Principles: Life and Work by Ray Dalio

Introduction

Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life. They can be applied again and again in similar situations to help you achieve your goals.

To be principled means to consistently operate with principles that can be clearly explained. Unfortunately, most people can’t do that. And it’s very rare for people to write their principles down and share them. That is a shame.

you, like me, probably don’t know everything you need to know and would be wise to embrace that fact. If you can think for yourself while being open-minded in a clearheaded way to find out what is best for you to do, and if you can summon up the courage to do it, you will make the most of your life.

I believe that the key to success lies in knowing how to both strive for a lot and fail well. By failing well, I mean being able to experience painful failures that provide big learnings without failing badly enough to get knocked out of the game.

Experience taught me how invaluable it is to reflect on and write down my decision-making criteria whenever I made a decision, so I got in the habit of doing that.

The most important thing is that you develop your own principles and ideally write them down, especially if you are working with others.

Part I: Where I’m Coming From

Time is like a river that carries us forward into encounters with reality that require us to make decisions. We can’t stop our movement down this river and we can’t avoid those encounters. We can only approach them in the best possible way.

Over the course of our lives, we make millions and millions of decisions that are essentially bets, some large and some small. It pays to think about how we make them because they are what ultimately determine the quality of our lives.

Meditation has benefited me hugely throughout my life because it produces a calm open-mindedness that allows me to think more clearly and creatively.

The lesson? When everybody thinks the same thing—such as what a sure bet the Nifty 50 is—it is almost certainly reflected in the price, and betting on it is probably going to be a mistake. I also learned that for every action (such as easy money and credit) there is a consequence (in this case, higher inflation) roughly proportionate to that action, which causes an approximately equal and opposite reaction (tightening of money and credit) and market reversals.

I was having a great time partying with friends from HBS and dating a lot. My roommate was dating a Cuban woman and he set me up on a blind date with one of her friends, an exotic woman from Spain named Barbara who could barely speak English. This wasn’t a problem, because we communicated in different ways. She thrilled me for nearly two years before we moved in together, got married, had four sons, and shared an amazing life together. She still thrills me but is too private a person for me to say more about her.

Much as I loved the job and the people I worked with, I didn’t fit into the Shearson organization. I was too wild. For example, as a joke that now seems pretty stupid, I hired a stripper to drop her cloak while I was lecturing at a whiteboard at the California Grain & Feed Association’s annual convention. I also punched my boss in the face. Not surprisingly, I was fired. But the brokers, their clients, and even the ones who fired me liked me and wanted to keep getting my advice. Even better, they were willing to pay me for it, so in 1975 I started Bridgewater Associates.

My business has always been a way to get me into exotic places and allow me to meet interesting people. If I make any money from those trips, that’s just icing on the cake.

Seek out the smartest people who disagreed with me so I could try to understand their reasoning. 2. Know when not to have an opinion. 3. Develop, test, and systemize timeless and universal principles. 4. Balance risks in ways that keep the big upside while reducing the downside.

Steve Jobs said, “It was awful-tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don’t lose faith. I’m convinced that the only thing that kept me going was that I loved what I did.”

I believe one of the most valuable things you can do to improve your decision making is to think through your principles for making decisions, write them out in both words and computer algorithms, back-test them if possible, and use them on a real-time basis to run in parallel with your brain’s decision making.

I learned that if you work hard and creatively, you can have just about anything you want, but not everything you want. Maturity is the ability to reject good alternatives in order to pursue even better ones.

I asked Paul, who was dressed in the traditional gown they’d given him, how he liked it and he said, “What could be better than to sit on the floor, dressed in pajamas, eating with my hands, with nice people?” We all laughed.

wise people stick with sound fundamentals through the ups and downs, while flighty people react emotionally to how things feel, jumping into things when they’re hot and abandoning them when they’re not.

One has many more supposed friends when one is up than when one is down, because most people like to be with winners and shun losers. True friends are the opposite.

Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside.

Good principles are effective ways of dealing with reality. To learn my own, I spend a lot of time reflecting. So rather than just giving you my principles, I will share the reflections behind them.

Look to the patterns of those things that affect you in order to understand the cause-effect relationships that drive them and to learn principles for dealing with them effectively.

