Book Review — Principles by Ray Dalio

I Curated 22 Work/Life Principles from Ray Dalio, Billionaire Investor.

Work and life lessons from the founder of Bridgewater, listed in the top 100 most influential people globally by Time magazine

“Whatever success I’ve had in life has more to do with my knowing how to deal with my not knowing than anything I know.” — Ray Dalio

Introduction to Ray Dalio and His Book “Principles”

When I read about Ray Dalio’s childhood story in the first chapter of his book, I immediately connected with him and got hooked on the book as he mirrored and reflected on some memories from my past.

Reading his 70 years of experience summarized in 210 principles in a few days has been an excellent investment in my education and growth.

A reader needs to connect with a writer to make sense of the content and get the best out of the messages of a book. In addition, I read the book wearing my writer, editor, investor, academic, and entrepreneurial hats. His best-selling book appealed to all these reading personas; therefore, I want to provide an informed review.

A few reviewers characterized the book as fluff, and they expected hardcore investment advice on hedge funds.

However, even though some sounded obvious and simple, every sentence pleased me, reinforcing my knowledge and understanding of the investment world. I value principles more than technical details on the stock market. There are more detailed textbooks about such an approach.

Unlike some billionaires, Mr. Dalio did not inherit wealth and was not a prodigy. Instead, he grew up an ordinary kid in a middle-class family. His father was a jazz musician and supported him in being creative and independent.

In his childhood, he mowed lawns, distributed newspapers, and shoveled snow to make money. But, more intriguingly, he had memory and learning problems that encouraged him to choose a career that did not require many memory skills.

From his younger years onward, he embraced reality and dealt with it. Like many successful entrepreneurs, he failed several times and went broke. However, using his principles and learning from his failure, he returned and got stronger.

Life requires fundamental truth, what we call principles. The value propositions help us find our meaning and make better decisions. To this end, Mr Dalio’s “Principles” is a unique book from several angles. First, it is written as a first-person biography narrating from the beginning to the writing time of the book, explaining 210 principles with eye-opening examples.

Later I found the audio version of the book from Audible and hearing his voice reinforced my learning. The audio version is around 16 hours which took me several days to listen during my commute. However, it provided a straightforward approach, reassessed my principles, and sharpened my investment decision-making.

Even though Mr Dalio is a wealthy and famous person, he presents himself with modesty, integrity, and empathy to his audience. What is more important is he is walking his talk.

In this post, I want to share some fundamental principles that I learned from Ray Dalio’s book called Principles: Life and Work, published in 2017. The book received over 45,000 votes and more than 2,600 reviews on Goodreads and over 8,000 reviews on Amazon.

This 2018 winner of the Axiom Business Book Award and New York Times #1 bestseller has received accolades from famous leaders such as Bill Gates, Arianna Huffington, Michael Bloomberg, Jamie Dimon, Tim Ferriss, Reed Hastings, Adam Grant, Steve Schwarzman, and Andrew Ross Sorkin.

Mr Dalio describes his company Bridgewater’s exceptionally influential culture as “an idea meritocracy that strives to achieve meaningful work and meaningful relationships through radical transparency”.

Time Magazine selected him among the world’s 100 most influential people in 2012. The recognition characterized him as having a “strong and a bit unorthodox conviction about the workings of the economic machine”. I added a video at the end so that you can learn how the economic machine works from his perspective in an educative presentation.

In an assessment of the 25 most important private companies in the US by Fortune.com, Bridgewater was rated in the top five. The Fortune report informs that “everything about Bridgewater is radical, from its size to its culture. With more than $150 billion under management, it’s the world’s biggest hedge fund company and has produced a net gain of $45 billion. Its flagship $70 bil­lion Pure Alpha fund has averaged 13% annual returns since 1991.”

As a well-educated person with an MBA from Harvard, Mr. Dalio asserts that life, management, economics, and investing can be systematized into rules and understood like machines. Therefore, he uses technology, standardization, and automation for the productivity and sustainability of his business.

