Achieve Anything: The 5-step algorithm that led Ray Dalio to a $100B Fund

The quality of your life is largely determined by the quality of the decisions you make.

This post is part of a larger series in which we learn about rationality and decision making from some of the world’s best decision makers and cognitive behavior experts. I break down their concepts and bring you practical, ready-to-use-tools you can apply in your everyday life for better decisions, more confidence, and less bias.

Evidence of the following working: Anecdotal (with high believability)

In this post, you will learn

  • How to use the 5-step algorithm to achieve anything you want
  • Limitations of the 5-step algorithm
  • How to actually remember to apply the 5-step algorithm

Bonus: Worksheet with useful prompts to use the algorithm

Ray Dalio was an up-and-coming hedge fund manager. The small fund he’d started in 1975 in his bedroom was posting decent returns for his clients and was steadily gaining more attention and business.

Then something terrible happened.

In 1982, Ray Dalio went broke.

He predicted a big recession and positioned his hedge fund accordingly.

But the Federal Reserve Bank massively lowered interest rates which sent markets soaring.

Ray Dalio was dead wrong and lost his clients and himself a lot of money. So much he had to let go of his staff and borrow $4,000 from his dad to make ends meet.

So what led him to say this in an interview 35 years later?

“…this was very, very painful, but it turned out to be the best thing that ever happened to me”

He explains that it led him to completely change the way he looked at the world

“I went from a state of mind of thinking ‘I know’ to a state of mind thinking, ‘how do I know?’…”

This seemingly little shift in mindset had large consequences. He started developing and writing down principles and practices for understanding reality, uncovering blind spots and making better decisions. He constantly analyzed his decisions, learned from mistakes and steadily improved and refined his principles.

Today his fund BridgeWater is the largest hedge fund in the world, with over $100B of assets under management.

Ray Dalio attributes much of his success to the principles he’s developed and recently shared those in a book called Principles.

In that book, the prolific investor describes the 5-Step algorithm he has used to get what he wants.

“With practice, you will eventually play this game with a calm unstoppable centeredness in the face of adversity. Your ability to get what you want will thrill you. “
— Ray Dalio

Of course, I recommend that you read the book yourself.

But here is a Flavio colored sneak peek on the algorithm that hopefully may make you want more.

I have done the following to make it as applicable as possible.

  • Grouped sub-points into major themes so that they are easier to apply and remember.
  • Left out points that may be critical but I didn’t find as applicable.
  • Expanded on a few key points that made them more understandable for me.
  • Where applicable, I created checklist questions that will make it easier for you to apply this to your own life.
  • Went through the process with a semi-hypothetical example in italic of something I’m dealing for further understanding

If you’re serious about applying the 5-step algorithm into your life, I recommend that you take notes and come up with your own checklist questions around each point.

Yes, hipsters have dreams too (Photo: rawpixel)

5-Step Algorithm to Achieve Anything

Here is the overview over the process

  1. Have clear goals
  2. Identify problems and don’t tolerate them
  3. Diagnose problems to get at their root causes
  4. Design a plan to eliminate the causes and achieve the goal
  5. Execute

Easy, right?

Let’s look at the five steps with an example to see how to implement this in practice.

Example: I want a political organization that I believe will help fight climate change to raise a lot of money so they can win seats in the next elections.

1. Have Clear Goals

Prioritize. While you can have virtually anything in life that you want, you can’t have everything you want.

Checklist questions:

Do I have the appropriate amount of goals given my time and responsibilities that I’m not willing to negotiate? Which goals are the most important to me and which need to be cut out?

If I’m also trying to set up a successful business at the same time, raise a child and write a novel, I’ll likely not get very far in any of those areas. Seems like good advice, so let’s prioritize on raising money.

Great expectations create great capabilities.

I’ve noticed how my brain is a natural problem-solving machine. So is yours. It doesn’t care if you give it a big problem or a small problem, it will start thinking about how to solve it. So you might as well be ambitious in your goal setting.

Checklist Question: Is the goal I’m pursuing big enough? Can I make it 10x bigger?

If I ask myself: “How do I raise $100,000 in the next three months”, I’ll come up with a certain kind of action plan.
But if I ask myself: “How do I raise $1,000,000 in the next three months?”, my brain will start thinking about a different strategy altogether. It could mean that I should think about different donors, a different pitch, involving more people to help me get there and so forth.

Reconcile Desires and Goals

If you have a goal of losing weight, you can’t succumb to the desire to eat extra ice-cream every day.

Getting this right is critical. If you set a big goal that makes it hard to have fun on the way and get hits of dopamine for little successes (like publishing articles, closing deals, watching users use your product), you likely won’t stay on track for very long.