Part II: Life Principles

Embrace Reality and Deal with It

1.1 Be a hyperrealist.

Dreams + Reality + Determination = A Successful Life.

People who achieve success and drive progress deeply understand the cause-effect relationships that govern reality and have principles for using them to get what they want. The converse is also true: Idealists who are not well grounded in reality create problems, not progress.

1.2 Truth—or, more precisely, an accurate understanding of reality—is the essential foundation for any good outcome.

1.3 Be radically open-minded and radically transparent.

a. Radical open-mindedness and radical transparency are invaluable for rapid learning and effective change.

Being radically transparent and radically open-minded accelerates this learning process. It can also be difficult because being radically transparent rather than more guarded exposes one to criticism. It’s natural to fear that. Yet if you don’t put yourself out there with your radical transparency, you won’t learn.

b. Don’t let fears of what others think of you stand in your way. You must be willing to do things in the unique ways you think are best—and to open-mindedly reflect on the feedback that comes inevitably as a result of being that way. Learning to be radically transparent is like learning to speak in public: While it’s initially awkward, the more you do it, the more comfortable you will be with it.

I have experienced the positive effects of radical transparency for so long that it’s now uncomfortable for me not to be that way.

c. Embracing radical truth and radical transparency will bring more meaningful work and more meaningful relationships.

1.4 Look to nature to learn how reality works.

a. Don’t get hung up on your views of how things “should” be because you will miss out on learning how they really are.

b. To be “good” something must operate consistently with the laws of reality and contribute to the evolution of the whole; that is what is most rewarded.

c. Evolution is the single greatest force in the universe; it is the only thing that is permanent and it drives everything.

d. Evolve or die. This evolutionary cycle is not just for people but for countries, companies, economies—for everything. And it is naturally self-correcting as a whole, though not necessarily for its parts.

The key is to fail, learn, and improve quickly. If you’re constantly learning and improving, your evolutionary process will look like the one that’s ascending. Do it poorly and it will look like what you see on the left, or worse.

1.5 Evolving is life’s greatest accomplishment and its greatest reward.

a. The individual’s incentives must be aligned with the group’s goals.To

b. Reality is optimizing for the whole—not for you. Contribute to the whole and you will likely be rewarded. Natural selection leads to better qualities being retained and passed along (e.g., in better genes, better abilities to nurture others, better products, etc.). The result is a constant cycle of improvement for the whole.

c. Adaptation through rapid trial and error is invaluable.

d. Realize that you are simultaneously everything and nothing—and decide what you want to be.

e. What you will be will depend on the perspective you have. Where you go in life will depend on how you see things and who and what you feel connected to (your family, your community, your country, mankind, the whole ecosystem, everything). You will have to decide to what extent you will put the interests of others above your own, and which others you will choose to do so for. That’s because you will regularly encounter situations that will force you to make such choices. While such decisions might seem too erudite for your taste, you will make them either consciously or subliminally, and they will be very important.

1.6 Understand nature’s practical lessons.

a. Maximize your evolution.

b. Remember “no pain, no gain.”

While we don’t like pain, everything that nature made has a purpose, so nature gave us pain for a purpose. So what is its purpose? It alerts us and helps direct us.

c. It is a fundamental law of nature that in order to gain strength one has to push one’s limits, which is painful. As Carl Jung put it, “Man needs difficulties. They are necessary for health.” Yet most people instinctually avoid pain.

1.7 Pain + Reflection = Progress.

There is no avoiding pain, especially if you’re going after ambitious goals. Believe it or not, you are lucky to feel that kind of pain if you approach it correctly, because it is a signal that you need to find solutions so you can progress. If you can develop a reflexive reaction to psychic pain that causes you to reflect on it rather than avoid it, it will lead to your rapid learning/ evolving. 22 After seeing how much more effective it is to face the painful realities that are caused by your problems, mistakes, and weaknesses, I believe you won’t want to operate any other way. It’s just a matter of getting in the habit of doing it.

