Principles: Ray Dalio > Scottlingle Principles: Ray Dalio

A book about how to make good decisions (using Principles) both in Life & Work:

Principles are ways of successfully dealing with reality to get what you want out of life.
Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life. They reflect your inner character and values. They can be applied again and again in similar situations to help you achieve your goals.
The quality of our lives depends on the quality of the decisions we make.

My Favorite Idea from the book:

Believability Weight Your Decision Making

Find the most believable people possible who disagree with you and try to understand their reasoning
Remember that believable opinions are most likely to come from people who have successfully accomplished the thing in question at least three times, and who have great explanation of the cause-effect relationships that lead them to their conclusions.
Pay more attention to people’s reasoning for a conclusion than their specific conclusion
Think about whether you’re playing the role of a teacher, student, or peer, and whether you should be teaching, asking questions, or debating.
Understand how people came by their opinions
If you ask someone a question, they’ll give you an answer, so think through who you should address your question to.
Pay more attention to whether the decision-making system is fair than whether you get your way.
Believable parties are those who have repeatedly and successfully accomplished something – and have great explanations for how they did it.
One of the most important decisions you can make is who you ask questions of.
Listening to uninformed people is worse than having no answers at all.

4 Big Ideas from the book:

Radical Truth: an accurate understanding of reality—is the essential foundation for producing good outcomes. Realize that you have nothing to fear from knowing the truth.
Radical Transparency: Everyone gets access to the full truthful information, rather than having it filtered through other people first. In turn, people with better information can make better decisions, and the organization draws on the full power of its people. At Bridgewater, radical transparency means all meetings and interviews are recorded and made available to the entire team, and people’s assessments of each other are all public.
Radical Open-mindedness: To recognize the truth, you must accept that you are wrong and relentlessly find ways to increase the chances that you are right. Dalio calls this radical open-mindedness. Taking in more information, especially from other highly credible people, can only allow you to make better decisions, which will bring you closer to your goal.
Idea Meritocracy: An idea meritocracy is an environment in which the best ideas win, regardless of where or whom they came from.

An idea meritocracy requires that people do three things:

Put their honest thoughts on the table for everyone to see.
Have thoughtful disagreements where there is quality back and forth in which people evolve their thinking to come up with the best collective answers possible.
Abide by idea-meritocratic ways of getting past the remaining disagreements.

Your Ego

What holds a lot of people back from the truth is their ego. Many people’s egos center around being right and looking smart. But everyone is wrong a good portion of the time and ignoring this is blinding yourself to your mistakes and ways to improve yourself.
To deal with the emotional pain of finding truth, see life as a game, where the object is to get around a challenge and reach a goal.
Instead of declaring “I’m right,” ask, “How do I know I’m right?” You can’t be sure of anything—there are always risks that can hurt you badly, even in the safest-looking bets. Always assume you’re missing something.

Embrace Your Mistakes

An important truth people commonly ignore is their own weaknesses and mistakes. Thinking about their mistakes causes them pain.
By ignoring your weaknesses and mistakes, you are handicapping yourself in achieving your goals.
Mistakes happen all the time. It’s more important to recognize mistakes and learn from them, than to cover them up and make your problems worse.
Mistakes and pain are nature’s reminder to learn. You must reflect on your mistakes and design solutions to your problems to evolve. Dalio sums it up in his equation, “Pain + Reflection = Progress.”
Treat each mistake like a puzzle that, after you solve it, reveals a gem. Each gem continuously makes you stronger, and more gems help you ascend to higher levels of play where the challenges get greater

Radical Open-mindedness

To recognize the truth, you must accept that you are wrong and relentlessly find ways to increase the chances that you are right. Dalio calls this radical open-mindedness. Taking in more information, especially from other highly credible people, can only allow you to make better decisions, which will bring you closer to your goal.
Would you willingly blind yourself into doing something wrong? Most people do this.
Recognize that the chance that you independently always have the best answer is extremely low. Accept the possibility that others might see something better than you and point out threats and opportunities you don’t see.
Always be fearful that you’re wrong and you’re missing information. Don’t say “I’m right,” ask, “How do I know I’m right?

