Principles by Ray Dalio

Principles help people achieve better results than others. For investing, for example, there are investing principles. The author wanted to help others with their lives. He came up with over 200 principles. These are the tried and tested principles in which he led his life by. Carefully consider them. This article talks about principles, his life principles and management principles.

Your principles are your values in life. These will help you when you run into difficulties in life. Without principles, you will be forced to react to circumstances instead. It is possible to forge your own or to accept others. It is better to hone your own and they should ones where you truly believe in. ‘What do you value most deeply?’ It is important to make the right but tough choice.

All successful people operate by principles that help them be successful. Without principles, you would be forced to react to circumstances that come at you without considering what you value most and how to make choices to get what you want. This would prevent you from making the most of your life. – Ray Dalio

Time is like a river that will take you forward into encounters with reality that will require you to make decisions. You can’t stop the movement down this river, and you can’t avoid the encounters. You can only approach these encounters in the best way possible. – Ray Dalio

In order to be motivated, I needed to work for what I wanted, not for what other people wanted me to do. In order to be successful, I needed to figure out for myself how to get what I wanted, not remember the facts I was being told to remember. – Ray Dalio

I want you to work for yourself, to come up with independent opinions, to stress-test them, to be wary about being overconfident, and to reflect on the consequences of your decisions and to constantly improve. – Ray Dalio

Ray was an ordinary kid in school. He did a lot of odd jobs for money. He got into investing when young. Ray wanted to beat the market. ‘It isn’t easy for me to be confident that my opinions are right.’ ‘Bad opinions can be very costly’. ‘The consensus is often wrong, so I have to be an independent thinker’. He questioned other people’s reasoning. If you don’t know, go and find out. It is liberating to think for yourself. He learnt how to meditate and how to trade commodities. Ray also studied the currency markets. He studied at Harvard University. He worked at Merrill Lynch as a trading assistant. After 2 years, he started Bridgewater.

I learned that failure is by and large due to not accepting and successfully dealing with the realities of life, and that achieving success is simply a matter of accepting and successfully dealing with all my realities. – Ray Dalio

I learned that finding out what is true, regardless of what that is, including all the stuff most people think is bad—like mistakes and personal weaknesses—is good because I can then deal with these things so that they don’t stand in my way. – Ray Dalio

I learned that there is nothing to fear from the truth. While some truths can be scary – for example, finding out that you have a deadly disease – knowing them allows us to deal with them better. Being truthful, and letting others be completely truthful, allows me and others to fully explore our thoughts and exposes us to the feedback that is essential for our learning. – Ray Dalio

I learned that one of the greatest sources of problems in our society arises from people having loads of wrong theories in their heads—often theories that are critical of others—that they won’t test by speaking to the relevant people about them. Instead, they talk behind people’s backs, which leads to pervasive misinformation. – Ray Dalio

I learned that there is an incredible beauty to mistakes, because embedded in each mistake is a puzzle, and a gem that I could get if I solved it, i.e., a principle that I could use to reduce my mistakes in the future. – Ray Dalio

I learned that everyone makes mistakes and has weaknesses and that one of the most important things that differentiates people is their approach to handling them. I learned that there is an incredible beauty to mistakes, because embedded in each mistake is a puzzle, and a gem that I could get if I solved it. – Ray Dalio

In short, I learned that being totally truthful, especially about mistakes and weaknesses, led to a rapid rate of improvement and movement toward what I wanted. – Ray Dalio

Mistakes are critical to learning. Questions are better than answers as one can learn more. Figure out for yourself what you want. Mistakes are a good thing. Work with your realities and don’t fight them. Life is mundane without any dreams. Understand the laws of nature. He doesn’t believe in giving money to people and which cause them to feel less motivated to work hard.

While most others seem to believe that learning what we are taught is the path to success, I believe that figuring out for yourself what you want and how to get it is a better path. – Ray Dalio

While most others seem to believe that pain is bad, I believe that pain is required to become stronger. – Ray Dalio

I can’t comment on what having a lot of money means to others, but I do know that for me, having a lot more money isn’t a lot better than having enough to cover the basics. That’s because, for me, the best things in life—meaningful work, meaningful relationships, interesting experiences, good food, sleep, music, ideas, sex, and other basic needs and pleasures—are not, past a certain point, materially improved upon by having a lot of money. – Ray Dalio

In fact, I believe that without pursuing dreams, life is mundane. – Ray Dalio

For my tastes, if I had to choose, I’d rather be a backpacker who is exploring the world with little money than a big income earner who is in a job I don’t enjoy. – Ray Dalio

Truth (an accurate understanding of reality) is the most essential foundation of producing good outcomes. Ray also studied nature and how it evolved and interacted with humans. If you operate in harmony with nature, you will get rewarded. Do not disrupt nature’s cycle. Evolution is good, based on the author. The desire to improve is humanity’s driving force. It is the evolution that matters, not just attaining goals.