The challenges you face will test and strengthen you. If you’re not failing, you’re not pushing your limits, and if you’re not pushing your limits, you’re not maximizing your potential. Though this process of pushing your limits, of sometimes failing and sometimes breaking through—and deriving benefits from both your failures and your successes—is not for everyone, if it is for you, it can be so thrilling that it becomes addictive. Life will inevitably bring you such moments, and it’ll be up to you to decide whether you want to go back for more.

What once seemed impossibly complex becomes simple.

a. Go to the pain rather than avoid it. If you don’t let up on yourself and instead become comfortable always operating with some level of pain, you will evolve at a faster pace. That’s just the way it is.

Identifying, accepting, and learning how to deal with your weaknesses, • Preferring that the people around you be honest with you rather than keep their negative thoughts about you to themselves, and • Being yourself rather than having to pretend to be strong where you are weak.

b. Embrace tough love.

Of course most people would prefer not to have weaknesses. Our upbringings and our experiences in the world have conditioned us to be embarrassed by our weaknesses and hide them. But people are happiest when they can be themselves. If you can be open with your weaknesses it will make you freer and will help you deal with them better. I urge you to not be embarrassed about your problems, recognizing that everyone has them. Bringing them to the surface will help you break your bad habits and develop good ones, and you will acquire real strengths and justifiable optimism.

1.8 Weigh second-and third-order consequences.

people who choose what they really want, and avoid the temptations and get over the pains that drive them away from what they really want, are much more likely to have successful lives.

1.9 Own your outcomes.

Life doesn’t give a damn about what you like. It’s up to you to connect what you want with what you need to do to get it and then find the courage to carry it through.

1.10 Look at the machine from the higher level.

a. Think of yourself as a machine operating within a machine and know that you have the ability to alter your machines to produce better outcomes.

b. By comparing your outcomes with your goals, you can determine how to modify your machine.

c. Distinguish between you as the designer of your machine and you as a worker with your machine.

To be successful, the “designer/ manager you” has to be objective about what the “worker you” is really like, not believing in him more than he deserves, or putting him in jobs he shouldn’t be in. Instead of having this strategic perspective, most people operate emotionally and in the moment; their lives are a series of undirected emotional experiences, going from one thing to the next. If you want to look back on your life and feel you’ve achieved what you wanted to, you can’t operate that way.

d. The biggest mistake most people make is to not see themselves and others objectively, which leads them to bump into their own and others’ weaknesses again and again.

e. Successful people are those who can go above themselves to see things objectively and manage those things to shape change.

If you are disappointed because you can’t be the best person to do everything yourself, you are terribly naive. Nobody can do everything well.

Watching people struggle and having others watch you struggle can elicit all kinds of ego-driven emotions such as sympathy, pity, embarrassment, anger, or defensiveness. You need to get over all that and stop seeing struggling as something negative. Most of life’s greatest opportunities come out of moments of struggle; it’s up to you to make the most of these tests of creativity and character.

f. Asking others who are strong in areas where you are weak to help you is a great skill that you should develop no matter what, as it will help you develop guardrails that will prevent you from doing what you shouldn’t be doing. All successful people are good at this.

g. Because it is difficult to see oneself objectively, you need to rely on the input of others and the whole body of evidence.

h. If you are open-minded enough and determined, you can get virtually anything you want.

  1. Don’t confuse what you wish were true with what is really true.

  2. Don’t worry about looking good—worry instead about achieving your goals.

  3. Don’t overweight first-order consequences relative to second-and third-order ones.

  4. Don’t let pain stand in the way of progress.

  5. Don’t blame bad outcomes on anyone but yourself.

These are hard. Especially #2.

2 Use the 5-Step Process to Get What You Want Out of Life

It seems to me that the personal evolutionary process—the looping I described in the last chapter—takes place in five distinct steps. If you can do those five things well, you will almost certainly be successful. Here they are in a nutshell:

  1. Have clear goals.

  2. Identify and don’t tolerate the problems that stand in the way of your achieving those goals.

  3. Accurately diagnose the problems to get at their root causes.

  4. Design plans that will get you around them.

  5. Do what’s necessary to push these designs through to results.

First you have to pick what you are going after—your goals. Your choice of goals will determine your direction. As you move toward them, you will encounter problems. Some of those problems will bring you up against your own weaknesses. How you react to the pain that causes is up to you. If you want to reach your goals, you must be calm and analytical so that you can accurately diagnose your problems, design a plan that will get you around them, and do what’s necessary to push through to results. Then you will look at the new results you achieve and go through the process again. To evolve quickly, you will have to do this fast and continuously, setting your goals successively higher.

