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Principles: Life and Work

Ray Dalio
Last accessed on Saturday June 9, 2018
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believe that the key to success lies in knowing how to both strive for a lot and fail well. 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.
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I’ve always been an independent thinker inclined to take risks in search of rewards—not just in the markets, but in most everything. I also feared boredom and mediocrity much more than I feared failure.
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Speculators were behind the rising gold prices, they said, and they would get burned once things settled down. Back then, I still assumed that government officials were honest.
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The lesson? When everybody thinks the same thing—such as what a sure bet the Nifty 50 is—it is almost certainly reflected in the price, and betting on it is probably going to be a mistake. I also learned that for every action (such as easy money and credit) there is a consequence (in this case, higher inflation) roughly proportionate to that action, which causes an approximately equal and opposite reaction (tightening of money and credit) and market reversals.
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It enhanced my fear of being wrong and taught me to make sure that no single bet, or even multiple bets, could cause me to lose more than an acceptable amount. In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.
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didn’t fit into the Shearson organization. I was too wild. For example, as a joke that now seems pretty stupid, I hired a stripper to drop her cloak while I was lecturing at a whiteboard at the California Grain & Feed Association’s annual convention. I also punched my boss in the face. Not surprisingly, I was fired.
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Having greatly reduced its price risk, McDonald’s introduced the McNugget in 1983. I felt great about helping make that happen.
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came to see that people’s greatest weaknesses are the flip sides of their greatest strengths.
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At first, it seemed to me that I faced an all-or-nothing choice: I could either take on a lot of risk in pursuit of high returns (and occasionally find myself ruined) or I could lower my risk and settle for lower returns. But I needed to have both low risk and high returns, and by setting out on a mission to discover how I could, I learned to go slowly when faced with the choice between two things that you need that are seemingly at odds. That way you can figure out how to have as much of both as possible. There is almost always a good path that you just haven’t discovered yet, so look for it until you find it rather than settle for the choice that is then apparent to you.
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what was most important wasn’t knowing the future—it was knowing how to react appropriately to the information available at each point in time.
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Despite passing up this great opportunity, I don’t regret my choice. I learned that if you work hard and creatively, you can have just about anything you want, but not everything you want. Maturity is the ability to reject good alternatives in order to pursue even better ones.
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I wanted to surround myself with people who needed what I needed, which was to make sense of things for myself.
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wise people stick with sound fundamentals through the ups and downs, while flighty people react emotionally to how things feel, jumping into things when they’re hot and abandoning them when they’re not.
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my belief that having an ability to figure things out is more important than having specific knowledge of how to do something.
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The success of this approach taught me a principle that I apply to all parts of my life: Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside.
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Remember that most people will pretend to operate in your interest while operating in their own.
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Recognize that conflicts are essential for great relationships because they are how people determine whether their principles are aligned and resolve their differences.
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Spend lavishly on the time and energy you devote to getting in sync, because it’s the best investment you can make.
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Be open-minded and assertive at the same time. a. Distinguish open-minded people from closed-minded people. b. Don’t have anything to do with closed-minded people.
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Worry more about substance than style.
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If it is your meeting to run, manage the conversation. a. Make it clear who is directing the meeting and whom it is meant to serve. b. Be precise in what you’re talking about to avoid confusion. c. Make clear what type of communication you are going to have in light of the objectives and priorities. d. Lead the discussion by being assertive and open-minded. e. Navigate between the different levels of the conversation.
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If you can’t successfully do something, don’t think you can tell others how it should be done.
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Remember that people typically don’t change all that much.
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Remember that in great partnerships, consideration and generosity are more important than money. a. Be generous and expect generosity from others.
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Recognize that personal evolution should be relatively rapid and a natural consequence of discovering one’s strengths and weaknesses; as a result, career paths are not planned at the outset.
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Understand that a great manager is essentially an organizational engineer.
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Know what your people are like and what makes them tick, because your people are your most important resource. a. Regularly take the temperature of each person who is important to you and to the organization. b. Learn how much confidence to have in your people—don’t assume it. c. Vary your involvement based on your confidence.
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Think like an owner, and expect the people you work with to do the same. a. Going on vacation doesn’t mean one can neglect one’s responsibilities. b. Force yourself and the people who work for you to do difficult things.
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Perceive and Don’t Tolerate Problems 11.1 If you’re not worried, you need to worry—and if you’re worried, you don’t need to worry.
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From reading Life Principles, you know that I liked to imagine and build out new, practical concepts that never existed before.
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I learned that the more caring we gave each other, the tougher we could be on each other, and the tougher we were on each other, the better we performed and the more rewards there were for us to share.
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when people can’t be totally open, they can’t be themselves.
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Like a parent with adult children, I want you all to be strong, independent thinkers who will do well without me. I have done my best to bring you to this point; now is the time for you to step up and for me to fade away.
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my most fundamental work principle: • Make your passion and your work one and the same and do it with people you want to be with.
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Integrity comes from the Latin word integritas, meaning “one” or “whole.” People who are one way on the inside and another way on the outside—i.e., not “whole”—lack integrity; they have “duality” instead. While presenting your view as something other than it is can sometimes be easier in the moment (because you can avoid conflict, or embarrassment, or achieve some other short-term goal), the second- and third-order effects of having integrity and avoiding duality are immense. People who are one way on the inside and another on the outside become conflicted and often lose touch with their own values. It’s difficult for them to be happy and almost impossible for them to be their best.
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it has repeatedly been shown that systems of government have only worked when those with the power value the principles behind the system more than they value their own personal objectives.
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While you needn’t follow this idea-meritocratic approach exactly as I’ve done it, the big question is: Do you want to work in an idea meritocracy? If so, what is the best way for you to do that? An idea meritocracy requires people to do three things: 1) Put their honest thoughts on the table for everyone to see, 2) Have thoughtful disagreements where there are quality back-and-forths in which people evolve their thinking to come up with the best collective answers possible, and 3) Abide by idea-meritocratic ways of getting past the remaining disagreements (such as believability-weighted decision making).
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