It is natural for us to seek other things or to seek to make the things we have better. – Ray Dalio

I believe that the desire to evolve, i.e., to get better, is probably humanity’s most pervasive driving force. – Ray Dalio

Enjoying your job, a craft, or your favorite sport comes from the innate satisfaction of getting better. – Ray Dalio

For example, suppose making a lot of money is your goal and suppose you make enough so that making more has no marginal utility. Then it would be foolish to continue to have making money be your goal. People who acquire things beyond their usefulness not only will derive little or no marginal gains from these acquisitions, but they also will experience negative consequences, as with any form of gluttony. So, because of the law of diminishing returns, it is only natural that seeking something new, or seeking new depths of something old, is required to bring us satisfaction. – Ray Dalio

Because of this, people who can objectively reflect on themselves and others —most importantly on their weaknesses are—can figure out how to get around these weaknesses, can evolve fastest and come closer to realizing their potentials than those who can’t. – Ray Dalio

The most important quality that differentiates successful people from unsuccessful people is our capacity to learn and adapt to these things (values and abilities). – Ray Dalio

In other words, the sequence of 1) seeking new things (goals); 2) working and learning in the process of pursuing these goals; 3) obtaining these goals; and 4) then doing this over and over again is the personal evolutionary process that fulfills most of us and moves society forward. – Ray Dalio

Pursue self interest in harmony. Those people who made a lot of money has usually given back to society in some way because of these output. There are those who made money without making money their primary goal. If you aim to work for money, soon you will stop doing what you are currently doing because of the law of diminishing returns. The faster one adapts to setbacks, the better. Adaption is rewarded. Man has greater ability to learn over other types of organisms. Evolution works when an overly aggressive animal dies or an extremely timid one can’t survive etc. Man brain’s has the prefrontal cortex, which helps with thinking.

Most people don’t like helping others explore their weaknesses, even though they are willing to talk about them behind their backs. For these reasons most people don’t do a good job of understanding themselves and adapting in order to get what they want most out of life.’ Ray Dalio

Learn to understand your weaknesses. The quality of your life depends on what decisions you make. Learn to evolve as soon as possible. Happiness is usually attained when the particular event exceeds your expectations.

Reality + Dreams + Determination = A Successful Life. – Ray Dalio

There are two ways to be happy: 1) set high expectations and then exceed them or 2) lower your expectations so that they are at or below your conditions. – Ray Dalio

Another principle to keep in mind is that people need meaningful work (need not be a job and can be some long-term project) and meaningful relationships in order to be fulfilled. I have observed this to be true for virtually everyone, and I know that it’s true for me. – Ray Dalio

It is a fundamental law of nature that to evolve one has to push one’s limits, which is painful, in order to gain strength—whether it’s in the form of lifting weights, facing problems head-on, or in any other way. – Ray Dalio

Pain + Reflection = Progress. – Ray Dalio

For example, if you are dumb or ugly, you are unlikely to acknowledge it, even though doing so would help you better deal with that reality. Recognizing such “harsh realities” is both very painful and very productive. – Ray Dalio

Do not worry about looking good. Learn to face the harsh realities. Pain is a sign of progress. Don’t react to it badly and have the ‘flight or fight’ mentality. Learn to manage it so that you can be satisfied. Learn to spend some time to reflect on your decision. Find another way to deal with your problems. Learn to face the harsh realities in life. Knowing what is true is good for you. Worry about whether you can achieve your goal. Do not appear to try to look good and hide your weaknesses. Seek to learn more before making an important decision. Make decisions on first-, second- and third- order consequences and not just first order consequences. Learn to hold yourself accountable to decision making.

Successful people understand that bad things come at everyone and that it is their responsibility to make their lives what they want them to be by successfully dealing with whatever challenges they face. – Ray Dalio

If I had to pick just one quality that those who make the right choices have, it is character. Character is the ability to get one’s self to do the difficult things that produce the desired results. – Ray Dalio

Your character will determine how you overcome setbacks. Learn to operate in your stretch zone. To achieve your goals, create a machine which is both the design and people. Place the right people where you want them. If you are not the best person for the task, admit it and find someone else to do it. Learn to view your skillset objectively and see others in that way as well. 1) Choose your goals; 2) Design a plan; 3) Design a plan that will get around your problems; 4) Do the tasks specified in the plan. Have clear goals; identify the problems that will stand in your way; diagnose those problems; Design plans to get around this problems; Implement the plans. You need to do all the above steps. Do each step thoroughly and treat it as a separate process. Know the skills required for success. Imagine your challenges as a game. The game of life.

Choose your goals, identify problems, diagnose the problems, design a plan, do the tasks. You must choose the goals you want out of life. Each step must be distinct. Do not pursue too many goals at once. You will not be able to have everything you want though. Learn to prioritize and if need be, reject good alternatives. Goals and desires are different. ‘Avoid setting goals based on what you think you can achieve’. Most goals can be achieved through creativity and hard work. You can ask people for help Set goals without yet assessing whether or not you can achieve them. Set something that will be out of your reach at the present moment. Learn to deal with setbacks.