To help you stay centered and effective, pretend that your life is a martial art or a game, the object of which is to get around a challenge and reach a goal. Once you accept its rules, you’ll get used to the discomfort that comes with the constant frustration. You will never handle everything perfectly: Mistakes are inevitable and it’s important to recognize and accept this fact of life. The good news is that every mistake you make can teach you something, so there’s no end to learning. You’ll soon realize that excuses like “that’s not easy” or “it doesn’t seem fair” or even “I can’t do that” are of no value and that it pays to push through.

2.1 Have clear goals. a. Prioritize: While you can have virtually anything you want, you can’t have everything you want.

b. Don’t confuse goals with desires.

c. Decide what you really want in life by reconciling your goals and your desires.

d. Don’t mistake the trappings of success for success itself.

e. Never rule out a goal because you think it’s unattainable.

f. Remember that great expectations create great capabilities.

g. Almost nothing can stop you from succeeding if you have a) flexibility and b) self-accountability. Flexibility is what allows you to accept what reality (or knowledgeable people) teaches you; self-accountability is essential because if you really believe that failing to achieve a goal is your personal failure, you will see your failing to achieve it as indicative that you haven’t been creative or flexible or determined enough to do what it takes. And you will be that much more motivated to find the way.

h. Knowing how to deal well with your setbacks is as important as knowing how to move forward.

2.2 Identify and don’t tolerate problems. a. View painful problems as potential improvements that are screaming at you.

b. Don’t avoid confronting problems because they are rooted in harsh realities that are unpleasant to look at.

c. Be specific in identifying your problems.

d. Don’t mistake a cause of a problem with the real problem.

e. Distinguish big problems from small ones.

f. Once you identify a problem, don’t tolerate it. Tolerating a problem has the same consequences as failing to identify it. Whether you tolerate it because you believe it cannot be solved, because you don’t care enough to solve it, or because you can’t muster enough of whatever it takes to solve it, if you don’t have the will to succeed, then your situation is hopeless. You need to develop a fierce intolerance of badness of any kind, regardless of its severity.

2.3 Diagnose problems to get at their root causes.

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

b. Distinguish proximate causes from root causes.

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

People almost always find it difficult to identify and accept their own mistakes and weaknesses. Sometimes it’s because they’re blind to them, but more often it’s because their egos get in the way. Most likely your associates are equally reluctant to point out your mistakes, because they don’t want to hurt you. You all need to get over this. More than anything else, what differentiates people who live up to their potential from those who don’t is their willingness to look at themselves and others objectively and understand the root causes standing in their way.

2.4 Design a plan.

a. Go back before you go forward.

b. Think about your problem as a set of outcomes produced by a machine.

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

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

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

f. Recognize that it doesn’t take a lot of time to design a good plan.

2.5 Push through to completion.

a. Great planners who don’t execute their plans go nowhere.

b. Good work habits are vastly underrated.

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

When you complete one step, you will have acquired information that will most likely lead you to modify the other steps. When you’ve completed all five, you’ll start again with a new goal. If the process is working, your goals will change more slowly than your designs, which will change more slowly than your tasks. One last important point: You will need to synthesize and shape well. The first three steps—setting goals, identifying problems, and then diagnosing them—are synthesizing (by which I mean knowing where you want to go and what’s really going on). Designing solutions and making sure that the designs are implemented are shaping.

2.6 Remember that weaknesses don’t matter if you find solutions.

a. Look at the patterns of your mistakes and identify at which step in the 5-Step Process you typically fail.

b. Everyone has at least one big thing that stands in the way of their success; find yours and deal with it.

2.7 Understand your own and others’ mental maps and humility.

3 Be Radically Open-Minded

3.1 Recognize your two barriers.

a. Understand your ego barrier.

b. Your two “yous” fight to control you.

c. Understand your blind spot barrier.

