One of my all-time favourite books
Ray Dalio offers a philosophical approach to work, living and the meaning of life. You might disagree in places, but he offers life lessons and values as both a prescription and a catalyst for exploration while urging us to find and practice our own set of principles. There are much wisdom and food for thought as other entire books.
Some chapters provide detailed references to the standards he forged over an illustrious career spanning more than four decades. While you can skim the long descriptions of his estate planning and philanthropy (I didn’t), the rest of this hefty volume is a reference tool that provides an excellent summary of Dalio’s life and work principles.
Whether you strive to change the world, pursue a quiet contemplative life or even just have a good time, Dalio implores you to choose deliberately, to reflect and know yourself, and to consider your decisions carefully.
Dalio says he regrets that some of the leaders he admires most didn’t publish or reveal the principles that guided their lives and work. I meanwhile record my life and work principles here in my blog. In case, I need to look back at them in the future.
Speaking as one of the world’s richest, most influential people, he urges you to think deeply about “what you want” and to then determine your authentic principles: the “fundamental truths and behaviours” that you want to use to guide every step and decision in your life and career.
Dalio offers these Life principles:
Whatever life you choose, make sure that it fits your nature.
Know yourself. Self-awareness. Authenticity.
Do you prefer to strive and change things, or would you rather enjoy life and relax?
Make deliberate, careful decisions based on research, evidence and the advice of qualified people. To be happy, most people need “meaningful work and relationships.”
The ‘Do five things.‘
To succeed, do each of these things exclusively and in sequence:
- Set clear goals
Choose which goals to pursue. Striving for something you know you can achieve won’t stretch you, so choose ambitious goals that fit your passions. You don’t want to work hard on a goal which wasn’t yours.
- Welcome challenges and address them
Embrace your problems. Never avoid or ignore them. Prioritize the problems for which the solutions deliver the greatest returns. What doesn’t kill you makes you stronger.
- Get to the “root causes” of your obstacles
Consider the base causes of your problems. Diagnose the underlying reasons to design effective solutions.
- Design your plans
Create detailed plans to fix your problems; include deadlines and clear responsibilities.
I usually add a fallback plan in case of a dead end.
- Do whatever is necessary to get results
Connect your work to your goals for confidence, motivation and resilience. Measure and keep track of your progress.
Dalio offers these Work principles:
Dalio follows 16 principles to guide his company in every personnel and management decision. He says open, truthful and “radically transparent” organizations create a culture of “idea meritocracy.”
Being honest and open to other people’s opposing thoughts creates an upward “evolutionary loop.” which in turn provide the best solution for a seemingly complex problem.
A quick look into his 16 work principles:
Radical truth and transparency
Tell the truth. Always and right away. Don’t protect employees from bad news but try to involve them in determining the solution. Commit to openness. Don’t share personal or sensitive information, but remain open internally.
Fire anyone responsible for external leaks.
* he did mention the word ‘fire’ a lot in the book.
Meaningful work and relationships
Show you care about your employees by supporting them when they need you. Provide health care, and sponsor community events that include families. Build a culture in which people care about each other and collaborate openly. Make rewards commensurate with outcomes.
Nowadays, employees want to feel appreciated.
Make mistakes, and learn from them
Allow mistakes; don’t punish people and don’t place blame. Have people reflect on their errors so they can improve.
“Stay in sync”
Foster discussion and debate so people can “align” around your decisions. Encourage feedback and critiques back and forth between subordinates and leaders. Remove people who can’t accept criticism. Fire them.
Let “believability weight your decision making”
Listen to everyone, but give greater weight to those with demonstrably more knowledge and success. In order to do so, you need to know everyone’s experience and background.
“Recognize how to get beyond disagreements”
Use your principles to guide your resolutions. Don’t resolve crucial matters through compromise. Seek the best solutions by using principles-driven decision-making, but then expect everyone to get behind decisions once made. Suspend principles only when the firm’s well-being is on the line.
“Remember that the ‘who’ is more important than the ‘what’”
Determine who will take responsibility. Choose the right people; hold them accountable.
Hire “systematically and scientifically.” Know the requirements of the positions. Check references and past performance. Hire for the character as well as abilities. Match for values, skills and cultural fit for the job and the firm. Align new hires’ incentives with the firm’s goals, and link everyone to someone “they report to.” Pay above average, but not too much; tie bonuses to performance.
“Constantly train, test, evaluate and sort people”
Move people around, assess them, and give them positive and negative feedback. Stretch them through trial and error to learn what they do best and under what conditions. Know their strong and weak points. Develop and deploy them accordingly. Remove people who fail to perform.
Improve the management of your machines
The better you know your systems, the more easily you can diagnose issues and solve them. Gauge your machines’ health by their outputs. Tweak the system constantly to optimize it and the people behind it.
“Perceive and don’t tolerate problems”
Treat problems as opportunities to improve. Use your natural anxieties to anticipate and fix things before they do damage.
“Diagnose problems to get at the root causes”
Identify specific problems and the people accountable for them. Get to root causes by asking questions that dig below the surface, layer by layer.
Make improvements to fix problems
After you diagnose the problem and its causes, design appropriate, specific solutions. Control for unintended consequences, and adjust for proper goal alignment.
