Book of the Week: Principles
15 Mar 2016
This week, I read Principles by Ray Dalio. Why? Because he’s $15.4 billion dollars worth of rich and I want to be too. Ray Dalio is the founder of Bridgewater Associates, the largest hedge fund in the world. Some people may be familiar with his 30 minute video explanation of How The Economic Machine Works. The video is definitely worth watching. His principles document is also worth reading. The document is divided into 3 parts. The first part talks about principles in general, the second part talks about his life principles and the last part talks about his management principles. The bulk of it is 55 pages, which covers the first two parts and an outline of the third section. If you understand his life principles, the rest should follow. You can read it in one sitting, but it is pretty dense. It was very hard to summarize the book. You should just read it. Ray probably poops gold bricks. [youtube https://www.youtube.com/watch?v=PHe0bXAIuk0&w;=560&h;=315]
Above all else, I want you to think for yourself—to decide 1) what you want, 2) what is true and 3) what to do about it. I want you to do that in a clear-headed thoughtful way, so that you get what you want.
The Importance of Principles Values are what is important to an individual person. Principles are what allows you to live a life according to those values. People act according to their principles and this affects their relationships with other people. As you experience life and reflect on events, you start having to make difficult choices, which reveal what you truly believe in. Ray’s Life Principles You can’t talk about a person’s life principles without talking about a person’s life, which helped shaped their principles. After graduating from Harvard Business School Ray went into commodities futures before commodities futures were hot. He started Bridgewater after he got fired for insubordination (punching his boss and hiring a striper for a convention). He summarizes his basic approach to as
- working for what I wanted, not for what others wanted me to do
- coming up with the best independent opinions I could muster to move toward my goals
- stress- testing my opinions by having the smartest people I could find challenge them so I could find out where I was wrong
- being wary about overconfidence, and good at not knowing; and
- wrestling with reality, experiencing the results of my decisions, and reflecting on what I did to produce them so that I could improve.
Reality + Dreams + Determination = A Successful Life
Success is about getting what you want out of life. There is some end goal you want to achieve and everything else should be setup to confront the reality of the situation and move on on a path to achieve those goals. If doesn’t matter what the goal is, it is about being able to do things to achieve those goals. Different people want different things. Success is about getting the thing that you want, not what other people or society tells you that you want. Don’t follow dreams that aren’t your own. Questions and Answers
In fact I believe that most people who are quick to come up with answers simply haven’t thought about all the ways that they can be wrong.
This goes back to the machine learning expert telling me I was a failure, because I didn’t take the time to think from first principles. You need think about what the questions are before you get the answers. Truth
Truth —more precisely, an accurate understanding of reality— is the essential foundation for producing good outcomes.
Truth has a lot of benefits. Personally, if you are the same on the inside as you are on the outside, you can live life without being in conflict with your values. Being truthful with other people, lets you explore each other’s thoughts and allows you get feedback, which helps people grow and learn. Truth lets you tackle the world as it is, not how you wish it to be. Truth is Ray Dalio’s most fundamental principle. Pain
Pain + Reflection = Progress
You can’t make progress until the take on the pain of the reality of the situation. Only after you have an accurate grip on reality can you make progress toward your goals. What is the truth? It may not be what you want and it may be harsh and painful, but you can’t escape it. When people encounter pain, they either want to fight it or run away from it. Unless you can embrace the suck, you doom yourself to encounter the pain over and over again without making progress toward your goals.
5-Step Process to Getting What You Want Out of Life
- Setting Goals
- Identifying and Not Tolerating Problems
- Diagnosing the Problems
- Designing the Plan (Determining the Solutions)
- Doing the Tasks
You can have virtually anything you want, but you can’t have everything you want.
Your values determine what you want, what your goals are. Important of goals. A lot of people can’t state their goals. If you know what you truly want in life, you just have to execute. The United States constitution says you can pursue happiness, but it is up to you to define what happiness is. The hard part is setting the goals. What do you want out of life? You can have anything you want, but you can’t have everything. You need to choose what is most important to you. This comes from your values. You should think about the goals without worrying about the steps needed to get there. That comes later. Ray’s Management Principles There are over 200 management principles. I skimmed over the outline and did not read them all. A lot of the principles you have probably encountered before if you’ve read management books or articles about startup, hiring, etc. The 80/20 Rule is there. The meat of content is the life principles. Everything else follows from that. Resources