Ray Dalio’s Principles — Part I
A while ago, I asked all of you to check out Ray Dalio’s book ‘Principles.’ The book offers hundreds of practical lessons built around his core concepts such as thoughtful disagreement, meritocratic decision making, believability, radical truthfulness, and radical transparency. Overall, the book presents a straightforward approach to decision-making that Dalio learned over the course of his life and work. There is also a video mini-series that does a good job at explaining some of these concepts. At first, it was hard for me to like this book because I believe weighing a group towards believability may drown out the diversity we may need to spark true creativity. Nevertheless, there are some sound principles that I did like in the book.
Here are some takeaways from part II of the book which focuses on life principles-
Be an Independent Thinker: Think for yourself about what is true. Then decide what to do and have the courage to do it. Because the quality of our decisions determines the quality of our lives, we inevitably make mistakes. It is crucial to learn by reflecting on our mistakes to create principles to help us not make the same mistakes in the future.
Embrace Reality: Once we learn to love the process of learning from mistakes, it will help understand reality as truth is the essential foundation for producing good outcomes. According to Dalio, it is crucial to work with reality as it is and not as it should be. He calls this hyper-realism. Having big dreams, embracing reality, and lots of determination brings successful life.
The Five-step Process for Success: Evolution is about adapting. The more capable you become, the more you can take on more significant challenges.
- Step 1: Know your goals and run after them
- Step 2: Encounter the problems that get in your way.
- Step 3: Diagnose these problems to arrive at their causes. Don’t jump to solutions. Reflect on symptoms vs. disease
- Step 4: Eliminate the problems by designing a way to get around them
- Step 5: Execute those designs
Do these steps over and over as if they are the laws of nature.
Ego and Blindspots: Ego and blind spots are the two most significant barriers to success. Ego blocks us from knowing our weaknesses and makes us believe our own opinions without proper stress testing. This causes us to make inferior decisions and to learn less. Blind spots cause us to think we can see more than what we actually can see. The antidote for both is radical open-mindedness.
Be Radically Open-minded: Learning what’s true is more important than being right. But the key is to find insightful people and independent thinkers who think differently from you but at the same time have the ability to disagree thoughtfully. Only when we let go of our fear of being wrong, will we be able to take on the most significant challenges in our life.
People are Wired Differently: All of us are born with attributes that can both help us and hurt us. Understanding how we are wired can give us tremendous power. So, it always begins with managing oneself and our mind. This is very difficult because there is always a constant battle between our conscious mind and our subconscious mind. Reconciling our thoughts and feelings is the most important task here. Only after we manage ourselves, can we orchestrate others to get what we want.
Making Effective Decisions: The biggest threat to effective decision making is harmful emotions. The antidote is to use data, logic and reason to synthesize and simplify the problems before making decisions. Over time, create principles based on what worked and what didn’t. Reaching this phase is not easy as we have to practice all the things I mentioned above.
To summarize, we all struggle with different things at different times, but the most successful people continue progressing towards their goals without letting emotions getting in the way. They do this because they train their mind continuously and have the highest emotional fitness to successfully invoke different parts of the brain to make the best decisions.
Here are a few things I thought were worth sharing this week:
Great story on what happened at GE. Capital allocation, resource allocation, culture, and strategy are all interrelated and can show how an iconic company like GE can fail even if you get one of these things wrong.
The point at which a company’s growth hits the shoulder of the S-curve is important to anticipate for better strategic planning. Eugene Wei uses Amazon, Twitter & Snapchat as examples to explain this useful concept. Please note that this is a very long read and can easily be a short book.
My article on meetings from last week in case you missed it.
