Last updated April 10, 2022

Status: Author: Ray Dalio Medium: #literature/books/implemented Links: Currently Reading List - Principles (Book) Application

Principles (Book)

• Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life
  • can be applied again and again in similar situations to help you achieve your goals
    • Helps us make better decisions

Principle 1 - 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

• Clear principles is vital for authentic interactions
• Having principles forces you to think for yourself
• Get into the habit of clarifying your reasoning and principles to the point where others can adopt them

Book structure

1. Where I’m Coming From
   • Personal experiences that led to principles
2. Life Principles
   • The universal application of principles
3. Work Principles

Part 1

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.

• prices reflect people’s expectations, so they go up when actual results are better than expected and they go down when they are worse than expected

“You better make sense of what happened to other people in other times and other places because if you don’t you won’t know if these things can happen to you and, if they do, you won’t know how to deal with them.”

Part 2 - Principles

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.

• Everything happens from cause-effect relationships
  • By forming connections, we can establish principles that optimally deal with them
  • Success comes from relying on these principles

Structure of principles

1. Higher-level principles (chapter titles)

2. Mid-level principles (1.1)
3. Sub-principles (letters)

• Life principles should be entirely read, while work principles is a reference book
• start with the higher-level principles and the text explaining them, plus the headings for both the principles and subprinciples

1 - Embrace Reality and Deal with It

• Principles help us avoid problems in the future
• The author sets big goals, and uses failure to reflect and reach them
  • Parkinson’s Law on steroids mixed with reflection to generate insane improvement
    • Pushing through struggles results in a “mistake learner’s high”

1.1 - Hyperrealist

• Hyperrealism makes dreams actionable
• Dreams + Reality + Determination = a successful life
  • 75% make an impact

1.2 Truth

• An accurate understanding of reality—is the essential foundation for any good outcome
  • Improve the bad stuff as the good stuff will maintain itself

1.3 Open-minded, radically transparent

• Being transparent reduces friction in feedback loops since there are no misinterpretations
• Open-mindedness leads to less self-deception and inclination for external feedback
• Do things your own best way, and reflect on the feedback that comes from your choices
  • Accelerates overall learning process
  • Adds meaning and enjoyment of othings
  • It will take 18 months to fully adopt this
    • Eventually you will experience the benefits of open-mindedness and transparency to the point where you don’t care about some minor hindrances

Imagine how many fewer misunderstandings we would have and how much more efficient the world would be—and how much closer we all would be to knowing what’s true—if instead of hiding what they think, people shared it openly (opinions of others and the world)

1.4 Nature

• The origins of everything is rooted in nature
• It’s surreal how we’re able to reflect and learn from our experiences, rather than continually operate off of instincts
• We can understand something by thinking:
  1. Top down
     • Find the one law that drives it all
       • ex) Supply and demand for stock price
  2. Bottom up
     • The laws that drive each specific case
       • ex) Factors of growth for a stock market sector
• Expecting something to be a certain way (bias) will prevent us from seeing what it actually is
• 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
  • if you come up with something the world values, you almost can’t help but be rewarded
• Evolution/change is the single greatest force in the universe; it is the only thing that is permanent and it drives everything
• Evolve or die

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

• Our evolutionary nature has led to different interests, the natural selection process, and rapid experimentation/adaptation
• We are everything and nothing
  • Everything as in our perception of life is gone when we die
  • Nothing when looked at from the entirety of the universe
• Our realities depend on our perspectives

1.6 Understand Nature’s Practical Lessons

• Most bad things are preconceived notions, and in reality, we can find good in them
• It is human nature to lose satisfaction in the things we strive for
  • Thus, continually learning is everlastingly fulfilling
    • success is struggling and evolving as effectively as possible, i.e., learning rapidly about oneself and one’s environment, and then changing to improve
• Use pain to direct and alert us
• It is a fundamental law of nature that in order to gain strength one has to push one’s limits, which is painful
  • ex) exercise, mind (e.g., frustration, mental struggle, embarrassment, shame)

