Principles – Ray Dalio

Principles – by Ray Dalio
Date read: 10/14/17. Recommendation: 8/10.

Dalio offers a detailed analysis of his principles for life and work, which have led him to become one of the most successful investors of our time. He offers these lessons with a refreshing dose of humility–not what you'd expect from the founder of one of the world's largest hedge funds. I gravitated towards his life principles where he champions truth, the value of painful mistakes, and the importance of looking beyond first-order consequences. His work principles also offer great insight into human relationships, conflict resolution, and the importance of building a culture of transparency. 

See my notes below or Amazon for details and reviews. 


My Notes:

Whatever success I've had in life has had more to do with my knowing how to deal with my not knowing than anything I know.

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.

Life Principles:
Truth–or more precisely, an understanding of reality–is the essential foundation for any good outcome.

Once we get the things we are striving for, we rarely remain satisfied with them. The things are just the bait. Chasing after them forces us to evolve, and it is the evolution and not the rewards themselves that matters to us and to those around us. This means that for most people success is struggling and evolving as effectively as possible.

Pain = Signal that you need to find solutions so you can progress.

If you're not failing, you're not pushing your limits, and if you're not pushing your limits, you're not maximizing your potential.

No matter what you want out of life, your ability to adapt and move quickly and efficiently through the process of personal evolution will determine your success and your happiness.

People who overweigh the first-order consequences of their decisions and ignore the effects of second- and subsequent-order consequences rarely reach their goals. This is because first-order consequences often have opposite desirabilities from second-order consequences, resulting in big mistakes in decision making. (i.e. exercise, first-order = pain, time, second-order = fitness, health).

Whatever circumstances life brings you, you will be more likely to succeed and find happiness if you take responsibility for making your decisions well instead of complaining about things beyond your control. Psychologists call this having an "internal locus of control," and studies consistently show that people who have it outperform those who don't.

Acknowledging your weaknesses is not the same as surrendering to them. It's the first step toward overcoming them.

Recognize that knowing what someone (including you) is like will tell you what you can expect from them.

Remember that there are typically many paths to achieving your goals. You only need to find one that works.

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.

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

The biggest threat to good decision making is harmful emotions.

You need to weigh first-order consequences against second- and third-order consequences, and base your decisions not just on near-term results but on results over time.

First pitfall of bad decision making: subconsciously make the decision first then cherry-pick the data that supports it.

To synthesize well (convert a lot of data into an accurate picture), you must 1) synthesize the situation at hand, 2) synthesize the situation through time, and 3) navigate levels effectively.

The best choices are the ones that have more pros than cons, not those that don't have any cons at all.

Some decisions are best made after acquiring more information; some are best made immediately...You need to constantly evaluate the marginal benefit of gathering more information against the marginal cost of waiting to decide.

Work Principles:
Nothing is more important or more difficult than to get the culture and people right.

The essential difference between a culture of people with shared values (which is a great thing) and a cult (which is a terrible thing) is the extent to which there is independent thinking.

You have to work in a culture that suits you. That's fundamental to your happiness and effectiveness.

Speak up, own it, or get out...What you're not allowed to do is complain and criticize privately–either to others or in your own head.

Fairness and generosity are different things.

Treasure honorable people who are capable and will treat you well even when you're not looking.

Everyone makes mistakes. The main difference is that successful people learn from them and unsuccessful people don't.

Pain is a message that something is wrong and it's an effective teacher that one shouldn't do that wrong thing again.

It seems to me that if you look back on yourself a year ago and aren't shocked by how stupid you were, you haven't learned much.

Every mistake that you make and learn from will save you from thousands of similar mistakes in the future.

If you want to evolve, you need to go where the problems and the pain are. By confronting the pain, you will see more clearly the paradoxes and problems you face. Reflecting on them and resolving them will give you wisdom.

When there is pain, the animal instinct is flight-or-fight. Calm yourself down and reflect instead.

By avoiding conflicts one avoids resolving differences. People who suppress minor conflicts tend to have much bigger conflicts later on, which can lead to separation, while people who address their mini-conflicts head on tend to have the best and longest-lasting relationships.

Thoughtful disagreement is not a battle; its goal is not to convince the other party that he or she is wrong and you are right, but to find out what is true and what to do about it.

Recognize that conflicts are essential for great relationships because they are how people determine whether their principles are aligned and resolve their differences.

Remember that every story has another side. Wisdom is the ability to see both sides and weigh them appropriately.

When you have alignment, cherish it. While there is nobody in the world who will share your point of view on everything, there are people who will share your most important values and the ways in which you choose to live them out. Make sure your end up with those people.

We value people most who have what I call the three C's: character, common sense, and creativity.

Personality assessments are often more objective and reliable than interviews.

Look for people who are willing to look at themselves objectively...People who lack that ability fail chronically.

Know that most everyone thinks that what they did, and what they are doing, is much more important than it really is.

Most people get caught up in the blizzard of things coming at them. In contrast, successful people get above the blizzard so they can see the causes and effects at play.

If you want to build great metrics, start with the most important questions and imagine the metrics that will answer them.

Remember that almost everything will take more time and cost more money than you expect. (multiply by 1.5X)