Checklist question: Are there enough day-to-day activities where I will either enjoy the work so much I’ll be ‘in the zone’? Are there stepping stones along the way where I will get feeling of success that will keep me going through the inevitable hard and boring times?

I actually enjoy meeting people, finding out what their goals are, and if what I’m selling is helpful to that end, convince them to purchase my services (more of a short-term desire, dopamine spike than a long-term goal). So, in this case, (some of) my desires are supporting my goals for my fundraising plan.

2. Identify and don’t tolerate problems

Admit painful problems and view them as opportunities to grow.

Acknowledging weaknesses is not the same as surrendering to them.

Ray advises us to look at the pain signal as a sign of potential improvements that are screaming at us.

Checklist Question: What about am I lying to myself? What is the painful truth that needs to be acknowledged?

The “painful” truths in my example case are that we have virtually no existing fundraising efforts, no database with donors and no track record and that I have limited time and don’t really know what the heck I’m doing.

Be specific in identifying your problems.

Here Dalio specifically admonishes us to differentiate between problems arising from a lack of skill and problems arising from innate weaknesses.

Checklist Question: To solve this problem, do I lack the know-how or do I have an innate weakness in this area?

In my case, while I’ve spent some amount of time selling products and projects and have some track record in that area, I’ve never fundraised for a political organization before. I enjoy meeting people and I don’t see myself having trouble asking for money (I’ve done so many times in sales before). So this is a case of a lack of skill and not an innate weakness.

3. Diagnose problems to get at their root causes

This part is probably the one most people trip up. Either by neglecting to this in the first place or by jumping from an identified problem to a solution in a nanosecond.

Focus on “what is” before deciding “what to do about it”

Make sure you’ve spoken with all the relevant people (to uncover blind spots) and have stepped back from the situation enough to properly get all the evidence together.

Checklist Questions: Have I spoken with the relevant people to assess the situation? Do I have all the relevant facts? Where am I biased?

In my situation, I’ve spoken with a few people about what our current fundraising status is, but there is still quite a few things I want to learn from other believable people about the best practices in fundraising before going into action mode.

Distinguish proximate causes from root causes.

Big point here. Finding the root cause of all of our problems should help solve the problem once and for all.

Checklist Questions:

Is this a symptom or a cause?

Ask the 5-whys

Q1: Why is there no money in the bank?
A1: There are no fundraising operations
Q2: Why are there no fundraising operations?
A2: There was too little time and too little knowhow on how to do this
Q3: Why was there too little time and too little knowhow?
A3: We didn’t have the right people in place
Q4: Why were the right people with the right time not in place?
A4: Because we didn’t know that we’d need those people
Q5: Why didn’t we know we’d need those people?
A5: Because we’re limited by our blind spots

Sometimes this exercise gets a bit existential. Probably time to stop.

It’s probably accurate to learn more about blind spots and mental models for virtually anyone (confirmation bias, anyone?). But the root cause at which we can solve this issue in a reasonable amount of time is by bringing in the right people now.

If the answer however was, we couldn’t recruit the right people (even though we knew we needed them), then we’d need to look one level deeper and understand why these people didn’t want to join our organization and solve problems at that level.

Recognize that knowing what someone (including you) is like will tell you what you can expect from them.

As he does throughout the book, here, Dalio calls us to be as honest as possible about our own mistakes and weaknesses and to point them out in others. This part is not for everyone, but I do see the benefit of knowing more about how you are really like. Doing this gives you the ability to plan around your weaknesses, for example by partnering with others who are strong in those areas.

Checklist Question: Is there a fundamental weakness within myself or within my colleagues that is part of the root cause?

In this case, maybe the previous leadership of the party didn’t prioritize well enough. I’m not sure. That problem seems addressed for now.

4. Design a plan

Remember that there are typically many paths to achieving your goals.

One is enough.

Maybe a good place to use Lateral Thinking Techniques to generate more creative ideas.

Think of your plan as being like a movie script in that you visualize who will do what through time

Sketch out the plan broadly (“Hire those great people”) and then go into specific tasks and timelines (“In the next two weeks, choose the headhunters who will find those great people”).

Dalio says that by visualizing the entire movie into the future, things like costs, time and personnel will surface naturally until you have all the gears in the machine meshing smoothly.

I think he wants us to use our inner simulator (same function we intuitively use to predict where tennis ball will land, vs. calculating the position through Newtonian physics) to predict what we need to pay attention too.

I’ve learned the power of a ‘pre-mortem’, where you pretend you are at the time of your deadline and ask yourself how surprised you’d be if your plan had failed. Then you can ask about what went wrong and fix your plan. See how this works here by a method developed at the Center for Applied Rationality (CFAR): murphy-jitsu

Write down your plan for everyone to see and to measure your progress against.

I think he means to create a Gantt-Chart with all the tasks, deadlines and owners into one document.