1.7 Pain + Reflection = Progress

• By seeing pain, we are making progress
  • To make use of our pain, we need to reflect
    • Reflecting while in pain is best, but reflecting after is just as important
      • ex) It’s hard to learn forms of improvement while going through a breakup, but after you will have realized things you could have done better
  • Results in rapid learning by utilizing our resources and experiences
• Go to the pain rather than avoid it
  • By catering towards pain, we can:
    1. Identify, accept, and learn from weaknesses
    2. Let others know you are fine with criticism
    3. Not feel obligated to hide signs of weakness
• Accept tough love
  • The #1 motivating factor to persevere through tough times is realizing that it is possible
  • The faster we can adapt to our personal evolutions, the more successful we can be

1.8 Weigh second and third order consequences

• Taking into account second- and third-order consequences can help us better deal with the first order
  • Don’t overweigh the first, and don’t ignore the second/third
  • ex) The pain and time spent (1st) on exercise is worth it for better health and appearance (2nd)

1.9 Own your outcomes

• Internal locus of control
• We have to be responsible for what we make out of our lives

1.10 Look at the machine from the higher level

• Gives us an overview of all the cause-effect relationships in our life so we can set up our desirable outcomes
• We can alter our workflows and principles to optimize our output
• Method of working towards goals is like a machine
  • Design
    • What has to be done
    • ex) An army
  • People
    • Who will do the designwork
    • ex) The people in the army
• Makes the process modular and adjustable
• Be realistic with our capabilities and expectations
  • See others and ourselves in the machine as objectively as possible
    • Know weaknesses, strengths
      • Put others to fill our gaps
• When encountering weaknesses we can:
  1. Deny them
  2. Accept them and work towards them to make them strengths
     • Ideal but not always possible
  3. Accept weaknesses and find alternatives
     • most viable
  4. Change the topic at hand
     • Must be reasonable
• 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
• Rely on the input of others to make up our distorted self-understanding
• If you are open-minded enough and determined, you can get virtually anything you want
  • The initial method may not work, but there are other ways hidden for us to find

Key Principles

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. 6. Face harsh realities

2 - 5 Step Process

1. Have clear goals. - Requires higher-level thinking (visualize, prioritize) 2. Identify and don’t tolerate the problems that stand in the way of your achieving those goals. - Perceptive, synthesis, high standards 3. Accurately diagnose the problems to get at their root causes. - Logical, open-minded, conversational 4. Design plans that will get you around them. - Visualization, practicality 5. Do what’s necessary to push these designs through to results. - Self-discipline, good work habits, results-oriented

• 5 steps is a feedback loop
• Detrimental for evolution
• We need to know what parts we are good at, and know what parts we struggle on

2.1 Have clear goals

• Prioritize
  • We can have virtually everything we want, but not everything
  • Too many decisions leads to paralysis
• Don’t confuse goals with desires
  • Goals should be things we truly need to achieve
  • Desires are usually first-order
• Decide what we really want from life and pursue it
  • Don’t distract ourselves by acts like consumerism or sex
• Never rule out unattainable goals
  • New learnings can lead to new possibilities
• Nothing can stop us if we are flexible and self-accountable
  • Flexibility is learning from others
  • Self-accountability lets us know our true progress
• Managing setbacks is as important as moving forward
  • Sometimes we just need to minimize our losses

2.2 Identify, don’t tolerate problems

• View painful problems as potential improvements screaming at you
• Don’t be afraid to confront harsh realities and problems
  • Acknowledging weaknesses does not mean surrendering
• Be throrough in understanding our problems
  • Helps us find the right solutions
  • Root causes
• Focus on the large problems
• Don’t tolerate problems after identifying them
  • Leads to hopelessness

2.3 Diagnose Problems to get at their Roots

• Good diagnosis requires 15-60 minutes
  • Speaking with relevant people
  • Getting relevant evidence
• Proximate causes are inactions that lead to problems
  • Adjectives described as verbs
  • ex) I forgot to brush my teeth > I am forgetful
• Be objectively honest

2.4 Design a Plan

• Go back before forward
  • Gain context
• Practice higher-level thinking towards your machine
• We only need to find one path that works out of many
• Refine our plans to the point where we know what happens at every time
• Write down actionable and measurable steps for everyone involved
• Plans can be made in mere hours to days, what’s important is as thorough process

2.5 Push through to completion

• Execution is key
  • Self-discipline
  • Remember why
• Develop good habits to make it easier
  • To-do lists

2.6 Weaknesses don’t matter when the solution is found

• Everyone has at least one big thing that stands in the way of their success; find yours and deal with it
  • What is it? ex) Identifying problems, designing solutions, pushing through to results
  • Why is it? ex) your emotions trip you up, you can’t visualize adequate possibilities
  • Use our personal strengths or seek help through humility

2.7 Understand your own and others’ mental maps and humility

• Having humility helps us learn from those smarter than us
• An ideal is to have humility and a strong mental map
  • Rate people through both

3 - Radically Open Minded

Most important chapter????

