Book review: “Principles” by Ray Dalio

“Principles” is the latest book by Ray Dalio — founder of Bridgewater, the world’s largest hedge fund. In this rather hefty tome of a book, Dalio offers an insight into the principles which he’s applied throughout his life and work, and his underlying reflections. He kicks off the book by explaining that “Good principles are effective ways of dealing with reality” and that “To learn my own, I spend a lot of time reflecting.”

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“Principles” consists of three parts. In the first part, titled “Where I’ coming from”, Dalio looks back on his career and the founding of Bridgewater. “Life Principles” is the name of the second part, and covers Dalio’s approach to life’s challenges and opportunities. Finally. part three covers Dalio’s “Work Principles”. Let me share the key things I’ve taken away from “Principles”, starting with Dalio’s Life Principles:

  • Embrace reality and deal with it — Dalio shares an important equation which in his view makes for a successful life: Dreams + Reality + Determination = A Successful Life. For the ‘reality’ component of this equation to work, Dalio encourages his readers to be radically open minded and radically transparent.

Fig. 1 — Going to the pain instead of avoiding it — Taken from: Ray Dalio — Principles, p. 154

  • Identifying, accepting, and learning how to deal with your weaknesses.

Fig. 2 — Ray Dalio’s 5-step process — Taken from: Ray Dalio — Principles, p. 171

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Fig. 3 — Differences between left and right brain — Taken from: https://visme.co/blog/left-brain-right-brain-marketing/

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Fig. 4 — Understand the differences between right-brained and left-brained thinking — Taken from: Ray Dalio — Principles, p. 223

  1. The left hemisphere reasons sequentially, analyses details, and excels at linear analysis. “Left-brained” or “linear” thinkers who are analytically strong are often called “bright.”

Dalio’s Work Principles are dominated by the concept of an Idea Meritocracy — i.e. a system that brings together smart, independent thinkers and has them productively disagree to come up with the best possible collective thinking and resolve their disagreements in a believability-weighted way (see Fig. 5 below). Dalio successfully implemented an Idea Meritocracy at Bridgewater and shares the components of such a system in his book:

Idea Meritocracy = Radical Truth + Radical Transparency + Believability — Weighted Decision Making

  • Radical Truth — Talking openly about our issues and have paths for working through them.

Fig. 5 — The Idea Meritocracy as is the best way to make decisions — Taken from: https://twitter.com/RayDalio/status/1066357616350253057

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Fig. 6 — Diagnose problems to get at their root causes — Taken from: Ray Dalio — Principles, p. 484–490

To diagnose well, ask the following questions:

  • Is the outcome good or bad?

Main learning point: Whilst “Principles” feels a tad repetitive at times and some of Dalio’s ideas might not be easy to implement, I feel that Dalio’s principles can provide great direction for all people working in organisations, big or small. His reflections on things such as transparency and decision-making will be valuable to anyone reading this great book.

Related links for further learning:

  1. https://youtu.be/c1OoWdqbKdg

Written by

Product at ASOS, author of "My Product Management Toolkit", family, boxing and founder of @hiphoplistings and blogging via http://t.co/uGr5nRye

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