Some principles to live by

Here are some notes from the book Principles written by Ray Dalio.

1. On the importance of principles

• “The most important thing I learned is an approach to life based on principles that helps me find out whats true and what to do about it.”

• “Principles are fundamental truths that serve as the foundations for behaviour that gets you what you want out of life. They can be applied again and again in similar situations to help you achieve your goals.”

1) What do you want?

2) What is true?

3) What should you do to achieve what you want in light of what is true?

• “Having a good set of principles is like having a good collection of recipes for success.”

2. On being grit

• “The most painful lesson that was repeatedly hammered home is that you can never be sure of anything: There are always risks out there that can hurt you badly, even in the seemingly safest bets, so its always best to assume you’re missing something. This lesson changed my approach to decision making in ways that will reverberate throughout this book - and to which I attribute much of my success.”

• “There is almost always a good path that you just haven’t figured out yet, so look for it until you find it rather than settle for the choice that is then apparent to you.”

• “I saw that to do exceptionally well you have to push your limits and that, if you push your limits, you will crash and it will hurt a lot. You will think you have failed - but that won’t be true unless you give up. Believe it or not, your pain will fade and you will have many other opportunities ahead of you, though you might not see them at the time. The most important thing you can do is to gather the lessons these failures provide and gain humility and radical open-mindedness in order to increase your chances of success. Then you press on.”

3. On transparency

• “I believed strongly that we should bring problems and disagreements to the surface to learn what should be done to make things better. So Ross and i worked to build out an “error log” in the trading department.”

4. On decision making

• “I learned a great fear of being wrong that shifted my mind-set from thinking “Im right” to asking myself “How do I know I’m right”. And I saw clearly that the best way to answer this question is by finding other independent thinkers who are on the same mission as me and who see things differently from me. By engaging them in thoughtful disagreement, I’d be able to understand their reasoning and have them stress-test mine. That way, we can all raise our probability of being right.”
• “Think like an owner, and expect the people you work with do the same”
• “I learned that there is nothing to fear from truth. While some truths can be scary - for example finding out that you have a deadly disease - knowing them allows us to deal with them better. Being truthful, and letting others be completely truthful allows me and others to fully explore our thoughts and expose us to the feedback that is essential for our learning”

5. On reflection

• “Learning from history: What had happened, after all, was “another one of those”.”

• “I gradually learned that prices reflect peoples expectations, so they go up when actual results are better than expected and they go down when actual results are worse than expected. And most people tend to be biased by their recent experiences. p. 11”

• “What happens after we crash is most important. Successful people change in ways that allow them to continue to take advantage of their strengths while compensating for their weaknesses and unsuccesful people don’t.”

6. On meditation

• “Meditation has benefited me hugely throughout my life because it produces a calm open-mindedness that allows me to think more clearly and creatively.”