Here is also where my most read medium post so far seems helpful to mention: Systems vs. Goals, where I talk about the importance of setting up systems you can execute every day to achieve goals.

I won’t go into all the details of the fundraising plan, but here is an example of how this could work:

Goal: Raise $1,000,000 within 3 months
Find people who have a track record for fundraising
Convince people who are great at fundraising to join the effort
Let them fundraise
Lower Level of Step 1:
By end of the week
Go through my LinkedIn connections and identify 10 people from within my existing network that might know about fundraising or know people who do
Write template email that asks for recommendations on whom they believe to be the best fundraisers who could share our vision
Personalize the template and send email to 10 people, including a follow up reminder through the yesware plugin
By the end of the next week
Collect answers and start building a target list in a google spreadsheet
Prioritize list by perceived track record and perceived political leanings
Ask for introductions and set up meetings

Time to murphy-jitsu and refine the plan.

5. Push through to completion

Remember the connection between tasks and goals

If you can’t execute your plan, you won’t go anywhere. So if you’re ever losing sight of that connection, ask yourself “Why?”. If you lose the ‘why’, you will lose sight of your goals too.

Good work habits are vastly underrated

Probably a good time to review that Getting Things Done book you bought and haven’t read yet.

Establish clear metrics to make certain that you are following your plan

Dalio says that it’s ideal to have someone else measure and report on your success. If you aren’t hitting your targets, that’s another problem that needs to be diagnosed and solved.

Work with the right people

One of my favorite lines in the book was here, hidden almost as an afterthought:

There many successful, creative people who aren’t good at execution. They succeed because they forge symbiotic relationships with highly reliable task-doers.

If you discover you aren’t great at execution (seems as the data shows me I’m great in some parts of execution and bad in others), then it’s time to find some more reliable folks who maybe aren’t as creative, and you can go far together!

So that is it for the 5-step process. Now as always, I try to bring you the full picture as far as my know-how and mental biases allow me to.

Biggest Limitations of the Process

Unknown unknowns

One challenge I see with the 5-step process is the existence of potential unknown unknowns.

Steve Jobs would not have designed the Apple the way he did had he not taken that calligraphy class.

In his famous Stanford commencement speech he said:

If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.

There are many more examples of innovations and insights, such as the discovery of penicillin and LSD-25, that came from activities that had nothing to do with the original problem statement.

A few takeaways here

  • It’s crucial that you keep learning about things that don’t seem to benefit you directly in achieving your goals. A self-reflective walk in the woods, a random book you read or conversation with a stranger in a coffee shop could lead to unlocking significant insights, either shifting your goal altogether or your fundamental approach to the problem.
  • You never know when you will connect the dots. The process seems to limit itself to things you either already know (known knowns) or know how to ask about through research and questioning others (known unknowns).
  • Intuition tells me 5-Step process works best for relatively well-defined goals in relatively short time frames that depend less on unknown-unknowns.

Tacit Knowledge

When you want to learn tennis, you also can’t get there just by reading books about tennis. Much better to practice tennis regularly and learn how to move your feet and arms for optimal outcomes. The learning happens less explicitly but more on body/subconscious level. The acquired knowledge is called tacit knowledge.

So another challenge with the 5-step process is that you can’t just take the 5-step process laid out here and start having massive results in a field you have little to no experience.

Because on top of applying the structured 5-steps, a lot of the value created by the approach lies in knowing how to actually apply the 5-steps in your context. The more you practice the 5-steps for the goals you have, the better you will get at the steps over time.

How to Actually Remember to Apply the 5-Step Algorithm

The biggest challenge I faced when I first learned about the algorithm, was to remember to use it day to day.

The root cause of that problem seems to be that I just hadn’t spent enough time reviewing and learning the process.

What is the answer to this problem (based mostly on science)?

  1. Overlearning: A 1992 meta-analysis suggested that overlearning does significantly affect recall over time.
  2. Teach someone else one-to-one. Seems to work by retrieval, as a recent study found.
  3. Make a mind map about this. Seems to help with recall (although not better than other methods, but maybe more fun?)
  4. Create a system to use this once a day or once a week for a few months.

Those actions will force you to truly understand it and remember it on a much deeper level.

Bonus: Worksheet for You

Here is a Google Sheet you can use to get started with the 5-step process

So what are your goals!??

  • What is most urgent in your life or career?
  • What do the people around you need?
  • What does the world need you to do?

Pick a goal and try it out right now using the worksheet!


If you’ve read so far, my goal is that you actually start implementing this stuff and my second goal is that you send me some claps, so that others can benefit as well!

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Flavio Rump is a hippie entrepreneur and investor. He shares decision-making models from the world’s best decision makers. You can read his articles, watch his YouTube Videos or join his free newsletter to learn how to make better decisions.