Tag Archives: Ray Dalio

Ray Dalio is one of the most successful investors in the world. Tony Robbins and Tim Ferris call him the Steve Jobs of investing.

He argues that there most of the hard problems in life are „another one of those”. Situation is somewhat similar to a pattern recognized before and the real trick is to correctly identify the pattern and auto play the correct behavior.

By using the same tactic in his investment work, he analyzed how asset classes perform in certain situations and what usually leads to an economic downturn.

By properly recognizing the signs and probable outcomes, his firm has become a worlds largest hedge fund – Bridgewater Associates.

He calls his learnings „principles” and when he cans, he tries to make them into computer algorithms because computers are so much better than people at avoiding cognitive biases.

The methaphors used thought this book speak to me very strongly. He uses the metaphor „machine” for life circumstantces and argues that you can either be a cog or look at it from a higher level and design it. You are a worker in the machine, but you always have the power to zoom out and design the machine itself.

Amazon link

The book has 2 parts: Life principles and Work principles. This post is about the first one – life.

Small notes:

• I really need to write my own principles and playbooks for different scenarios that occur often in life
• Biggest motivator to change is the pain you feel after the mistake. That is why it is very crucial not to run away from it, but use it as a cue to change behavior.
• Kindness instead of truth is sometimes tricky because it leads to dishonesty and that – to poor communication

Habits, again.

This comes over and over again. The key to success is helpful habits.

Every habit consists of Cue, Behaviour and reward. Identyfying proper cues and rewarding behavior gets you there.

 

This book is essentially a goldmine. I truly can have no hope of summarizing it. Highlights speak for themselves.

 

My highlights

• Whatever success I’ve had in life has had more to do with my knowing how to deal with my not knowing than anything I know.
• reflect on and write down my decision-making criteria whenever I made a decision,
• My most obvious weakness was my bad rote memory. I couldn’t, and still can’t, remember facts that don’t have reasons for being what they are
• great is better than terrible, and terrible is better than mediocre, because terrible at least gives life flavor.
• 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.
• 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 never valued more traditional, antiseptic relationships where people put on a façade of politeness and don’t say what they really think.
• believe that all organizations basically have two types of people: those who work to be part of a mission, and those who work for a paycheck.
• Moreover, I recognized that managers who do not understand people’s different thinking styles cannot understand how the people working for them will handle different situations,
• matching the right types of people to the right types of situations is key.
• “Capable people are those who sit there worrying about the future. The unwise are those who worry about nothing.
• a. Dreams + Reality + Determination = A Successful Life.
• 1.2 Truth—or, more precisely, an accurate understanding of reality—is the essential foundation for any good outcome.
• Besides giving me the freedom to be me, it has allowed me to understand others and for them to understand me, which is much more efficient and much more enjoyable than not having this understanding.
• Don’t get hung up on your views of how things “should” be because you will miss out on learning how they really are.
• Whenever I observe something in nature that I (or mankind) think is wrong, I assume that I’m wrong and try to figure out why what nature is doing makes sense.
• now realize that nature optimizes for the whole, not for the individual, but most people judge good and bad based only on how it affects them.
• 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.
• So rather than getting stuck hiding our mistakes and pretending we’re perfect, it makes sense to find our imperfections and deal with them. You will either learn valuable lessons from your mistakes and press on, better equipped to succeed—or you won’t and you will fail.
• The individual’s incentives must be aligned with the group’s goals.
• Contribute to the whole and you will likely be rewarded.
• It is a great paradox that individually we are simultaneously everything and nothing.
• I realized that most everything that at first seemed “bad” to me—like rainy days, weaknesses, and even death—was because I held preconceived notions of what I personally wanted.
• But if you can remember to reflect after it passes, that’s valuable too. (I created a Pain Button app to help people do this, which I describe in the appendix.)
• 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.
• you have the opportunity to choose healthy and painful truth or
• At some point in your life you will crash in a big way.
• Look at the machine from the higher level.
• One of the hardest things for people to do is to objectively look down on themselves within their circumstances (i.e., their machine) so that they can act as the machine’s designer and manager.
• You shouldn’t be upset if you find out that you’re bad at something—you should be happy that you found out, because knowing that and dealing with it will improve your chances of getting what you want.
• Don’t confuse what you wish were true with what is really true.
• Don’t overweight first-order consequences relative to second- and third-order ones.
• Dawkins’s River Out of Eden.
• Achieving goals
  • 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.
• For example, when setting goals, just set goals.
• Decide what you really want in life by reconciling your goals and your desires.
• Remember that great expectations create great capabilities.
• Focus on the “what is” before deciding “what to do about it.”
• Everyone has at least one big thing that stands in the way of their success; find yours and deal with
• The two biggest barriers to good decision making are your ego and your blind spots.
• Sincerely believe that you might not know the best possible path and recognize that your ability to deal well with “not knowing” is more important than whatever it is you do know.
• Radically open-minded people know that coming up with the right questions and asking other smart people what they think is as important as having all the answers.
• Don’t worry about looking good; worry about achieving your goal.
• That is because what exists within the area of “not knowing” is so much greater and more exciting than anything any one of us knows.
• Be clear on whether you are arguing or seeking to understand, and think about which is most appropriate based on your and others’ believability.
• you should make it clear that you are asking questions because you are seeking to understand their perspective.
• also recommend that both parties observe a “two-minute rule” in which neither interrupts the other, so they both have time to get all their thoughts out.
• a. Plan for the worst-case scenario to make it as good as possible.
• right then and there I called the other doctor to see what each would say about the other’s views.
• Recognize the signs of closed-mindedness and open-mindedness that you should watch out for.
• circumstances, truly open-minded people, even the most believable people I know, always ask a lot of questions.
• Nonbelievable people often tell me that their statements are actually implicit questions, though they’re phrased as low-confidence statements. While that’s sometimes true, in my experience it’s more often not.
• 3. Closed-minded people focus much more on being understood than on understanding others.
• 4. Closed-minded people say things like “I could be wrong . . . but here’s my opinion.” This is a classic cue I hear all the time. It’s often a perfunctory gesture that allows people to hold their own opinion while convincing themselves that they are being open-minded.
• Mental pain often comes from being too attached to an idea when a person or an event comes along to challenge it.
• Make being open-minded a habit.
• If you consistently use feelings of anger/frustration as cues to calm down, slow down, and approach the subject at hand thoughtfully,
• Get to know your blind spots. When you are closed-minded and form an opinion in an area where you have a blind spot, it can be deadly. So take some time to record the circumstances in which you’ve consistently made bad decisions because you failed to see what others saw.
• This led to one of my most valuable management tools: Baseball Cards,
• like “conceptual,” “reliable,” “creative,” and “determined”; the
• while many people have an instinctual fear of snakes, no one has an instinctual fear of flowers.
• The Spiritual Brain
• Beyond Religion,
• Choose your habits well.
• The most valuable habit I’ve acquired is using pain to trigger quality reflections.
• Our experience has been that left-brained folks tend to see right-brained folks as “spacey” or “abstract,” while right-brained thinkers tend to find left-brained thinkers “literal” or “narrow.”
• barry bassbal cards
• Myers-Briggs Type Indicator (MBTI), the Workplace Personality Inventory, the Team Dimensions Profile, and Stratified Systems Theory.
• Introversion vs. extroversion. Introverts
• Intuiting vs. sensing.
• Thinking vs. feeling.
• Planning vs. perceiving.
• Creators vs. refiners vs. advancers vs. executors vs. flexors.
• Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored.
• Everything looks bigger up close.
• it is smarter to choose the great over the new.
• Be an imperfectionist.
• When a line of reasoning is jumbled and confusing, it’s often because the speaker has gotten caught up in below-the-line details without connecting them back to the major points.
• “Until you make the unconscious conscious, it will direct your life and you will call it fate.”
• 5.6 Make your decisions as expected value calculations.
• Let’s say the reward for being right is $100 and its probability is 60 percent, while the penalty for being wrong is also $100. If you multiply the reward by the probability of being right you get $60 and if you multiply the penalty by the probability of being wrong (40 percent) you get $40. If you subtract the penalty from the reward, the difference is the expected value, which in this case is positive (+$20).
• Convert your principles into algorithms and have the computer make decisions alongside you.
• setting goals, identifying and not tolerating problems, diagnosing problems, coming up with designs to get around them, and then doing the tasks required.