“Do what you set out to do”
Generating ideas and vision may get the glory, but the hard work of execution matters. Wherever possible, pursue what people want to do, and prioritize those challenges accordingly.
“Use tools and protocols to shape how work is done”
Turn execution into habits. Use systems, tools, principles and processes to guide people. Use algorithms to computerize your best decision processes and principles.
“Don’t overlook governance”
Put rules, procedures and decision-making processes in place so people have a voice for their ideas and advice. Clarify who makes the final decision. Build-in clear decision accountabilities.
based on my original hand-written note in the book:
- Embrace Reality and Deal with it
- ) Be a hyper-realist
- (a) Dreams + Reality + Determination = A successful life.
- )Truth – or, more precisely, an accurate understanding of reality – is the essential foundation for any good outcome.
- ) Be Radically open-minded & radically transparent.
- (a) Radical open-mindedness and radical transparency are invaluable for rapid learning and effective change. – Learning is the product of continuous improvement based on real-time feedback loop in which we make decisions, see their outcomes, and improve your understanding of reality as a result. Put yourself out there and open for radical transparency.
- (b) Don’t let fears of what others think of you stand in your way. – you must be willing to do things in the unique ways you think are best and open-minded-ly reflect on feedback that comes your way.
- (c) Embracing radical truth and radical transparency will bring more meaningful work and more meaningful relationships.- Typically it takes about 18 months to change most habits.
- Look to nature to learn how reality works – we are incapable of designing and building a mosquito, let alone all the species and most of the other things in the universe. So, I start from the premise that nature is smarter than I am and try to let nature teach me how reality works.
- (a) Don’t get hung up on your views of how things ‘should’ be because you will miss out on learning how they really are. – It’s important not to let our biases stand in the way of our objectivity. To get good results, we need to be analytical rather than emotional. – Nature optimizes for the whole, not for the individual, but most people judge good and bad based only on how it affects them. What i had seen was the process of nature at work, which is much more effective at furthering the improvement of the whole than any process man has ever invented.
- (b) To be ‘good’ something must operate consistently with the laws of reality and contribute to the evolution of the whole, that is what most rewarded.
- (c) Evolution is the single greatest force in the universe; it is the only thing that is permanent and it drives everything. – evolution is good because it is the process of adaptation that generally moves things toward improvement.
- (d) Evolve or Die – the key is to fail, learn and improve quickly.
- Evolving is Life’s greatest accomplishment and its greatest reward.
- (a) The individual’s incentive must be aligned with the group’s goals.
- (b) Reality is optimizing for the whole – not for you. Contribute to the whole and you will likely be rewarded.
- (c) Adaptation through rapid trial and error is invaluable.
- (d) Realize that you are simultaneously everything and nothing – and decide what you want to be. – it is great paradox that individually we are simultaneously everything and nothing. Through our eyes, we are everything, but through the universe perspective, we are nothing.
- (e) What you will be will depend on the perspective you have. – where you go in life will depend on how you see things and who and what you feel connected to.
- Understand nature’s practical lessons
- (a) Maximize your evolution – the consistent drive toward learning and improvement makes getting better innately enjoyable and getting better fast exhilarating. – Materialistic things are just baited.
- (b) Remember “no pain, no gain” – the stuff we chasing after won’t maintain our happiness.
- (c) It is a fundamental law of nature that in order to gain strength one has to push one’s limits, which is painful. – As Carl Jung put it, “Man needs difficulties. They are necessary for health.”
- Pain + Reflection = Progress – your challenges will test and strengthen you. If you’re not failing, you’re not pushing your limits, and if you’re not pushing your limits, you’re not maximizing your potential.
- (a) Go to the pain rather than avoid it. – growth and personal improvement are rarely fun, it usually a painstaking experience.
- Embrace tough love
- Weight second – and third-order consequences. – usually, first-order consequences often have the opposite desirabilities from the second consequences resulting in big mistakes in decision making.
- Own your outcome – take responsibilities for the results of your decision making. Whatever circumstances life brings you, you will be more likely to succeed and find happiness if you take responsibilities for making your decision well instead of complaining about having things being beyond control.
- Look at the machine from the higher level (Bird-eye view)
- Think of yourself as a machine operating within a machine and know that you have the ability to go alter your machines to produce better outcomes.
- By comparing your outcomes with your goals, you can determine how to modify your machine.
- Distinguish between you as the designer of your machine and you as a worker with your machine.
- The Biggest Mistake most people make is to not see themselves and others objectively, which leads them to bump into their own and others’ weaknesses again and again.
- Successful people are those who can go above themselves to see things objectively and manage those things to shape change.
- Asking others who are strong in areas where you are weak to help you is a great skill that you should develop no matter what, as it will help you develop guardrails that will prevent you from doing what you shouldn’t be doing. – something that everyone including myself need to develop.
- Because it is difficult to see oneself objectively, you need to rely on the input of others and the whole body of evidence.
- If you are open-minded enough and determined, you can get virtually anything you want.
- ) Be a hyper-realist
Move past a lack of compelling style.
Dalio offers hard-earned wisdom. Many of his ideas reflect a truly rare quality – common sense.
The book is a bit dry for most people, but for me, the right word to describe the book would be – inspirational. Hence, I rated it at 10/10.