Color-blind people eventually find out that they are color-blind, whereas most people never see or understand the ways in which their ways of thinking make them blind. To make it even harder, we don’t like to see ourselves or others as having blind spots, even though we all have them. When you point out someone’s psychological weakness, it’s generally about as well received as if you pointed out a physical weakness.

3.2 Practice radical open-mindedness.

a. Sincerely believe that you might not know the best possible path and recognize that your ability to deal well with “not knowing”

b. Recognize that decision making is a two-step process: First take in all the relevant information, then decide.

c. Don’t worry about looking good; worry about achieving your goal.

Look bad, make mistakes. I like this a lot.

People interested in making the best possible decisions are rarely confident that they have the best answers. They recognize that they have weaknesses and blind spots, and they always seek to learn more so that they can get around them.

d. Realize that you can’t put out without taking in.

e. Recognize that to gain the perspective that comes from seeing things through another’s eyes, you must suspend judgment for a time—only by empathizing can you properly evaluate another point of view.

f. Remember that you’re looking for the best answer, not simply the best answer that you can come up with yourself.

g. Be clear on whether you are arguing or seeking to understand, and think about which is most appropriate based on your and others’ believability.

3.3 Appreciate the art of thoughtful disagreement.

3.4 Triangulate your view with believable people who are willing to disagree.

a. Plan for the worst-case scenario to make it as good as possible.

3.5 Recognize the signs of closed-mindedness and open-mindedness that you should watch out for.

1. Closed-minded people don’t want their ideas challenged.

Open-minded people are more curious about why there is disagreement.

2. Closed-minded people are more likely to make statements than ask questions.

Open-minded people genuinely believe they could be wrong; the questions that they ask are genuine.

3. Closed-minded people focus much more on being understood than on understanding others.

Open-minded people always feel compelled to see things through others’ eyes.

4. Closed-minded people say things like “I could be wrong . . . but here’s my opinion.”

Open-minded people know when to make statements and when to ask questions.

5. Closed-minded people block others from speaking.

Open-minded people are always more interested in listening than in speaking; they encourage others to voice their views.

6. Closed-minded people have trouble holding two thoughts simultaneously in their minds.

Open-minded people can take in the thoughts of others without losing their ability to think well—they can hold two or more conflicting concepts in their mind and go back and forth between them to assess their relative merits.

7. Closed-minded people lack a deep sense of humility.

Open-minded people approach everything with a deep-seated fear that they may be wrong.

3.6 Understand how you can become radically open-minded.

a. Regularly use pain as your guide toward quality reflection.

b. Make being open-minded a habit.

c. Get to know your blind spots.

d. If a number of different believable people say you are doing something wrong and you are the only one who doesn’t see it that way, assume that you are probably biased.

e. Meditate.

f. Be evidence-based and encourage others to be the same.

g. Do everything in your power to help others also be open-minded.

h. Use evidence-based decision-making tools.

i. Know when it’s best to stop fighting and have faith in your decision-making process.

4 Understand That People Are Wired Very Differently

4.1 Understand the power that comes from knowing how you and others are wired.

Many highly productive and creative people have suffered from bipolar disorder, among them Ernest Hemingway, Beethoven, Tchaikovsky, Vincent van Gogh, Jackson Pollock, Virginia Woolf, Winston Churchill, and the psychologist Kay Redfield Jamison (who has written frankly about her own experiences with the disease in her book An Unquiet Mind). I learned that we are all different because of the different ways that the machine that is our brain works—and that nearly one in five Americans are clinically mentally ill in one way or another.

a. We are born with attributes that can both help us and hurt us, depending on their application.

Your brain is built of cells called neurons and glia—hundreds of billions of them. Each one of them is as complex as a city. . . . The cells [neurons] are connected in a network of such staggering complexity that it bankrupts human language and necessitates new strains of mathematics. A typical neuron makes about ten thousand connections to neighboring neurons. Given billions of neurons, this means that there are as many connections in a single cubic centimeter of brain tissue as there are stars in the Milky Way galaxy.

4.2 Meaningful work and meaningful relationships aren’t just nice things we chose for ourselves—they are genetically programmed into us.

