Principles, Ray Dalio, (London: Simon and Schuster, 2017).
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Principles Synopsis
After a successful tenure in the finance industry, Ray Dalio teaches reader about the principles that he uses in his work and life. There are three sections to the book. The first section is an autobiography of his life. The second section outlines his principles for life. And the final section outlines his principles for work.
For Dalio, success is the result of meaningful work and strong relationships. With that in mind, his principles aim at equipping readers with the ability to make better decisions. Better decisions, in this context, means those that can help individuals achieve what they want. He proposes five principles of which readers should decide which ones to adopt.
- Embrace reality and deal with it
- Use the 5-step process to get what you want out of life
- Be radically open-minded
- Understand that people are very differently
- Learn how to make decisions effectively
Below are key themes and ideas that thread through the principles.
Key idea #1: Being radically open minded
One of the primary learning from Dalio’s book is that individuals need to practice open-mindedness to find success. This stems from one of the author’s principle, which is one should embrace reality and deal with it. Being open-minded fosters better relationships and help one overcome their ego and blind spots. It will also allow for space to reflect and acknowledge one’s strengths and weaknesses. Without this, many of Dalio’s principles and teachings will fall short. Thus, this is probably the most important idea of the whole book.
Being open-minded means focusing on understanding the truth rather than being right. This can be difficult as one needs to battle with the primitive brain (or the amygdala). This part of the brain is the switch for emotional responses and can be difficult to control. Those who can master their primitive brain are able to have productive disagreements because they do not get emotionally charged.
Key idea #2: Overcome your ego and blind spots
Dalio believes that for one to be successful, they must overcome their ego and blind spots. Our egos come from our primitive brain and holds strong emotions of our needs and our fears. Thus, when someone points out our mistakes, we react emotionally. In order to overcome ones’ ego, one must consciously identify what their primitive brain is saying versus what their rational brain is saying. This awareness will allow the individual to determine if what the primitive brain is saying is useful or relevant.
Our blind spots are the ways that we receive and process information which may prevent us from seeing things accurately. For example, if someone is very logical, they are likely to miss and ignore people’s emotional cues. Blind spots can be problematic as it leaves out key information and or doesn’t present the full picture. The three ways an individual can overcome their blind spots is either to teach their brain, use other aids (like reminders), or rely on others.
Key idea #3: Understand and internalize that everyone is different
One principle that Dalio writes about is the importance of acknowledging and understanding that everyone is different. In the book, he talks about a time where his three collaborators told him about his strengths and his weaknesses. His collaborators praised him for his innovation the energy that he brings to the team. However, they also said that how some of his words and actions would make other employees feel belittled, humiliated, and incompetent.
This came as a shock to Dalio, which made him recognize the importance of understanding how to deal with one another – what he may find is the right way to deal with things may be not be received in that same way. Moreover, being open-minded to acknowledge that others receive information differently allows for better communication between parties.
Key idea #4: Believability-weighted decision making
This insight simply suggests that one should weigh the advice of credible individuals with more weight than those who are less credible. Credible decision makers are individuals who have the benefit of experience. For example, you are likely to take travel tips from an individual who has lived in your destination city rather than one who has not. Additionally, one can determine the believability and capability of an individual by systematically and objectively monitoring an individual’s progress.
Key idea #5: 5 step process to get what you want in life
Dalio provides readers with a five-step process for getting what they want out of life. He recommends readers loop through these five steps.
- Set clear goals
- Identify the problems that stand between your and your goal
- Diagnose the root causes to the problems
- Design a plan to address or circumvent the problems
- Execute through to results
Key takeaways
- Being radically open-minded enables the other pillars for Dalio’s principles for success; this requires practice for overcoming one’s primitive brain.
- Weigh advice from credible sources with more weight than the advice from less credible sources.
- Recognize and accept that everyone is different, both in strengths and weaknesses and how they receive information.
Principles author Ray Dalio
Ray Dalio is the founder of one of the world’s largest hedge fund company, Bridgewater Associates. At the age of 12, he saved $300 from a paperboy job and invested his monies into the stock market. The only company he recognized was Northeastern Airlines. Little did he know that the company would be acquired and he would triple his investment. Dalio would go on to start a career trading commodities and futures before going to grad school. Two years after completing his MBA at Harvard, he opened his Bridgewater Associates in from his apartment. Following the 2008 financial crisis, Dalio published his first book, “How the Economic Machine Works: A Template for Understanding What is Happening Now.”
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