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Principles - Notes

Ray Dalio founder of Bridgewater Associates sets out the principles on which he built the company and how he has used them to make decisions, build and sustain a culture he describes as a radically transparent idea meritocracy.

Initial part of the book is biographical and talks about Dalio’s career progression and the start of Bridgewater. Defining experience for him was his conviction in the 1980 recession that the economy would go into depression as he expected foreign countries to default their massive loans and crash the entire system. Mexico defaulted in 1982, but the Fed responded and prevented any collapse. Dalio was dead wrong and Bridgewater came v.close to bankruptcy. Led him to fundamentally reappraise his approach. He figure to be successful:

He would need to seek out the smartest people and understand their reasoning

Know when not to have an opinion

Develop test and systematize universal principles

Balance risks to keep the upside whilst reducing the downside.

Part II Life Principles

Embrace reality and deal with it

Be radically open minded and radically transparent – essential to learning, developing and evolving

Can see this same process of iterative improvement in evolution

Evolving is life’s greatest accomplishment and its greatest reward

Weigh second and third order consequences - the desirability of each can be different even contradictory. 1st order effect often tempting but gets in the way of the real end goal.

We all struggle to see ourselves objectively when faced with our own weaknesses. Tend to deny, justify or explain. Have to own them.

5 step process to get what you want out of life:

  1. Have clear goals
  2. Identify and don’t tolerate the problems that stand in the way of those goals
  3. Accurately diagnose problems to get at their root causes
  4. Do what is necessary to push designs through to results.
  5. Radical open mindedness – sees this concept as critical and the most important in the book as it is the key to getting past what holds us back.

2 biggest barriers for most of us achieving our goals:

ego and blind spots.

Typical ego response to our own weakness and failure is to protect with bull shit – criticism and failure often illicit an unconscious threat response.

In addition we have blind spots – particular habits of thought that stop us seeing things as they really are. In as sense no different to the way that colour blindness warps our view of colour. If you know your blind you can figure out ways to cope.

Objective is to get at the truth and give up the desire to be right or to ‘win’. Get comfortable with not knowing

Decision-making is a 2 step process. Take in all relevant information then decide.

Appreciate the art of thoughtful disagreement. V useful to triangulate your thinking with thoughtful people who are willing to disagree.

PAIN + REFLECTION = PROGRESS

The pain in feedback is the signal to pay attention! Embrace the pain and learn to get to the other side meaning:

 

Identify accept and learn how to deal with weakness

Be with honest people who tell you what you need to hear and don’t just bottle negative thoughts

Being yourself and not have to pretend your strong when your weak.

Embrace tough love. We are conditioned to be embarrassed of our weaknesses and to hide them but people are happiest when they can be themselves.

Weigh 1st and 2nd order effects. Eg 1st order effects of exercise are pain time needed etc. 2nd order better health, appearance etc are desirable. With food 1st order effect often temptation too much sugar fat etc 2nd order = poor diet

Own your choices and outcomes.

Distinguish proximate and root causes. Proximate causes are typical actions that lead to problems – verbs eg I missed the train because I did not get up on time. Root cause is deeper.

Truly solving problems means separating the symptom from the disease and getting to this root.

Everyone has weaknesses and they usually show up in the pattern of mistakes we make.

When someone disagrees with you your programmed to view this as an attack – you get angry. It would be more logical to be curious. To be effective you have to let go of the need to be right in order to find out what is true.

People interested in making the best decisions are rarely confident they have all the best answers.

Appreciate the art of thoughtful disagreement. Disagreement is not usually a threat but an opportunity for learning.

Recognize the value of differences in personality and therefore thinking and working preferences and styles.

Organizing this diversity is like conducting an orchestra – magnificent if done well, terrible if done badly.

If you really know what a person is like you will have a pretty good idea of what to expect from them. As humans we have a unique capacity to understand what others are like and how they are likely to behave.

We are caught between 2 competing evolutionary impulses – individual selection which drives selfish decision making and group selection and collaboration.

The most constant struggle is between thinking and feeling.

Habit is the most powerful tool in the brains toolbox – neurologically located in the basal ganglia at the base of the cerebellum.

Caltech Professor Roger Sperry won the Nobel prize for medicine for discovering the different aspects of thinking attributed to the left and right hemispheres of the brain. In a nutshell:

 

  • The left hemisphere reasons sequentially analyses detail and excels at linear analysis. Analytical
  • The right hemisphere thinks across categories recognizes themes and synthesizes the big picture. Creative

Part III Work Principles

Great cultures bring problems and disagreements to the surface and solve them. They love developing and building things that have not been done before.

Meaningful work = excited to get your head into the problems and challenges.

The more caring we are of each other the tougher we can be with each other.

‘Our overriding objective is excellence, or more precisely constant improvement.’

Stress on working out peoples believability given their track record and experience. Eg a Dr is more believable talking about medicine than someone who is not.

Radical transparency / radical truth is easily appreciated intellectually the challenge is emotional because have to separate our egos.

‘In most companies people are doing two jobs: their actual job and the job of managing others’ impressions of how they’re doing their job.’

‘It is a fundamental law of nature that you get stronger only by doing difficult things.’