tools it has made possible, especially the “Dot Collector” (an app that gathers information about people in real time described in detail in the Work Principles), have already made an incredible difference in the way we work.

ANTICIPATING THE EUROPEAN DEBT CRISIS

Beginning in 2010, my Bridgewater colleagues and I began to see the emergence of a debt crisis in Europe.

Yet even when I did succeed in helping them see the linkages, the political decision-making systems they had to work within were dysfunctional. Not only did they have to decide what they would do as individual countries, the nineteen countries of the European Union had to agree with each other before they could act—in many cases unanimously. There was often no clear way of resolving disagreements, which was a big problem because what needed to be done (printing money) was objectionable to German economic conservatives.

never got the praise he deserved, but he didn’t care because his satisfaction came from seeing the results he produced. To me, that is a hero. As time passed,

At the meeting, I told them why this approach would not be inflationary (because it is the level of spending, which is money plus credit, and not just the amount of money, that drives spending and inflation). I focused on how the economic machine works

Countries behave in a more self-interested and less considerate way than what most of us would consider appropriate for individuals. When countries negotiate with one another, they typically operate as if they are opponents in a chess match or merchants in a bazaar in which maximizing one’s own benefit is the sole objective. Smart leaders know their own countries’ vulnerabilities, take advantage of others’ vulnerabilities, and expect the other countries’ leaders to do the same.

form their views based on what they learn in the media, and become quite naive and inappropriately opinionated as a result.

As a result, most people who see the world through the lens of the media tend to look for who is good and who is evil rather than what the vested interests and relative powers are and how they are being played out.

For example, representatives of those with greater income will say higher taxes stifle growth while representatives of those with less income will say the opposite. It’s hard to get everyone to even try to look at the whole picture objectively, let alone to operate in the interests of the whole. Nonetheless, I came to respect

have rarely known a person to be both extremely wise and extremely practical.

I gave Wang a copy of Joseph Campbell’s great

book The Hero with a Thousand Faces,

I also gave him The Lessons of Histor...

distillation of the major forces through history by Will and Ariel Durant, and River Out of Eden by the insightful Richard Dawkins, which explains how evolution works. He gave me Georgi Plekhanov’s classic On the Role of the Individual in History. All these books showed how the same things happened...

“Unattainable goals appeal to heroes,” he once told me. “Capable people are those who sit there worrying about the future. The unwise are those who worry about nothing. If conflicts got resolved before they became acute, there wouldn’t be any heroes.”

when I asked him about checks and balances of power, he pointed to Julius Caesar’s overthrow of the Roman Senate and Republic as an illustration of how important it is to make sure no one person is more powerful than the system.

Being around such people, especially if I can help them, is thrilling to me.

A hero

“found or achieved or [did] something beyond the normal range of achievement,” and who “has given his life to something bigger than himself or other than himself.”