Disagree Thoughtfully

Being open-minded will make you seek other smart people and explore their viewpoints, especially when you disagree with each other. This may create emotional conflict.
The key is to have “thoughtful disagreement” with the other person. This means your goal is not to prove that you’re right, but rather to find out which view is true and decide what to do about it.
Your ego may get in the way of getting new perspectives from other people. But if you care about your goals, you should be more afraid of missing important ideas than being proven wrong. What stings more—being wrong about something, or ultimately failing your goal?
People are wired very differently. They think in different ways and have different blind spots. This promotes conflict and misunderstandings with poor communication. Practice thoughtful disagreement to see their viewpoint and arrive at the truth together rationally.
People tend to confuse what they want to be true with what actually is true.
Don’t get hung up on your views of how things “should” be because you will miss out on learning how they really are.
Most people especially dislike others exploring their weaknesses because it makes them feel attacked, which produces fight or flight reactions; however, having others help one find one’s weaknesses is essential because it’s very difficult to identify one’s own.

Dalio’s Success Path:

Seek out the smartest people who disagreed with him so he could try to understand their reasoning
Know when not to have an opinion
Develop test, and systematize timeless and universal principles
Balance risks in ways that keep the big upside while reducing the downside
The best thing you can do to improve your thinking is to think through your principles for making decisions, write them out in words and computer algorithms, back test them if possible, then use them on a real-time basis to run in parallel with your brain’s decision making.

Use Principles to Make Good Decisions:

To do this well:
Slow down your thinking so you can note the criteria you are using to make your decision.
Write the criteria down as a principle.
Think about those criteria when you have an outcome to assess and refine them before the next “one of those” comes along.
Eventually 80% of the decisions you make is “just another one of those”. You then pull out the algorithm to solve “one of those”.
Convert your principles into algorithms and have the computer make decisions alongside you

To solve disagreements:

Put our honest thoughts on the table
Have thoughtful disagreements in which people are willing to shift their opinions as they learn, and
Have agreed-upon ways of deciding (voting, authorities, etc.) if disagreements remain so you can move on without resentment.
When two people believe opposite things, chances are that one of them is wrong.
It pays to find out if that someone is you.

Closed minded vs. Open minded people:

Closed-minded people don’t want their ideas challenged. They are typically frustrated that they can’t get the other person to agree with them instead of curious as to why the other person disagrees.

Open-minded people are more curious about why there is disagreement.
Closed-minded people are more likely to make statements than ask questions.
Open-minded people genuinely believe they could be wrong.
Open-minded people are always more interested in listening than in speaking.

Life Philosophy:

Things (toys, bigger houses, money, status, etc.) don’t supply anywhere near the long-term satisfaction that getting better at something does. It is the evolution, not the rewards, that matter.
It is much more important that you are a good designer/manager of your life than a good worker in it.
To gain strength one has to push one’s limits, which is painful.
Develop a reflexive reaction to psychic pain that causes you to reflect on it rather than avoid it
Go to the pain rather than avoid it. If you choose the healthy route, the pain will soon turn into pleasure.
Life doesn’t give a damn about what you like. It’s up to you to connect what you want with what you need to do to get it and then find the courage to carry it through.
Everyone has at least one big thing that stands in the way of their success; find yours and deal with it.
Aristotle defined tragedy as a terrible outcome arising from a person’s fatal flaw – a flaw that, had it been fixed, instead would have led to a wonderful outcome.
Ego and blind spots are the fatal flaws that keep intelligent, hardworking people from living up to their potential
Failure is largely the result of not accepting the truth of reality, amplified by further denial, mitigated by acceptance.
Use feelings of anger/frustration as cues to calm down, slow down, and approach the subject at hand thoughtfully.
Record the circumstances in which you’ve consistently made bad decisions because you failed to see what others saw. Write a list, tack it up on the wall, and stare at it. If ever you find yourself about to make a big decision in one of these areas, consult others.

Be evidence-based:

Most people do not look thoughtfully at the facts and draw their conclusions by objectively weighing the evidence. Instead, they make their decisions based on what their deep-seated subconscious mind wants and then they filter the evidence to make it consistent with those desires.
Your greatest challenge will be having your thoughtful higher-level you manage your emotional lower level you. The best way to do that is to consciously develop habits that will make doing the things that are good for you habitual.