4.3 Understand the great brain battles and how to control them to get what “you” want.

a. Realize that the conscious mind is in a battle with the subconscious mind.

b. Know that the most constant struggle is between feeling and thinking.

c. Reconcile your feelings and your thinking.

d. Choose your habits well.

e. Train your “lower-level you” with kindness and persistence to build the right habits.

f. Understand the differences between right-brained and left-brained thinking.

1. The left hemisphere reasons sequentially, analyzes details, and excels at linear analysis. “Left-brained” or “linear” thinkers who are analytically strong are often called “bright.” 2. The right hemisphere thinks across categories, recognizes themes, and synthesizes the big picture. “Right-brained” or “lateral” thinkers with more street smarts are often called “smart.”

g. Understand how much the brain can and cannot change.

4.4 Find out what you and others are like.

a. Introversion vs. extroversion.

b. Intuiting vs. sensing.

c. Thinking vs. feeling.

d. Planning vs. perceiving.

e. Creators vs. refiners vs. advancers vs. executors vs. flexors.

  • Creators generate new ideas and original concepts. They prefer unstructured and abstract activities and thrive on innovation and unconventional practices.

  • Advancers communicate these new ideas and carry them forward. They relish feelings and relationships and manage the human factors. They are excellent at generating enthusiasm for work.

  • Refiners challenge ideas. They analyze projects for flaws, then refine them with a focus on objectivity and analysis. They love facts and theories and working with a systematic approach.

  • Executors can also be thought of as Implementers. They ensure that important activities are carried out and goals accomplished; they are focused on details and the bottom line.

  • Flexors are a combination of all four types. They can adapt their styles to fit certain needs and are able to look at a problem from a variety of perspectives.

f. Focusing on tasks vs. focusing on goals.

g. Workplace Personality Inventory.

h. Shapers are people who can go from visualization to actualization.

If you’ve learned anything from this book I hope it’s that everyone has strengths and weaknesses, and everyone has an important role to play in life. Nature made everything and everyone for a purpose. The courage that’s needed the most isn’t the kind that drives you to prevail over others, but the kind that allows you to be true to your truest self, no matter what other people want you to be.

4.5 Getting the right people in the right roles in support of your goal is the key to succeeding at whatever you choose to accomplish.

a. Manage yourself and orchestrate others to get what you want.

5 Learn How to Make Decisions Effectively

5.1 Recognize that 1) the biggest threat to good decision making is harmful emotions, and 2) decision making is a two-step process (first learning and then deciding).

5.2 Synthesize the situation at hand.

a. One of the most important decisions you can make is who you ask questions of.

b. Don’t believe everything you hear.

c. Everything looks bigger up close. In all aspects of life, what’s happening today seems like a much bigger deal than it will appear in retrospect. That’s why it helps to step back to gain perspective and sometimes defer a decision until some time passes.

d. New is overvalued relative to great.

In my opinion, it is smarter to choose the great over the new.

e. Don’t oversqueeze dots.

5.3 Synthesize the situation through time.

a. Keep in mind both the rates of change and the levels of things, and the relationships between them.

Everything important in your life needs to be on a trajectory to be above the bar and headed toward excellent at an appropriate pace.

b. Be imprecise.

c. Remember the 80/ 20 Rule and know what the key 20 percent is.

d. Be an imperfectionist. Perfectionists spend too much time on little differences at the margins at the expense of the important things. There are typically just five to ten important factors to consider when making a decision. It is important to understand these really well, though the marginal gains of studying even the important things past a certain point are limited.

5.4 Navigate levels effectively.

a. Use the terms “above the line” and “below the line” to establish which level a conversation is on.

b. Remember that decisions need to be made at the appropriate level, but they should also be consistent across levels.

1. Remember that multiple levels exist for all subjects. 2. Be aware on what level you’re examining a given subject. 3. Consciously navigate levels rather than see subjects as undifferentiated piles of facts that can be browsed randomly. 4. Diagram the flow of your thought processes using the outline template shown on the previous page.