 

SUMMARY AND TABLE OF LIFE PRINCIPLES

• Think for yourself to decide
  • 1) what you want,
  • 2) what is true, and
  • 3) what you should do to achieve #1 in light of #2, and do that with humility and open-mindedness so that you consider the best thinking available to you.
• LIFE PRINCIPLES INTRODUCTION
  • • 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

• 1 Embrace Reality and Deal with It
  • 1.1 Be a hyperrealist.
    • a. Dreams + Reality + Determination = A Successful Life.
  • 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.
    • b. Don’t let fears of what others think of you stand in your 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.
  • 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.
    • b. Reality is optimizing for the whole—not for you.
    • 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.
  • 1.6 Understand nature’s practical lessons.
    • a. Maximize your evolution.
    • b. Remember “no pain, no gain.”
    • c. It is a fundamental law of nature that in order to gain strength one has to push one’s limits, which is painful.
  • 1.7 Pain + Reflection = Progress.
    • a. Go to the pain rather than avoid it.
    • b. Embrace tough love.
  • 1.8 Weigh second- and third-order consequences.
  • 1.9 Own your outcomes.
  • 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.
    • 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.
    • 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.
    • 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.
•  2 Use the 5-Step Process to Get What You Want Out of Life
  • 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.
    • 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.
  • 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.
  • 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.
  • 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.
  • 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” is more important than whatever it is you do know.
    • 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.
    • 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.
  • 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.
    • a. We are born with attributes that can both help us and hurt us, depending on their application.
  • 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.
    • 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.
    • f. Focusing on tasks vs. focusing on goals.
    • g. Workplace Personality Inventory.
    • h. Shapers are people who can go from visualization to actualization.
  • 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.
    • d. New is overvalued relative to great.
    • 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.
    • b. Be imprecise.
    • c. Remember the 80/20 Rule and know what the key 20 percent is.
    • d. Be an imperfectionist.
  • 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.
  • 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.”
    • 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.
    • c. Don’t mistake possibilities for probabilities.
  • 5.8 Simplify!
  • 5.9 Use principles.
  • 5.10 Believability weight your decision making.
  • 5.11 Convert your principles into algorithms and have the computer make decisions alongside you.
  • 5.12 Be cautious about trusting AI without having deep understanding.

 

Work Principles

I did start on “Work principles” part, but I had to stop to take a breathe 🙂

• Don’t let loyalty to people stand in the way of truth and the well-being of the organization
• Speak up, own it, or get out
• Distinguish between idle complaints and complaints meant to lead to improvement
• but I often hear people complaining about the style or tone of a criticism in order to deflect from its substance. If you think someone’s style is an issue, box it as a separate issue to get in sync on.
• Use “double-do” rather than “double-check” to make sure mission-critical tasks are done correctly.