PRINCIPLES BY RAY DALIO
BOOK REVIEWS BY BINOD
BINOD’S RATING: 7/10
Confession
Look I did not start off by wanting to read this book. The 550 pages looked dry and forbidding. In fact, I bought the book three years ago and it’s been brooding on my bookshelf ever since.
I don’t know what exactly triggered it, but I am glad I did finally open the book.
Overview
"Principles" reads like a modern-day Meditations, except the content is largely written for a professional/work context. “Principles” consists of three parts.
In the first part, titled “Where I'm coming from”, Dalio looks back on his career and the founding of Bridgewater. “Life Principles” is the name of the second part and covers Dalio’s approach to life’s challenges and opportunities. Finally. part three covers Dalio’s “Work Principles”.
If you are looking for his “Investing Principles” it's missing as Dalio is planning another book on that topic.
“Systemize your decision making.”
What I liked
Dalio collected all the Rules for Living and Working you could ever possibly need, and arranged them in clusters, subgroups, and units for easy perusal. This book is really an instructional manual for the clueless. It's all here, and most of it, while not entirely original, is still wise and valuable.
His most interesting and compelling concept, which he's apparently following at his hedge fund, is radical transparency, where everyone says exactly what they're thinking and no one beats around the bush, softens the truth, or fudges stuff.
The concept of an idea meritocracy. It’s importance, function, and benefits to Bridgewater are referenced countless times. I liked the idea of "believability weighting" decisions, using an individual’s past performance to dictate how much sway they have in decisions, which seems like a more scalable way to make good decisions as an organization grows
The idea that if we automate decision-making processes and run those processes alongside that of human decision-makers, we can make better decisions in the long run.
Baseball cards for the company employees so you can give the right task for the right person.
Being clear on your principles is important as it helps you recognize who else shares the same principles. If you don’t have the same values and principles, you will experience constant misunderstandings. I have seen this countless times within companies and teams.
“There are no greater battles than those between our feelings (most importantly controlled by our amygdala, which operates sub-consciously) and our rational thinking (most importantly controlled by our prefrontal cortex, which operates consciously)”
People who underestimate the second effect of things usually have bad outcomes. For example, In exercises, the first effect is the pain and time spent, and the second effect is the health and good appearance. People usually neglect the first and lose the second by consequence. Or they do the first hastily, never thinking of the second and third effects.
You can't excel in everything (don't have Einstein on your basketball team). Find your weaknesses first and then decide if you want to convert them to strengths or decide to find someone else to do it.
Reality and the truth can be painful. Dalio recommends using that pain as a signal to reflect and evolve. In fact, he says many instances of strength require pain to be built. We must feel the hardships of life to know what it’s like to overcome them. Open mindedness and accepting reality provide the best chances at success.
“The most important thing is that you develop your own principles and ideally write them down, especially if you are working with others.”
What I didn’t like
These are the principles that have made Dalio and Bridgewater extremely successful. However, no matter how successful Bridgewater is, you can find many companies that are just as successful and that have a completely different culture. That point is never mentioned anywhere in the book.
Dalio repeats that while Bridgewater’s culture “hurts at first”, it ends up making people happier. While I am a fan of “no pain no gain”, please do keep the survivor bias effect when reading things like this. Plus, it’s just his word- I have not seen an independent survey of Bridgewater employees to test this thesis.
He is also a fan of “forced rankings”, which saw its debut at GE under Jack Welch, and which has since been proved to be unfair and not useful time and again
I was shocked to see Dalio promote the use of the Myers Briggs Type Indicator (MBTI) personality test but it’s very dodgy. “In social science, we use four standards: Are the categories reliable, valid, independent and comprehensive?" Adam Grant, University of Pennsylvania professor of psychology, wrote on LinkedIn. "For the MBTI, the evidence says not very, no, no, and not really. The characteristics measured by the test have almost no predictive power on how happy you'll be in a situation, how you'll perform at your job, or how happy you'll be in your marriage." Some research suggests the MBTI is unreliable because the same person can get different results when retaking the test. Another limitation are the black-and-white categories: You are either an extrovert or introvert, a judger or a feeler. The MBTI may be missing even more nuances by assessing only four aspects of personality differences when there are at least five major personality dimensions, and more recent evidence has shown that there are six.
Dalio also thinks people can’t be trusted: “When offered the choice of being fair with you or taking more for themselves, most people will take more for themselves”. That seems like a skeptical work culture.
The Principles are quite repetitive with many redundancies. Maybe it’s Dalio's way to get his point through. But having hundreds of rules is too many to live by. Dalio needs to reduce them to, say, the ten most important.
Dalio's own hedge fund has struggled with new leadership, after his departure as CEO, highlighting again that there are some ingredients to success that are hard to quantify and replicate. There's a risk that standards will slip once the benevolent despot is out of the picture, no matter how big the pile of principles is.
Perhaps the most important consideration is the way Dalio recommends treating individuals. Truth and productivity are emphasized completely, with tact and emotion given minimal thought. The book even mentions prioritizing work during vacations. Communication style is explicitly mentioned as unimportant over substance. These are simply not environments the vast majority of individuals will feel good or perform well in.
Summary
All in all, I seriously recommend combing through each idea before internalizing it. While Dalio and Bridgewater may have thrived under this particular system, many individuals will not. I’d think very carefully about what personal costs I’m paying, before I tried to live to the letter of what he suggests.
But I would add this to the list of books that I wish were around when I was 20 years younger if only for the reason that (as Dalio says), while it is not important to follow the same principles that he did, it is important to chalk out one’s own principles and follow the same with rigor and diligence.
Overall an impressive work with precise, practical, no bullshit advice.
I wish more successful people (e.g. Steve Jobs) wrote down their principles like Dalio did, instead of having a slew of biographies written years after their death, which is often an unsatisfactory attempt to guess the values, beliefs and motivations of the illustrious and fascinating subject.