3.1 Recognize our Two Barriers

• Ego and blind spots
• Understand our ego barrier, the thing that prevents us from accepting mistakes/weaknesses
  • We have an emotional (amygdyla) and logical side (prefrontal cortex)
  • Consider how our lower-level thoughts influence our higher-level thoughts, and how that pans out when interacting with someone else’s
  • We may struggle to explain our desires through logical thinking because they are rooted in emotional reasoning
• Understand our blind spots
  • We truly need assistance

3.2 Radical open-mindedness

• motivated by the genuine worry that you might not be seeing your choices optimally
  • Controls our lower-level
• Sincerely believe that we aren’t always right
  • Not knowing is as important as knowing
• We can only look at someone’s perspective when we drop ours
• The chances of us always being right is small
• Respect the knowledge gaps and play the roles accordingly
  • A student should not speak as much as a teacher

3.3 Thoughtful Disagreement

• Instead of proving our righteousness, genuinely find out which opinion is right
  • Questions rather than statements
  • Encourage a calm discussion
  • We need to learn how to have exchanges without feeling offended/conflicted
  • Have discussion, don’t be one-sided

3.4 Triangulate Your View Through External Disagreement

• Consider delegating a decision to someone more thoughtful, and learn from their decision-making
• Plan for the worst-case scenario to make it as good as possible

3.5 Differentiate between closed and open minds

• Surround yourself with open-minded people
• Acceptance of conflict
• Questions vs statements
• Understood vs understanding
• “I could be wrong”, then a statement means closed-minded
• Ability to view other opinions

3.6 Become open-minded

• Pain is now your quality reflection
  • Use feelings of anger and frustration to calm down and be more critical of the moment
• Find out your most common bad decisions
  • Find out your blind spots
  • Before asking someone for help on that decision, talk to someone else about it
• Transcendental Meditation
  • enhanced my open-mindedness, higher-level perspective, equanimity, and creativity
• Evidence-based thinking and seeking

4 - Understand That People Are Wired Very Differently

4.1 Understanding ourselves and others is powerful

• Our mental differences with others is not due to one side’s dumbness, but rather physiological attributes
  • It’s not their choice, as it is literally how they were wired
• Most attributes are double-edged sowrds
  • ex) A focus on long-term goals prevents a person from enjoying everyday life
• Take note of people’s characteristics, like baseball cards
  • Adjectives (including personality tests)
    • ex) Creative
  • Actions/Inactions
    • ex) Holds others accountable

4.2 Meaningful work and relationships are genetically programmed

• We have evolved to work together

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

• Conscious fights against subconscious

• By relaxing our conscious mind, we can give more room for our subconscious mind

  • Abstract ideas come from relaxation

• Examine subconscious thoughts with our logical mind before acting on them

• Amygdyla’s flight or fight responses can be utilized and controlled

  • Reflect on our emotional choices/outbursts and think on if we should better control them
  • Be patient and caring with tending to our subconscious

• Habits are responses to cues

  • ex) Using pain to trigger reflection is a habit that uses pain as a cue

• Left vs right brain 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.”

  1. 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.”

4.4 Find out what you and others are like

• MBTI, Workplace Personality Inventory, the Team Dimensions Profile, and Stratified Systems Theory
• Introvert vs Extroversion
  • Introverts think by themselves and then present what they come up with
    • ex) Writing, emails
  • Extroverts get energy/ideas from being with people
    • ex) Group settings
• Intuiting vs Sensing
  • Intuiting see big pictures
    • ex) Context
  • Sensing see details
    • ex) Typos
• Thinking vs Feeling
  • Thinking considers facts and logic
  • Feeling considers emotions and empathy
• Planning vs Perceiving
  • Planned live orderly
    • Think about what to achieve, then how
  • perceiving are adaptable and spontaneous
    • Look at what’s happening to understand why
• Creators vs refiners vs advancers vs executors vs flexors
  • Creators - innovation
  • Advancers - enthusiasm and relational
  • Refiners - objective and systematic
  • Executors/Implementers - Detail and prioritizing
  • Flexors - Combination
• Focusing on tasks vs goals
  • Goalers are more reflective
    • For creative and changing environments
  • Taskers are reliable and consistent
• Workplace Personality Inventory
  • Roles of people
    • ex) A shaper turns imagination into actualization
      • Shaper = Visionary + Practical Thinker + Determined

