When he was 12 years old, Ray Dalio already had a couple of jobs (paperboy, caddy) and had saved up $300. Hearing about the stock market, Dalio invested his money in shares of Northeastern Airlines. “I bought it because it was the only company I’d heard of that was selling for less than $5 a share,” Dalio writes in his book Principles: Life and Work. Unknown to Dalio, the company was about to go bankrupt when it was acquired by another company, and the young investor tripled his money — marking an auspicious start to the career of the man who would found and build the largest hedge fund company in the world, Bridgewater Associates, with more than $150 billion in assets under management.
In Principles, Dalio lays out the life and work principles that have guided his journey from teen caddy to one of the 100 wealthiest people in the world.
Motivator or Oppressor?
Principles is a unique book divided into three parts. The first section is a straightforward and honest autobiography describing Dalio’s up-and-down Wall Street career. It includes a conversation, early in the history of Bridgewater, that Dalio had with his three closest collaborators. These trusted colleagues told him his strengths (being bright, innovative and energetic) but also his weaknesses (sometimes saying and doing things to employees “which makes them feel incompetent, unnecessary, humiliated, overwhelmed, belittled or oppressed.”). The conversation was a shock to Dalio, who had no idea of the negative impact he was having.
The problem was a lack of understanding, Dalio writes. “It was clear that I needed to be better understood and to understand others better. I realized then how essential it is that people in relationships must be crystal clear about their principles for dealing with each other.” This insight was the genesis of the development of Dalio’s Work Principles, which he would continue to refine over the course of his career.
Dalio’s work and life principles share the common core themes of reality and openness. His first life principle, for example, is to “embrace reality and deal with it.” Reality means understanding the unvarnished truth about oneself and others. However, it is hard to see yourself or others objectively if people are not honest and forthcoming (as his colleagues had been) and/or if you are not willing to listen to what they have to say. As a result, Dalio emphasizes the importance of being “radically open-minded and radically transparent.”
Radical transparency is equally prominent in Dalio’s work principles. His first work principle is to “trust in radical truth and radical transparency.” This requires a culture of brutal honesty. “Create an environment in which everyone has the right to understand what’s going on, and no one has the right to hold a critical opinion without speaking up,” he writes.
One of his other core work principles is what he calls “believability-weighted decision-making,” which is based on the idea that, he writes, “it is better to weight the opinions of more capable decision-makers more heavily than those of less capable decision-makers.” The challenge is to develop the measures of believability that are accepted by everyone in the organization — a challenge he meets through systematic and objective monitoring of people’s track records.
At nearly 600 pages, Dalio’s Principles offers a comprehensive framework for personal and professional success that is detailed and inspirational. These are not after-the-fact reflections on a life well led but, rather, the principles that Dalio developed in the moment as he sought to identify and capture the lessons of his successes and mistakes. “My hope is that reading this book will prompt you and others to discover your own principles from wherever you think is best and ideally write them down,” Dalio writes. “Doing that will allow you and others to be clear about what your principles are, and understand each other better.”