Ray Dalio is not only a successful business leader and investment consultant, but he is also a philanthropist. He joined the Giving Pledge, formed by Bill Gates and Warren Buffet, in 2011. He promised to donate more than half of his wealth to charitable programs. In 2012 he founded Dalio Foundation, contributing to charitable activities such as meditation research, polio eradication project, and National Philanthropic Trust projects.

22 Work & Life Principles Curated from Ray Dalio

The book has 593 pages, and I have around 30 pages of notes. Therefore, it is not possible to reflect all the principles covered in the book. Consequently, I selected the top 22 principles that resonated the most with me. My aim is to give my readers a quick taste of this comprehensive book.

1 — Embrace reality and deal with it: Be a hyper-realist. You have nothing to fear from knowing the truth. However, an accurate understanding of reality is essential for any good outcome. Look at how reality works. Logic, reason, and common sense are your best tools for synthesizing reality and understanding what to do about it.

2 — Own your outcomes. Weaknesses don’t matter if you find solutions. Pain plus reflection equals progress.

3 — Identify and don’t tolerate problems. Then, diagnose them to get at their root causes.

4 — Set clear goals, design a plan, and push through to completion.

5 — Weigh the second and third third-order consequences. Then, use the 5-step process to get what you want out of life. [Rules are elaborated in the book.]

6 — Be radically open-minded and radically transparent. Recognize the signs of close-mindedness.

7 — Recognize your two barriers: ego and blind spots.

8 — Appreciate the art of thoughtful disagreement. Triangulate your view with believable people who are willing to disagree.

9 — Understand the power that comes from knowing how you and others are wired.

10. Understand the great brain battles and how to control them to get what you want. Find out what you and others are like.

11 — Recognize that the biggest threat to decision-making is harmful emotions. So, first, learn, then decide.

12 — Choose your habits well. Reconcile your feelings and thinking.

13 — Remember the 80/20 Rule and know what the critical 20% is. Keep in mind the rates of change and the levels of things and the relationships between them.

14 — Learn how to make decisions effectively. Make your decisions as expected value calculations.

15 — Synthesize the situation at hand through time. Use logic, reason, and common sense to synthesize reality.

16 — Simplify and navigate levels effectively. Get and stay in sync. Great collaborations feel like playing jazz. But constantly train, test, evaluate, and sort people.

17 — Have integrity and demand it from others. Don’t leave conflicts unresolved.

18 — Create an environment where everyone has the right to understand what makes sense, and no one has the right to hold a critical opinion without speaking up. Be curious when someone smart disagrees with you.

19 — Create a culture in which it is okay to make mistakes and unacceptable not to learn from them. Know what types of mistakes are acceptable what unacceptable. Don’t allow people reporting to you to make unacceptable mistakes. And match the person to the design.

20 — Evolve or die. Evolving is life’s greatest accomplishment and its greatest reward.

21 — Don’t worry about looking good; instead, worry about achieving your goals. Observe the patterns of mistakes to see if they are products of weaknesses.

And as a technology advocate, my favorite principle from Mr Dalio:

22 — Convert your principles into algorithms and make your computer make decisions alongside you. Look at the machine from a higher level. Be cautious about trusting artificial intelligence without having a deep understanding. For heaven’s sake, don’t overlook governance.

Like Mr Dalio, I have concerns about artificial superintelligence, even though I work in the field.

Conclusions

The economy, markets, organizations, business rules, technology, processes, and procedures constantly change. However, principles remain as good as gold. Principles are timeless and can be transferred to subsequent generations with minor amendments.

I enjoyed reading, analyzing, and sharing the learning from this valuable, engaging, and insightful book. I hope you enjoy it as much as many readers did.

I finish my article by introducing this 30-minute economic lesson from Ray Dalio. It is an informative and engaging tutorial that received over 25 million views. I wish I had watched such a video 50 years ago. Then, I could have predicted the market and made better investment decisions. Action-oriented knowledge is power.

Ray has over a million followers on YouTube. He created several more 30-minute video clips with illustrations teaching his principles to his followers in his channel. He loves sharing and passing along his knowledge and experience.

Thank you for reading my review and perspectives.

If you enjoyed this story, you might also like this trending story introducing another legendary investor, Warren Buffet.

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