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

• Orchestrate yourself and others
  • Make refining your strengths habitual

5 - Effective Decision-Making

• Our goal is to make systematic and repeatable decisions that can be taught to others
• Harmful emotions threat decision-making
• Decision-making entails learning then deciding
• Synthesizing
  • Take lots of data into an accurate picture
    • Combine with other synthesizers for optimal decision-making

5.2 Synthesize the situation at hand

• The source of our info is most important
• When feeling overwhelmed, wait
• Great > new
• Have an equal balance

5.3 Synthesize through time

• Plot out events and find patterns
  • Helps find relationships

5.4 Navigate levels effectively

1 The High-Level Big Picture: I want meaningful work that’s full of learning.

• 1.1 Subordinate Concept: I want to be a doctor.
  •  Sub-Point: I need to go to medical school.
    •  Sub-Sub Point: I need to get good grades in the sciences.
      • Sub-Sub-Sub Point: I need to stay home tonight and study
• Focus on above-the-line discussion, only dipping into below-the-line discussion to illustrate a major point
• Tips on level-thinking
  1. 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
     • Always return to the bigger picture after exploring the details of a topic

5.5 Logic, reason, and common sense help synthesize and understand reality

• Be conscious on whether you’re using your lower level or upper level thinking

5.6 Decisions as expected value calculations

• Decisions have probabilities
• Increasing the probability of good outcomes never hurt
  • Consider raising a 50/50 guess if possible
• Knowing when to bet
  • Don’t do poorly favored bets

5.7 Prioritize by weighing information to not deciding

• Helps understand when the right time is to make a decision

5.8 Simplify

• Focus on essential details

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

5.9 Use principles

• Helps categorize occurences and apply appropriate solutions
  1. Slow down thinking to note criteria you are using for decisions
  2. Write the criteria as a principle
  3. Think about those criteria when you have an outcome to assess, and refine them for the next occurence

5.10 Weight Decision Making

• When in a disagreement, see if the parties can agree on the same principles being assessed
• Know who to listen to and know how heavy our opinions are

5.11 Turn our principles into algorithms and use computers

• Thinking > Principles > Algorithms
• The combination of man and machine
  • Man utilizes their gift of creativity and imagination to come up with efficient and complex systems that can be done by the computers

5.12 Be cautious about trusting AI without having deep understanding

• Computers are prone to misinterpreted correlations
  • ex) Breakfast in morning means you are hungry in morning
• Have our brain and our computers double check each other

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

Life Principles Overview

• Things I think I should remember/work on:
  • 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.
  • Once you identify a problem, don’t tolerate it.
  • 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.
  • Your two “yous” fight to control you
  • Understand egos and blind spots

Work Principles

Overview

• 4.4
• Everything is a case study
• Systemize principles

Conclusion

Tools

• A tool to see what someone is like
  • Baseball cards
    • Personality, strengths, weaknesses
• Coaching the coach
• A system to share ideas and resolve disagreements
• Recording and learning from mistakes
  • Issue log
• Issue Log
  • Keep track of points of pain
    • Immediate probing then reflection questions later on
• Dispute resolver
  • Connections to converse with about certain problems
• Daily update tool
  • The day’s contents, issues, and reflections
    • Help see the overall status of a person
• Contract tool
  • Monitor commitments to each other
    • Accountability, used by requester and provider
• Process flow diagram
  • Visual to making decisions
  • Used to show responsibilities, roles
• Policy and procedures
• Metrics
  1. Know what goal
  2. Know how to get there
  3. Know parts that can be measured
  4. Know how to adjust process based on measures

Created:: {{2amt2:2021-06-15}} 11:28