Principles by Ray Dalio
What follows are three distinct parts that can be read either independently or as a connected whole. Part 1 is about the purpose and importance of having principles in general, having nothing to do with mine. Part 2 explains my most fundamental life principles that apply to everything I do. Part 3, explains my management principles as they are being lived out at Bridgewater.
Since my management principles are simply my most fundamental life principles applied to management, reading Part 2 will help you to better understand Part 3, but it’s not required—you can go directly to Part 3 to see what my management principles are and how Bridgewater has been run.
One day I’d like to write a Part 4 on my investment principles. If you are looking to get the most bang for your buck (i.e., understanding for the effort), I suggest that you read Parts 1 and 2, and the beginning of Part 3 (through the Summary and Table of Principles) which will give you nearly the whole picture. It’s only about 55 pages of a normal size book.
Above all else, I want you to think for yourself—to decide 1) what you want, 2) what is true and 3) what to do about it. I want you to do that in a clear-headed thoughtful way, so that you get what you want.
I wrote this book to help you do that. I am going to ask only two things of you—1) that you be open-minded and 2) that you honestly answer some questions about what you want, what is true and what you want to do about it. If you do these things, I believe that you will get a lot out of this book. If you can’t do these things, you should reflect on why that is, because you probably have discovered one of your greatest impediments to getting what you want out of life.
Part 1: The Importance of Principles ...... 原则的重要性
Part 2: My Most Fundamental Life Principles ...... 我基本的生活原则
Part 3: My Management Principles ...... 我的管理原则
© 2011 Ray Dalio
Principles are concepts that can be applied over and over again in similar circumstances as distinct from narrow answers to specific questions. Every game has principles that successful players master to achieve winning results. So does life. Principles are ways of successfully dealing with the laws of nature or the laws of life. Those who understand more of them and understand them well know how to interact with the world more effectively than those who know fewer of them or know them less well.
Different principles apply to different aspects of life—e.g., there are “skiing principles” for skiing, “parenting principles” for parenting, “management principles” for managing, “investment principles” for investing, etc—and there are over-arching “life principles” that influence our approaches to all things. And, of course, different people subscribe to different principles that they believe work best.
I am confident that whatever success Bridgewater and I have had has resulted from our operating by certain principles. Creating a great culture, finding the right people, managing them to do great things and solving problems creatively and systematically are challenges faced by all organizations.
What differentiates them is how they approach these challenges. The principles laid out in the pages that follow convey our unique ways of doing these things, which are the reasons for our unique results. Bridgewater’s success has resulted from talented people operating by the principles set out here, and it will continue if these or other talented people continue to operate by them. Like getting fit, virtually anyone can do it if they are willing to do what it takes.
What is written here is just my understanding of what it takes: my most fundamental life principles, my approach to getting what I want, and my “management principles,” which are based on those foundations. Taken together, these principles are meant to paint a picture of a process for the systematic pursuit of truth and excellence and for the rewards that accompany this pursuit. I put them in writing for people to consider in order to help Bridgewater and the people I care about most.
Until recently, I didn’t write out these principles because I felt that it was presumptuous for me to tell others what would work best for them. But over time, I saw the people who I cared about most struggling with problems and wanted to help them; I also found that their problems were almost always the result of violating one or more of these principles, and that their problems could be solved by applying these principles. So I began writing down the types of problems and the broken principles that caused them. When I began, I didn’t know how many principles I would end up with but, through this process, I discovered that about 200 principles pretty much cover all the problems.1 I’m sure that I will come up with more as I learn more.
When I say that these are my principles, I don’t mean that in a possessive or egotistical way. I just mean that they are explanations of what I personally believe. I believe that the people I work with and care about must think for themselves. I set these principles out and explained the logic behind them so that we can together explore their merits and stress test them. While I am confident that these principles work well because I have thought hard about them, they have worked well for me for many years, and they have stood up to the scrutiny of the hundreds of smart, skeptical people, I also believe that nothing is certain. I believe that the best we can hope for is highly probable. By putting them out there and stress testing them, the probabilities of their being right will increase.
I also believe that those principles that are most valuable to each of us come from our own encounters with reality and our reflections on these encounters – not from being taught and simply accepting someone else’s principles. So, I put these out there for you to reflect on when you are encountering your realities, and not for you to blindly follow.
What I hope for most is that you and others will carefully consider them and try operating by them as part of your process for discovering what works best for you. Through this exploration, and with their increased usage, not only will they be understood, but they will evolve from “Ray’s principles” to “our principles,” and Ray will fade out of the picture in much the same way as memories of one’s ski or tennis instructor fade and people only pay attention to what works.2 So, when digesting each principle, please...
...ask yourself: “Is it true?”
Before I discuss the management principles themselves, it’s important for me to articulate my own most fundamental life principles because my management principles are an extension of them.
In Part 1, I explain what I mean by principles, why I believe they are important, and how they are essential for getting what you want out of life.
Part 2 explains my most fundamental life principles. I describe what I believe are the best ways of interacting with reality to learn what it’s like, and how to most effectively deal with it to get what you want. I also discuss what I believe are the most common traps that people fall into that prevent them from getting what they want, and how people’s lives can be radically better by avoiding them. I wrote this so you can better understand why my other principles are what they are, though you don’t need to read this part to understand the others.
Part 3 is about my management principles. As I have run Bridgewater for more than 35 years, it explains Bridgewater’s approach up till now. It begins at the big-picture, conceptual level, with an explanation of why I believe that any company’s results are primarily determined by its people and its culture. It then drills down into what I believe are the important principles behind creating a great culture, hiring the right people, managing them to achieve excellence, solving problems systematically and making good decisions.
There are of course lots of other types of principles. For example, I hope to one day write about my investment principles. However, management principles are now what we need most, so here are the ones that I think make sense and have worked for me.
Part 1: The Importance of Principles原则的重要性
I believe that having principles that work is essential for getting what we want out of life. I also believe that to understand each other we have to understand each other’s principles.3 That is why I believe we need to talk about them.
We will begin by examining the following questions:
What are principles?
Why are principles important?
Where do principles come from?
Do you have principles that you live your life by? What are they? How well do you think they will work, and why?
Answer all questions with complete honesty, without worrying what I or others might think. That honesty will allow you to be comfortable living with your own principles, and to judge yourself by how consistently you operate by them. If you don’t have many well-thought-out principles, don’t worry. We will get there together, if we remain open-minded.
- What are principles?
Your values are what you consider important, literally what you “value.” Principles are what allow you to live a life consistent with those values. Principles connect your values to your actions; they are beacons that guide your actions, and help you successfully deal with the laws of reality. It is to your principles that you turn when you face hard choices.
- Why are principles important?
All successful people operate by principles that help them be successful. Without principles, you would be forced to react to circumstances that come at you without considering what you value most and how to make choices to get what you want. This would prevent you from making the most of your life. While operating without principles is bad for individuals, it is even worse for groups of individuals (such as companies) because it leads to people randomly bumping into each other without understanding their own values and how to behave in order to be consistent with those values.
- Where do principles come from?
Sometimes we forge our own principles and sometimes we accept others’ principles, or holistic packages of principles, such as religion and legal systems. While it isn’t necessarily a bad thing to use others’ principles—it’s difficult to come up with your own, and often much wisdom has gone into those already created—adopting pre-packaged principles without much thought exposes you to the risk of inconsistency with your true values. Holding incompatible principles can lead to conflict between values and actions—like the hypocrite who has claims to be of a religion yet behaves counter to its teachings. Your principles need to reflect values you really believe in.