Principles – Ray Dalio

5 steps to success

  • They are iterative
  • Do them ONE at a time!

Step 1: Have clear goals

  • You shoulder (almost) never drop a goal because you think it’s unattainable!

Step 2: Identify problems/obstacles

  • Bring problems to the surface, so you can learn from them
  • Don’t mistake causes with problems!
    • Problem = Poor performance
    • Cause = Not getting enough sleep
  • While the logical part of your brain knows it’s good to address your problems, your emotional part hates it

Step 3: Diagnose the root cause

  • Diagnose before proposing solutions
  • Find the disease rather than the symptoms (look at ROOT causes, rather than proximate causes)
    • Symptoms = I missed the train because I didn’t buy train tickets
    • Disease = I missed the train because I’m forgetful

Step 4: Design principles for avoiding the problems/obstacles in the future

Step 5: Follow the principles

What are principles?

  • Principles = Decision making criteria

How to find principles?

  • Categorize situations and find principles for dealing with them:
    • Pain + Reflection (find the root cause) = Principles
  • Use other peoples principles
  • What do do when experiencing a new type of situation you don’t have principles for?
    • Find someone who has!

How to improve your principles?

  • Analyze previous decisions to see if they would have worked
  • Write them down as algorithms a computer can run!
    • Computers can process more information and are unemotional!
    • Compare your intuitions with the decisions made by the computer:
      • If the computer were right and your intuition were wrong, examine why
      • If your intuition was right and the computer were wrong, consider updating the principles the computer uses

Life principles

Understand your 2 biggest barriers

  1. Ego barrier
    • It’s hard to see your own weaknesses & mistakes!
  2. Blind spot barrier
    • We all see the world differently (Linear vs. lateral thinking, big picture vs. details, etc.)

Solve your 2 biggest barriers with open-mindedness

  • Realize that others might see something more accurately than you
    • The probability that you have the best answer is really low!
  • How to be more open minded?
    • Explore different points of view while being in the state of “not knowing”.
    • Understand the arguments of the smartest people who disagree with you
    • When someone is more believable than yourself, place them as teacher and yourself as student
    • If everybody disagrees with you, try to figure out the reason for it!


  • Humility is important, because it’s required for seeking help from others
  • Knowing a lot + humility is better than either alone!

Radical transparency

Seeing yourself as a machine within a bigger machine

  • It’s more important to be a designer of your machine, than a worker of your machine (even though both are important)
  • How to improve your machine?
    • Identify recurring problems!
    • Compare your outcomes with your goals!

Consider whether to find big picture or in details

  • Only go into details when necessary

Understand that we are all wired differently

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  • Just like we are born with physical constraints, we are also born with mental constraints
    • Some can be changed through training while others can’t.
    • Brain plasticity is real, but the brain isn’t 100% mallable
  • Find ways of dealing with your weaknesses
    • Deny them (what most people do)
    • Turn them into strengths
    • Find workarounds
    • Pursue different goals
    • Get help
  • We are preprogrammed with learning
    • We are instinctively afraid of snakes, but not of flowers
  • You have to see yourself and others objectively
    • Looking at yourself objectively is hard, so get help from others input!

Work principles

  • Understand that most people will operate according to their own interests

Make believability-weighted decisions

  • Believable people are those who have repeated successes and can explain the cause-effect relationships behind them
  • Bridgewater’s dot collector lets them see the believability-weighted conclusion and the equal-weighted conclusion, to see if there are any disagreements
    • The dot collector uses ratings on different attributes (creativity, expertise in subject, etc. ) from peers & tests.

How Ray Dalio operates Bridgewater

Personality tests they use

  • MBTI
  • The workplace personality inventory
  • The team dimensions profile
  • Stratified systems theory


  • Library of common scenarios and the principles to apply

Dot collector

  • See each others thought in real time
  • Give each other positive or negative dots for specific attributes, which is dynamically inserted into a grid for everyone to see

Baseball cards

  • Information from reviews, tests, choices they make, etc.
    • This information is analyzed by computers to generate people’s strengths & weaknesses on the baseball cards

People profile

  • A text summary of the baseball cards


  • Name some people you would like to solve a problem, and then it synthesizes their strengths and find similar people

Issue log

  • Who made which mistake?
  • How severe?

Pain button

  • Lets people record their pain as they experience it
  • Later they are prompted to reflect on it to make progress (because of his principle “pain + reflection = progress”)

Dispute resolver

  • A series of guided questions to resolve disputes

Daily update tool

  • For employees to report what they did, issues & reflections on those issues

Contract tool

  • For everything people agree to do at meetings

Process flow diagrams

  • Who has which responsibilities?

Policy & procedural manual

  • Instructions for how to behave


  • Find them by:
    • Knowing your goals
    • Knowing the processes that lead to those goals
    • Finding the best places in the processes to measure
    • Find levers that affect those metrics

Making decisions

  • Based on your knowledge your decide which actions to take to pursue your goals, which are based on your values
  • Have the best possible life by:
    • Knowing what the best decisions are
    • Having the courage to make them

Techniques for good decision making

  • Use logic, reason and common sense!
    • Make expected value calculations
      • Value of decision = (Benfits * likelihood of benefits) – (cost * likelihood of cost)
    • Compare the benefit of gathering more information with the cost of waiting to decide.
  • Perhaps get someone else to make your decision?

Getting perspective

  • Be wary of emotional decision making
    • What feels good in the moment might be bad long-term
  • When facing two seemingly opposed decisions, get the best of both worlds?
  • A group can make better decisions than an individual!
  • Remember that everything seems much bigger in the moment than in retrospect
  • Get rid of irrelevant details, so you can see what’s important!
    • Also, usually don’t seek more than the 20% of information that gives you 80% of the results!


How much better is it to be REALLY successful?

  • He experienced everything from being down to being on top
    • Talked to those he wanted to talk to!
    • Gone where he wanted to go!
    • Gotten everything he wanted to own!
    • Done everything he wanted to do!
  • But he says it wasn’t much better than having basic needs meet: Good bed, relationships, food & sex!
    • He is still struggling
    • The people at the top weren’t that much more special
    • Having a lot comes with heavy burdens
    • Being well known is probably worse than being anonymous
    • Even his impact was small, when putting things in perspective

We are insignificant

  • You are 1 out of 7 billion people, which is 1 out of 10 million species on the planet, which is 1 out of 100 billion planets in our galaxy, which is 1 out of about 2 trillion galaxies
  • Your life is 1/3000 of humanity’s existence, which is 1/20.000 of the earths existence

Investing advice

  • Make many uncorrelated bets

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