Principles

By Ray Dalio (Amarjeet)

Principles For Success by Ray Dalio (In 30 Minutes)

Since the same kinds of things happen over and over again, in your life, a relatively few well-thought-out principles will allow you to deal with just about anything that reality throws at you. Where you get these principles from doesn't matter as much as having them and using them consistently - and that you never stop refining and improving them.

To acquire principles that work, it's essential that you embrace reality and deal with it well. Don't fall into the common trap of wishing that reality worked differently than it does or that your own realities were different. Instead, embrace your realities and deal with them effectively. After all, making the most of your circumstances is what life is all about. This includes being transparent with your thoughts and open-mindedly accepting the feedback of others. Doing so will dramatically increase your learning.

Along your journey you will inevitably experience painful failures. It is important to realize that they can either be the impetus that fuels your personal evolution or they can ruin you, depending on how you react to them. I believe that evolution is the greatest force in the universe and that we all evolve in basically the same way. Conceptually, it looks like a series of loops that either lead upward toward constant improvement or remain flat or even trend downward toward ruin. You will determine what your own loops look like.

Your evolutionary process can be described as a 5-Step Process for getting what you want. It consists of setting goals, identifying and not tolerating problems, diagnosing problems, coming up with designs to get around them, and then doing the tasks required. The important thing to remember is that no one can do all the steps well, but that it's possible to rely on others to help. Different people with different abilities working well together create the most powerful machines to produce achievements.

If you're willing to confront reality, accept the pain that comes with doing so, and follow the 5-Step Process to drive yourself toward your goals, you're on the path to success. Yet most people fail to do this because they hold on to bad opinions that could easily be rectified by going above themselves to objectively look down at their situation and weigh what they and others think about it. It's for that reason I believe you must be radically open-minded.

Our biggest barriers for doing this well are our ego barrier and our blind spot barrier. The ego barrier is our innate desire to be capable and have others recognize us as such. The blind spot barrier is the result of our seeing things through our own subjective lenses; both barriers can prevent us from seeing how things really are. The most important antidote for them is radical open-mindedness, which is motivated by the genuine worry that one might not be seeing one's choices optimally. It is the ability to effectively explore different points of view and different possibilities without letting your ego or your blind spots get in your way. Doing this well requires practicing thoughtful disagreement, which is the process of seeking out brilliant people who disagree with you in order to see things through their eyes and gain a deeper understanding. Doing this will raise your probability of making good decisions and will also give you a fabulous education.

If you can learn radical open-mindedness and practice thoughtful disagreement, you'll radically increase your learning. Finally, being radically open-minded requires you to have an accurate self-assessment of your own and others' strengths and weaknesses. This is where understanding something about how the brain works and the different psychometric assessments that can help you discover what your own brain is like comes in. To get the best results out of yourself and others, you must understand that people are wired very differently.

In a nutshell, learning how to make decisions in the best possible way and learning to have the courage to make them comes from a) going after what you want, b) failing and reflecting well through radical open-mindedness, and c) changing/evolving to become ever more capable and less fearful.

Some more granular principles for how to do all of the above and weigh your options in specific situations to determine the right path to follow are listed below.

1. Recognize that

   • the biggest thread to good decision making is harmful emotions, and
   • decision making is a two-step process (first learning and then deciding)

   Never seize on the first available option, no matter how good it seems, before you have asked questions and explored.

2. Synthesize the situation at hand -

   • One of the most important decisions you can make is who you ask questions of
   • Dont believe everything you hear
   • Everything looks bigger up close - That's why it helps to step back to gain perspective and sometimes defer a decision until some time passes
   • New is overvalued relative to great
   • Dont oversqueeze dots - A dot is just one piece of data from one moment in time; keep that perspective as you synthesize

3. Synthesize the situation through time

   • Keep in mind both the rates of change and level of things and the relationships between them
   • Be imprecise - Understand the concept of "by and large" - it is the level at which you need to understand most things in order to make effective decisions
   • Remember the 80/20 rule and know what the key 20 percent (to learn or where your effort should go) is
   • Be an imprefectionist

4. Logic, reason, and common sense are your best tools for synthesizing reality and understanding what to do about it

5. Make your decisions as expected value calculations - all of you have read about "expected value" in your basic probability course. Sometimes its smart to take a chance even when the odds are overwhelmingly against you if the cost of being wrong is negligible relative to the reward that comes with the slim chance of being right.

   • Raising the probability of being right is valuable no matter what your probability of being right already is
   • Knowing when not to bet is as important as knowing what bets are probably worth making
   • The best choices are the ones that have more pros than cons, not those that dont have any cons at all

6. Prioritize by weighing the value of additional information against the cost of not deciding

   • All of your must-dos must be above the bar before you do your like-to-dos
   • Dont mistake possibilities for probabilities

7. Simplify - "Any damn foos can make it complex. It takes a genius to make it simple."

8. Use principles

   • Slow down your thinking so you can note the criteria you are using to make your decision
   • Write the criteria down as a principle
   • Think about those criteria when you have an outcome to assess, and refine them before the next "one of those" comes along

9. Believability weight your decision making - In case of disagreement with others, start by seeing if you can agree on principles that should be used to make that decision. If you disagree on the principles, try to work through your disagreement based on your respective believability.

10. Convert your principles into algorithms and have the computer make decisions alongside you. The process of man's mind working with technology is what elevates us - its what has taken us from an economy where most people dig in the dirt to today's information age. Its for that reason that people who have common sense, imagination and determination, who knows what they value and what they want, and who also use computers, math, and game theory are the best decision makers there are.

You can of course do all of these things alone, but if you've understood anything about the concept of radical open-mindedness, it should be obvious that going it alone will only take you so far. We all need others to help us triangulate and get to the best possible decisions - and to help us see our weaknesses objectively and compensate for them. More than anything else, your life is affected by the people around you and how you interact with each other. Your ability to get what you want when working with others who want the same things is much greater than your ability to get these things by yourself.