5.5 Logic, reason, and common sense are your best tools for synthesizing reality and understanding what to do about it.

5.6 Make your decisions as expected value calculations.

a. Raising the probability of being right is valuable no matter what your probability of being right already is.

b. Knowing when not to bet is as important as knowing what bets are probably worth making.

c. The best choices are the ones that have more pros than cons, not those that don’t have any cons at all.

5.7 Prioritize by weighing the value of additional information against the cost of not deciding.

a. All of your “must-dos” must be above the bar before you do your “like-to-dos.” Separate your “must-dos” from your “like-to-dos” and don’t mistakenly slip any “like-to-dos” onto the first list.

b. Chances are you won’t have time to deal with the unimportant things, which is better than not having time to deal with the important things. I often hear people say, “Wouldn’t it be good to do this or that?” It’s likely they are being distracted from far more important things that need to be done well.

c. Don’t mistake possibilities for probabilities.

5.8 Simplify!

“Any damn fool can make it complex. It takes a genius to make it simple.”

5.9 Use principles.

1. Slow down your thinking so you can note the criteria you are using to make your decision. 2. Write the criteria down as a principle. 3. Think about those criteria when you have an outcome to assess, and refine them before the next “one of those” comes along.

5.10 Believability weight your decision making

5.11 Convert your principles into algorithms and have the computer make decisions alongside you.

Software developers, mathematicians, and game-theory modelers aren’t running away with all the rewards; it is the people who have the most common sense, imagination, and determination.

5.12 Be cautious about trusting AI without having deep understanding.

In order to have the best life possible, you have to: 1) know what the best decisions are and 2) have the courage to make them.

Part III: Work Principles

Meaningful relationships and meaningful work are mutually reinforcing, especially when supported by radical truth and radical transparency.

we put into place a policy that we would pay for half of practically any activities that people want to do together up to a set cap (we now support more than a hundred clubs and athletic and common-interest groups); we paid for food and drink for those who hosted potluck dinners at their houses; and we bought a house that employees can use for events and celebrations. We have Christmas, Halloween, Fourth of July, and other parties that often include family members. Eventually, others who valued this kind of relationship took responsibility for it and it spread to become a cultural norm so that I could just sit back and watch beauty happen.

it’s how I choose to live out my values around excellence, meaningful work, and meaningful relationships.

we expect people to behave in a manner that is consistent with how people in high-quality, long-term relationships behave—that is, with a high level of mutual consideration for each other’s interests and a clear understanding of who is responsible for what. On the surface, that sounds nice and straightforward, but what exactly does that mean? It is important to be clear. Take for example a case in which an employee’s family member is diagnosed with a severe illness, or an employee dies tragically, leaving his or her family in a precarious situation. These things happen far more often than any of us would like them to, and there are of course customs and laws that define the basic accommodations and benefits (such as personal vacation days, short-and long-term disability insurance, and life insurance) that are required. But how do you determine what kinds of assistance should be provided beyond that? What are the principles for deciding how to handle each specific situation fairly—which may not always mean doing the same thing in every case? None of this is easy, but the following principles provide some guidance.

Make sure people give more consideration to others than they demand for themselves. This is a requirement.

It is more inconsiderate to prevent people from exercising their rights because you are offended by them than it is for them to do whatever it is that offends you. That said, it is inconsiderate not to weigh the impact of one’s actions on others, so we expect people to use sensible judgment in not doing obviously offensive things. There are some behaviors that are clearly offensive to many people, and it is appropriate to specify and prohibit them in clear policies. The list of those specifics, and the policies pertaining to them, arise from specific cases. Applying this principle to them is done in much the same way that case law is created.

Fairness and generosity are different things. If you bought two birthday gifts for two of your closest friends, and one cost more than the other, what would you say if the friend who got the cheaper gift accused you of being unfair? Probably something like, “I didn’t have to get you any gift, so stop complaining.” At Bridgewater, we are generous with people (and I am personally generous), but we feel no obligation to be measured and equal in our generosity.

If you want to have a community of people who have both high-quality, long-term relationships and a high sense of personal responsibility, you can’t allow a sense of entitlement to creep in.

Remember that most people will pretend to operate in your interest while operating in their own.

Treasure honorable people who are capable and will treat you well even when you’re not looking.

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