In summary, in order to get what you want, the first step is to really know what you want, without confusing goals with desires, and without limiting yourself because of some imagined impediments that you haven’t thoroughly analyzed. – Ray Dalio

The more painful the problem, the louder it is screaming. In order to be successful, you have to 1) perceive problems and 2) not tolerate them. – Ray Dalio

People who tolerate problems are the worse off because, without the motivation to move on, they cannot succeed. In other words, if you are motivated, you can succeed even if you don’t have the abilities (i.e., talents and skills) because you can get the help from others. But if you’re not motivated to succeed, if you don’t have the will to succeed, the situation is hopeless. – Ray Dalio

Pain + Reflection = Progress. Much as you might wish this were not so, this is a reality that you should just accept and deal with. – Ray Dalio

Creating a design is like writing a movie script in that you visualize who will do what through time in order to achieve the goal. – Ray Dalio

It is critical to know each day what you need to do and have the discipline to do it. People with good work habits have to-do lists that are reasonably prioritized, and they make themselves do what needs to be done. – Ray Dalio

Most problems are potential improvements that are screaming at you. Bring problems to the surface. Only identify the bigger problems. Push through the pain of facing your problems. Be centered and logical when going through this process. Be very specific in specifying your problems. Don’t confuse problems with causes. Once you identify the problem, you must not tolerate them. Focus on the diagnosis of the problem instead of jumping to solutions. It takes time. Be calm and logical before moving forward. Identify the root cause of your problems and not the proximate causes. Accept their mistakes. Look at yourself objectively. Next, design the plan. Visualize the design sequentially. Write down concrete steps and broad steps as well. Write down the plan and include names. It is important to write such a design. The design will provide you with the to-do tasks. Next, start doing those tasks. This is the fifth stage and one needs to be proactive and self-disciplined in order to complete the tasks. Find out your weaknesses and overcome them. Try and get feedback from others on your progress. It is difficult to identify your own weaknesses because of the ‘ego’ problem. Values à Goals à Problems à Diagnoses à Designs à Tasks. Be hyperrealistic and hypertruthful to grow.

You need a great culture and great people for things to work. These are the two most important factors for success in an organization. Organizations are like people, they make mistakes too. Manage your feedback loops well.

You have nothing to fear from the truth. Be extremely open (All others to be brutally honest). Have integrity and demand it from others.

Badmouthing people behind their backs shows a serious lack of integrity and is counterproductive. It doesn’t yield any beneficial change, and it subverts both the people you are badmouthing and the environment as a whole. If you talk behind people’s backs at Bridgewater you are called a slimy weasel. – Ray Dalio

Don’t believe it when someone caught being dishonest says they have seen the light and will never do that sort of thing again. Chances are they will. The cost of keeping someone around who has been dishonest is likely to be higher than any benefits. – Ray Dalio

Create a culture which it is okay to make mistakes but unacceptable not to identify, analyze and learn from them. – Ray Dalio

Just try to find out what is true. Don’t try to ‘win’ the argument. Finding out that you are wrong is even more valuable than being right, because you are learning. – Ray Dalio

Being open-minded is far more important than being bright or smart. – Ray Dalio

Don’t let ‘loyalty’ stand in the way of truth and openness. Be radically transparent. Record meetings and share the minutes with others. Don’t tolerate dishonesty. Learn from your mistakes. Do not feel bad over mistakes. Learn from them! Do not feel bad over your weaknesses. Don’t worry about looking good – worry about achieving your goal. Learn to personalize the mistake so that that particular person is made aware and can learn. Write your weaknesses down. Learn to reflect when you feel pain. Learn to be self-reflective. Reinforce the merits of mistake based learning. Create a mistake log. Understand something before listening to instructions. Try to understand the underlying motivation.

While it is good to be open-minded and questioning, it’s dumb to treat the views of people with great track records and experience the same as those without track records and experience. – Ray Dalio

As a general rule, if you have a demonstrated track record, then you can have an opinion of how to do it – if you don’t, you can’t, though you can have theories and questions. – Ray Dalio

Large group interactions are usually less effective. The marginal benefits diminish as the group gets larger. Someone must manage the flow of the meeting. Be clear in assigning responsibilities. Match people to the design properly. Be wary of group-think and solo-think. Worry about substance more than style. Referendums may not work as not everyone has equal views or have views that lend equal weight. Consider multiple possibilities. Give people personal responsibility so that they cannot shirk responsibility. It is good to have shared values with others. Learn to hold people accountable. There is a key difference between goals and tasks. Values are most important, abilities come next and skills are the least important. Some people see details while some see only the big pictures. ‘Some people rely more on remembering what they were taught when making decisions, and others rely more on their independent reasoning.’ Some like to focus on daily tasks when others focus on goals instead. Some are planners while some are perceivers. Hire the right people cos’ the penalties for hiring wrong are huge. Hire people for the long term. Learn to manage and not micromanage. Align employee goals with yours and conduct open discussions. Explain principles behind decision making. Avoid the ‘sucked down’ phenomenon. Make the goals clear and make people acknowledge them directly.

Don’t try to control people by giving them orders. They will likely resent the orders, and when you’re not looking, defy them. – Ray Dalio

It is a law of nature that you must do difficult things to gain power and strength. As with working out, after a while you make the connection between doing difficult things and the benefits you get from doing them, and you come to look forward to doing these difficult things. – Ray Dalio



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