Dalio - Principles

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To Barbara, the half of me who has made me whole for more than forty years.

B efore I begin telling you what I think, I want to establish that Im a dumb shit who doesnt know much relative to what I need to know. Whatever success Ive had in life has had more to do with my knowing how to deal with my not knowing than anything I know. The most important thing I learned is an approach to life based on principles that helps me find out whats true and what to do about it.

Im passing along these principles because I am now at the stage in my life in which I want to help others be successful rather than to be more successful myself. Because these principles have helped me and others so much, I want to share them with you. Its up to you to decide how valuable they really are and what, if anything, you want to do with them.

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.

Every day, each of us is faced with a blizzard of situations we must respond to. Without principles we would be forced to react to all the things life throws at us individually, as if we were experiencing each of them for the first time. If instead we classify these situations into types and have good principles for dealing with them, we will make better decisions more quickly and have better lives as a result. Having a good set of principles is like having a good collection of recipes for success. All successful people operate by principles that help them be successful, though what they choose to be successful at varies enormously, so their principles vary.

To be principled means to consistently operate with principles that can be clearly explained. Unfortunately, most people cant do that. And its very rare for people to write their principles down and share them. That is a shame. I would love to know what principles guided Albert Einstein, Steve Jobs, Winston Churchill, Leonardo da Vinci, and others so I could clearly understand what they were going after and how they achieved it and could compare their different approaches. Id like to know which principles are most important to the politicians who want me to vote for them and to all the other people whose decisions affect me. Do we have common principles that bind us togetheras a family, as a community, as a nation, as friends across nations? Or do we have opposing principles that divide us? What are they? Lets be specific. This is a time when it is especially important for us to be clear about our principles.

My hope is that reading this book will prompt you and others to discover your own principles from wherever you think is best and ideally write them down. Doing that will allow you and others to be clear about what your principles are and understand each other better. It will allow you to refine them as you encounter more experiences and to reflect on them, which will help you make better decisions and be better understood.

We come by our principles in different ways. Sometimes we gain them through our own experiences and reflections. Sometimes we accept them from others, like our parents, or we adopt holistic packages of principles, such as those of religions and legal frameworks.

Because we each have our own goals and our own natures, each of us must choose our own principles to match them. While it isnt necessarily a bad thing to use others principles, adopting principles without giving them much thought can expose you to the risk of acting in ways inconsistent with your goals and your nature. At the same time, you, like me, probably dont 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. If you cant do that, you should reflect on why that is, because thats most likely your greatest impediment to getting more of what you want out of life.

That brings me to my first principle:

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. Being clear on your principles is important because they will affect all aspects of your life, many times a day. For example, when you enter into relationships with others, your principles and their principles will determine how you interact. People who have shared values and principles get along. People who dont will suffer through constant misunderstandings and conflicts. Think about the people you are closest to: Are their values aligned with yours? Do you even know what their values or principles are? Too often in relationships, peoples principles arent clear. This is especially problematic in organizations where people need to have shared principles to be successful. Being crystal clear about my principles is why I labored so much over every sentence in this book.

The principles you choose can be anything you want them to be as long as they are authentici.e., as long as they reflect your true character and values. You will be faced with millions of choices in life, and the way you make them will reflect the principles you haveso it wont be long before the people around you will be able to tell the principles you are really operating by. The worst thing you can be is a phony, because if youre a phony you will lose peoples trust and your own self-respect. So you must be clear about your principles and then you must walk the talk. If inconsistencies seem to exist, you should explain them. Its best to do that in writing because by doing so, you will refine your written principles.

While I will be sharing my own principles, I want to make clear to you that I dont expect you to follow them blindly. On the contrary, I want you to question every word and pick and choose among these principles so you come away with a mix that suits you.

I learned my principles over a lifetime of making a lot of mistakes and spending a lot of time reflecting on them. Since I was a kid, Ive been a curious, independent thinker who ran after audacious goals. I got excited about visualizing things to go after, had some painful failures going after them, learned principles that would prevent me from making the same sort of mistakes again, and changed and improved, which allowed me to imagine and go after even more audacious goals and do that rapidly and repeatedly for a long time. So to me life looks like the sequence you see on the opposite page.