For those who haven’t heard of Ray Dalio, Ray is an American businessman who specialises in managing assets for other people (mainly large institutions) who has amounted a net worth of roughly $16 billion. I have always admired Ray Dalio’s ethos. Putting aside his great success with building Bridgewater, which as of 2015 has $169 billion assets under management, Ray has published some seminal pieces of work that lays down his view on some important topics like how the world works (The Economic Machine), his approach to allocating assets (All-weather) and his personal view on what led him to success with the strata of foundational Principles. Although a lot of these documents were probably intended for internal use to communicate his vision, principles, etc he clearly realised the value to society to share with the world.

 

You can see when Ray commits to a task he is not a man to cut any corners. Principles is a 106-page document consisting of 3 parts: the importance of principles; my most fundamental life principles; my management principles. The paper has a huge amount of value to give a great insight into the mindset of a man who has achieved a lot in his lifetime while at the same time deeply reflecting on his own process to better understand his mistakes to avoid them next time around, and achieve better successes. I thought I would share some notes from my read.

 

Part 1: The Importance of Principles

    • Having principles that work is essential for getting what we want out of life.
    • Principles are what allow you to live a life consistent with your life values; connecting your values to actions.
    • Operating without principles is bad for individuals and even worse for groups of individuals.
    • Adopting pre-packaged principles without much thought exposes you to the risk of inconsistency with your true values.
    • People who have shared values and principles get along. People who don’t will suffer through constant misunderstandings and conflicts with one another.
    • To be most effective, each principle must be consistent with your values, and this consistency demands that you ask Why? E.g.
      • “I won’t steal” = The Principle
      • “Because you feel empathy for your potential victim?” or “Is it because you fear getting caught?” = The “Why?” = The Value
      • Work for what you want, not for what others want you to do/be; work for yourself and come up with independent opinions, stress-test them; be wary of over-confidence; and reflect on the consequences of your decisions and constantly improve.
      • Being truthful is an extension of your freedom to be you. People who are one way on the inside and believe that they need to be another way outside to please others becomes conflicted and often lose touch with what they really think and feel… difficult to be happy and almost impossible for them to be at their best.
      • There is beauty in mistakes because embedded in each mistake is a puzzle and a gem that could be attained if the puzzle is solved.
      • Great people become great by looking at their mistakes and weaknesses and figuring out how to get around them.
      • Figuring stuff out for yourself, what you want and how you get it, is a better path to success.
      • Having the questions is better than having the answers because it leads to more learning.
      • Mistakes are good things because most learning comes via making mistakes and reflecting.

       

      Part 2: Ray’s Most Fundamental Principles

      • The people who really change the world are the ones who see what’s possible and figure out how to make that happen.
      • There are an infinite number of laws of the universe and all progress or dreams achieve comes from operating in a way that’s consistent with them.
      • TRUTH – more precisely, an accurate understanding of reality is the essential foundation for producing “good” outcomes.
      • What most people call “good” and “bad” typically reflects their particular group’s preferences: the Taliban’s definitions are different from Americans’, which are different from others’—and within each group there are differences and they are intended to paint a picture of the world the way they’d like it to be rather than the way it really is.
      • Understanding what is good is obtained by looking at the way the world works and figuring out how to operate in harmony with it to help it (and yourself) evolve.
      • Our lives are not satisfied by obtaining our goals, but rather by striving for them.
      • The personal evolutionary process:
        1. Seeking new things (goals);
        2. Working and learning in the process of pursuing these goals;
        3. Obtaining these goals; and
        4. Then repeating the above 3 steps
      • There is a strong correlation between giving society what it wants and making money.
      • It is extremely important to one’s happiness and success to know oneself – most importantly to understand one’s own values and abilities – and then to find the right fits.
      • Man’s development of the prefrontal cortex has allowed the human race to reflect and conduct other cognitive thinking. Allowing us to reflect, learn and evolve faster.
      • Having others help one find one’s weaknesses is essential because it’s very difficult to identify one’s own.
        • Reality + Dreams + Determination = Successful life
        • What is success? Nothing more than getting what you want – that is up to you to decide.
        • Two paths of happiness:
          1. High expectations and strive to exceed them
          2. Lower expectations

      … Most choose the first path, which means to be happy we have to keep evolving.

          • The quality of our lives depends on the quality of decisions we make.
          • We ‘learn’ to make good decisions.
          • 5 important decisions:
            • How big of an impediment is psychological pain to your progress?
            • How much do you let what you wish to be true stand in the way of seeing what is really true?
            • How much do you worry about looking good relative to actually being good?
            • How much do you respond to 1st order consequences at the expense of 2nd and 3rd order consequences?
            • How much do you let yourself off the hook rather than hold yourself accountable for your success?
          • Pain + Reflection = Progress
          • People who are interested in making the best possible decisions rarely are confident that they have the best possible answers. So they seek to learn more.
          • You can probably get what you want out of life if you can suspend your ego and take a no-excuses approach to achieving your goals with open-mindedness, determination, and courage, especially if you rely on the help of people who are strong in areas that you are weak.
          • One quality that those who make the right choices have is character.
          • Whether or not you achieve your goals is a test of what you are made of.
          • Think of yourself as:
            • You (1), the designer
            • You (2), the pursuer
          • If you (2) can’t complete the task you(1) has outlined fire yourself and replace with another resource
          • 5 things you have to do to get what you want out of life:
            1. Choose your goals
            2. Design a plan
            3. Encounter problems
            4. Diagnose problems
            5. Design another plan that will get around your problems
          • The process of personal evolution:
            1. Have clear goals.
            2. Identify and don’t tolerate the problems that stand in the way of achieving your goals.
            3. Accurately diagnose these problems.
            4. Design plans that explicitly lay out tasks that will get you around your problems and onto your goals.
            5. Implement these plans – i.e., do these tasks
          • By and large, life will give you what you deserve and it doesn’t give a damn what you “like.”
          • Don’t confuse “goals” and “desires.”
            • Goals = things you’re really want to achieve
            • Desires = things you want that can prevent you from reaching your goal (first-order consequence)
              • Example: Goal = Losing 5 kg body weight Vis-à-vis Desire = order Domino’s pizza
          • You will get many everlasting dividends if you can find the root causes and properly deal with them.
          • Proximate causes and root causes are different:
            • Proximate cause: “I missed the train because I didn’t check the train schedule.”
            • Root cause: “I didn’t check the schedule because I am forgetful.”
          • What differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively => Growing pains.
          • Problems are great because they are very specific impediments.
          • It is critical to know each day what you need to do and have the discipline to do it.
          • People with good habits have a to-do list.
          • Ask yourself what is your biggest weakness that stands in the way of what you want.
          • Most people have “ego barriers” and don’t go looking for their weaknesses because society has taught us that weakness is bad (wrong!).

      5-step process for achieving what you want in a nutshell:

      Value > Goal > Problem > Diagnoses > Design > Task

       

I hope some of this helps you along your way.

Image sourced from Ray Dalio’s Principles


Also published on Medium.

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