Principles by Ray Dalio
1) WHAT ARE PRINCIPLES?
Your values are what you consider important, literally what you value. Principles are what allow you to live a life consistent with those values. Principles connect your values to your actions; they are beacons that guide your actions and help you successfully deal with the laws of reality. It is to your principles that you turn when you face hard choices.
2) WHY ARE PRINCIPLES IMPORTANT?
All successful people operate by principles that help them be successful. Without principles, you would be forced to react to circumstances that come at you without considering what you value most and how to make choices to get what you want.
3) WHERE DO PRINCIPLES COME FROM?
Sometimes we forge our own principles and sometimes we accept others’ principles, or holistic packages of principles, such as religion and legal systems.
4) DO YOU HAVE PRINCIPLES THAT YOU LIVE YOUR LIFE BY? WHAT ARE THEY?
Your principles will determine your standards of behavior. When you enter into relationships with other people, your and their principles will determine how you interact.
Through this time and till now I followed the same basic approach I used as a 12-year-old caddie trying to beat the market, i.e., by 1) working for what I wanted, not for what others wanted me to do; 2) coming up with the best independent opinions I could muster to move toward my goals; 3) stress- testing my opinions by having the smartest people I could find challenge them so I could find out where I was wrong; 4) being wary about overconfidence, and good at not knowing; and 5) wrestling with reality, experiencing the results of my decisions, and reflecting on what I did to produce them so that I could improve.
This brings me to my most fundamental principle:
Truth —more precisely, an accurate understanding of reality— is the essential foundation for producing good outcomes.
It is only natural that seeking something new, or seeking new depths of something old, is required to bring us satisfaction.
In other words, the sequence of
1) seeking new things (goals);
2) working and learning in the process of pursuing these goals;
3) obtaining these goals, and
4) then doing this over and over again is the personal evolutionary process that fulfills most of us and moves society forward.
The most important quality that differentiates successful people from unsuccessful people is our capacity to learn and adapt to these things.
It is a fundamental law of nature that to evolve one has to push one’s limits, which is painful, in order to gain strength—whether it’s in the form of lifting weights, facing problems head-on, or in any other way
Most people react to pain badly. They have fight or flight reactions to it: they either strike out at whatever brought them the pain or they try to run away from it. As a result, they don’t learn to find ways around their barriers, so they encounter them over and over again and make little or no progress toward what they want
Most learning comes from making mistakes, reflecting on the causes of the mistakes, and learning what to do differently in the future.
Pain + Reflection = Progress
people who know that understanding what is real is the first step toward optimally dealing with it make better decisions.
People who overweigh the first-order consequences of their decisions and ignore the effects that the second-and subsequent-order consequences will have on their goals rarely reach their goals
Successful people understand that bad things come at everyone and that it is their responsibility to make their lives what they want them to be by successfully dealing with whatever challenges they face
That schematic is meant to convey that your goals will determine the machine that you create to achieve them; Your machine will consist of the design and people you choose to achieve the goals.
MY 5-STEP PROCESS TO GETTING WHAT YOU[40] WANT OUT OF LIFE
Have clear goals.
Identify and don’t tolerate the problems that stand in the way of achieving your goals.
Accurately diagnose these problems.
Design plans that explicitly lay out tasks that will get you around your problems and on to your goals.
Implement these plans—i.e., do these tasks.
You must approach these as distinct steps rather than blur them together.
Each of these five steps requires different talents and disciplines
It is essential to approach this process in a very clear-headed, rational way rather than emotionally.
By and large, life will give you what you deserve and it doesn’t give a damn what you like. So it is up to you to take full responsibility to connect what you want with what you need to do to get it, and then to do those things—which often are difficult but produce good results—so that you’ll then deserve to get what you want.
Setting Goals
- You can have virtually anything you want, but you can’t have everything you want.
- Avoid setting goals based on what you think you can achieve.
- Achieving your goals isn’t just about moving forward.
2. IDENTIFYING AND NOT TOLERATING PROBLEMS
Most problems are potential improvements screaming at you. In order to be successful, you have to
1) perceive problems and
2) not tolerate them.
Remember that identifying problems is like finding gems embedded in puzzles; if you solve the puzzles you will get the gems that will make your life much better.
- Be very precise in specifying your problems.
- Don’t confuse problems with causes.
3) DIAGNOSING THE PROBLEMS
- You will be much more effective if you focus on diagnosis and design rather than jumping to solutions.
- You must be calm and logical.
- You must get at the root causes.
- Recognizing and learning from one’s mistakes and the mistakes of others who affect outcomes is critical to eliminating problems.
- Pain + Reflection = Progress
So to be successful, you must be willing to look at your own behavior and the behavior of others as possible causes of problems.
The most important qualities for successfully diagnosing problems are logic, the ability to see multiple possibilities, and the willingness to touch people’s nerves to overcome the ego barriers that stand in the way of truth.
4) DESIGNING THE PLAN (DETERMINING THE SOLUTIONS)
Creating a design is like writing a movie script in that you visualize who will do what through time in order to achieve the goal. The design will give you your to-do list (i.e., the tasks).
5) DOING THE TASKS
They tend to be self-disciplined and proactive rather than reactive to the blizzard of daily tasks that can divert them from execution. They are results-oriented: they love to push themselves over the finish line to achieve the goal.
Values → 1) Goals → 2) Problems → 3) Diagnoses → 4) Designs → 5) Tasks
As you design and implement your plan to achieve your goals, you may find it helpful to consider that:
Life is like a game where you seek to overcome the obstacles that stand in the way of achieving your goals;
You get better at this game through practice;
The game consists of a series of choices
The game consists of a series of choices that have consequences:
- You can’t stop the problems and choices from coming at you, so it’s better to learn how to deal with them;
- You have the freedom to make whatever choices you want, though it’s best to be mindful of their consequences;
- The pain of problems is a call to find solutions rather than a reason for unhappiness and inaction, so it’s silly, pointless, and harmful to be upset at the problems and choices that come at you (though it’s understandable);
- We all evolve at different paces, and it’s up to you to decide the pace at which you want to evolve;
- The process goes better if you are as accurate as possible in all respects, including assessing your strengths and weaknesses and adapting to them.
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