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Principles

Principles

by Ray Dalio

15

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Principles = Fundamental Truths

Principles = Fundamental Truths
  • Principles are essential truths that work as the foundations for the behavior that leads you where you want in life.
  • Those principles that are most valuable come from your own experiences and your reflections on those experiences.
  • You turn to your principles when you face difficult choices.
  • They connect your values to your actions, guide your actions and help you successfully deal with the reality you live in.

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Pre-Packaged Principles

Your principles should reflect the values you truly believe in.

While it isn’t always a bad thing to use the principles of someone else (it’s hard to come up with your own, and often much wisdom has gone into those already created), adopting pre-packaged principles without much reflection can expose you to the risk of inconsistency with your true values.

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Principles In Relationships

Your principles will influence your standards of behavior. In relationships with other people, your and their principles will decide how you collaborate.

People who have shared values and principles get along. People who don’t share values and principles, experience misunderstandings and conflict with one another. Most of the times in relationships, our principles are ambiguous.

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The Personal Evolutionary Process

Reality + Dreams + Determination = A Successful Life.

We translate our dreams into reality by continually interacting with reality (in pursuit of our dreams) and by using these interactions to learn more about reality itself and how to interact with it in order to get what we want. We must do that with determination.

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Ray Dalio

“There are always risks out there that can hurt you badly, even in the seemingly safest bets, so it’s always best to assume you’re missing something.”

Ray Dalio

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Put Yourself On The Road To Success

Put Yourself On The Road To Success
  • Seek out the smartest people you disagreed with and try to understand their logic
  • Know when it's best not to have an opinion
  • Develop, test, and systematize timeless and universal principles
  • Balance risks in ways that keep the big upside while reducing the downside.

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How To Solve Disagreements

  • Express your sincere, authentic thoughts
  • Have considerate debates in which people are willing to shift their opinions as they learn new perspectives
  • Have agreed-upon ways of deciding (voting, authorities, etc.) if disagreements remain so you can move on without resentment.

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Clarify Your Own Principles

The most important thing for you to do is write down your principles to clarify them.

  • Write down every type of interaction you had and how you handled them (take the future into consideration as well). Test your assumption and update your data when necessary.
  • Record why you made certain decisions, then check in on that logic later.

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Ray Dalio

"I believe that life consists of an enormous number of choices that come at us and that each decision we make has consequences, so the quality of our lives depends on the quality of the decisions we make."

Ray Dalio

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Understand Reality and Deal With It

  • A correct understanding of reality is the essential foundation for any good outcome.
  • Don’t get attached to your views about how things should be; there should always be space for learning.
  • Evolution is the single greatest force in the universe.
  • Evolving is life’s greatest accomplishment and its greatest reward.
  • “No pain, no gain”. Evolution won’t always feel good.
  • Pain + Reflection = Progress. The quality of your life will depend on the decisions you make at those painful moments.
  • Weigh second and third-order consequences.
  • Think of yourself as a machine operating within a machine and know that you have the ability to alter your machines to produce better outcomes.
  • Distinguish between you as the designer of your machine and you as a worker with your machine.

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Confront Your Weaknesses

Confront Your Weaknesses
  • Don’t confuse reality with the way you wish reality to be.
  • Don’t overweight first-order consequences relative to second and third-order ones.
  • Don’t let pain stop you from progressing.
  • Don’t blame negative results on anyone but yourself.

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Getting What You Want Out Of Life

Use this five-step process:

  1. Set clear goals.
  2. Identify the issues that stand in the way of you achieving those goals.
  3. Diagnose the issues correctly to get at their root causes.
  4. Draft plans that will get you around them.
  5. Do what’s necessary to push these plans through to results.

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How To Set Clear Goals

  • Prioritize: you can’t have everything you want
  • Don’t confuse goals with desires. A goal - something you have to achieve; a desire - something you want, but it stands in the way of your goals.
  • Don't give up on the goals that seem impossible.
  • Don’t confuse the signs of success with success itself.
  • Learn how to deal with your setbacks; this is as important as knowing how to move forward.

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How to Make Decisions Effectively

How to Make Decisions Effectively
  • Know and understand the biggest threat to good decision making - harmful emotions
  • Decision making is a two-step process: first learning, then deciding
  • Synthesize the situation you're dealing with
  • Make your decisions as expected value calculations
  • Prioritize by weighing the value of additional information against the cost of not deciding
  • Use Principles and convert them into algorithms and have the computer make decisions alongside you.

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Work Principles

  • Value knowing the truth. You have nothing to fear from knowing it
  • Cultivate meaningful work and meaningful relationships
  • Foster a culture that allows mistakes and encourages learning from them
  • Weight your decision making in a realistic way
  • Recognize how to get beyond disagreement
  • Remember that WHO is more important than WHAT
  • Hire right, because the costs for hiring wrong are huge
  • Constantly train, test, evaluate, and sort people
  • Identify and don’t tolerate problems
  • Diagnose problems to get at their root causes
  • Design improvements to your machine to get around your problems
  • Do what you set out to do
  • Use tools and protocols to shape how work is done
  • Don’t overlook governance.

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Align objectives with appropriate types of communication

Make clear what type of communication you are going to have in light of the objectives and priorities. 

If your goal is to have people with different opinions work through their differences (i.e., open-minded debate), you’ll run your meeting differently than if its goal is to educate.

Asertiveness and open-mindedness

It is up to the meeting leader to balance conflicting perspectives, push through impasses and decide how to spend time wisely.

If you’re running the conversation, you should be weighing the potential cost in the time that it takes to explore opinions of inexperienced employees versus the potential gain in being able to assess their thinking and gain a better understanding of what they’re like.

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Stress + Rest = Growth

You need to push to the outer limits of your current ability, and then follow that hard work with appropriate recovery time.

This is how you grow your mind and get better at any skill....

Focus on the Process

The best athletes and entrepreneurs aren’t focused on being the best; they’re focused on constant self-improvement.

Concentrating on the process is best for both performance and mental health. It lifts off your shoulders a huge burden, so you can concentrate on the things you can control.

Stay Humble

Knowledge is always evolving and advancing — if you want to evolve and advance with it, you need to keep an open mind.

And to keep an open mind, leave your ego at the door. 

Getting Negative Feedback

Getting Negative Feedback

... is not the best thing to happen at work. It normally leads to a racing mind, emotional discomfort and increased blood pressure.

We may try to defend ourselves, or brush aside the feedba...

It’s Not Personal

Unless it is completely uncalled for, negative feedback generally has the intention of informing us about our areas of improvement. If feedback isn’t provided, you may not grow and improve. If no one tells you that you are doing something wrong, you will keep doing it wrongly forever.

Providing timely feedback may be a sign that the manager cares and wants you to improve.

Don’t Shoot The Messenger

One should not be defensive when provided with negative feedback, and understand that it is for our own good.

One needs to act on the feedback by approaching it from a neutral and objective standpoint, not taking it as a personal attack. Instead of reacting, just pause and listen. Reflect on the feedback, giving yourself some time and space to respond with a level head.