Creating Your Own Principles:

Write down every kind of encounter you have and how you have, and should, handle it. Update these are you get more data and stress-test your assumptions.
Record why you made certain decisions, then check in on that reasoning later.
Think of problems as puzzles you need to solve. By solving the puzzle, you get a gem in the form of a principle that helps you avoid the same sorts of problems in the future.

Pain + Reflection = Progress.

If you can develop a reflexive action to psychic pain that causes you to reflect on it rather than avoid it, it will lead to your rapid learning/evolving.
If you push through this process of personal evolution, you will naturally ascend to higher and higher levels.
Go towards the pain rather than avoid it. The quality of your life will depend on the choices you make at those painful moments.
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.

When encountering your weaknesses, you have four choices:

You can deny them (which is what most people do).
You can accept them and work at them in order to try to convert them into strengths (which might or might not work depending on your ability to change).
You can accept your weaknesses and find ways around them.
Or, you can change what you are going after. Which solution you choose will be critically important to the direction of your life.
The worst path you can take is the first.

To confront your own weaknesses:

Don’t confuse what you wish were true with what is really true.
Don’t worry about looking good—worry instead about achieving your goals.
Don’t overweight first-order consequences relative to second and third order ones.
Don’t let pain stand in the way of progress.
Don’t blame bad outcomes on anyone but yourself.
Don’t mistake the cause of the problem with the real problem. Get to the root of it.

Learn How to Make Decisions Effectively

Think about how you can make all of your decisions well, in a systematic, repeatable way, and then being able to describe the process so clearly and precisely that anyone else can make the same quality decisions under the same circumstances.
Recognize that the biggest threat to good decision making is harmful emotions, and the decision making is a two-step process (first learning, then deciding)
Failing to consider second and third order consequences is the cause of a lot of painfully bad decisions, and it is especially deadly when the first inferior option confirms your own biases.
Knowing when not to bet is as important as knowing what bets are probably worth making.
You can significantly improve your track record if you only make the bets that you are most confident will pay off.
The best choices are the ones that have more pros than cons, not those that don’t have any cons at all.
Watch out for people who argue against something whenever they can find something – anything – wrong with it, without properly weighing all the pluses and minuses. Such people tend to be poor decision makers.

Create a Culture in Which It Is Okay to Make Mistakes and Unacceptable Not to Learn from Them

Fail well. Everyone fails, so fail well.
Get over “blame” and “credit” and get on with “accurate” and “inaccurate.”
Remember to reflect when you experience pain.
Know that nobody can see themselves objectively.
Once a decision is made, everyone should get behind it even though individuals may still disagree.

Hire Right, Because the Penalties for Hiring Wrong are Huge

Match the person with the design
Think through which values, abilities, and skills you are looking for (in that order).
Look for people who sparkle, not just “any of those”
Pay attention to people’s track records.
Recognize that performance in school doesn’t tell you much about whether a person has the values and abilities you are looking for.
Don’t hire people just to fit the first job they will do; hire people you want to share your life with.
When considering compensation, provide both stability and opportunity
Focus more on making the pie bigger than on exactly how to slice it so that you or anyone else gets the biggest piece.
Great people are hard to find so make sure you think about how to keep them.

Constantly Train, Test, Evaluate, and Sort People

Understand that you and the people you manage will go through a process of personal evolution.
Recognize that personal evolution should be relatively rapid and a natural consequence of discovering one’s strengths and weaknesses; as a result, career paths are not planned at the outset.
Evaluate accurately, not kindly
Think about accuracy, not implications
Don’t hide your observations about people.
Use evaluation tools such as performance surveys, metrics, and formal reviews to document all aspects of a person’s performance.
When you are really in sync with someone about their weaknesses, the weaknesses are probably true
Evaluate employees with the same rigor as you evaluate job candidates
Don’t lower the bar
Recognize and deal with key-man risk. Every key person should have someone who can replace them.
Hold yourself and your people accountable and appreciate them for holding you accountable

Diagnose Problems to Get at Their Root Causes

To diagnose well, ask the following questions:
Is the outcome good or bad?
Who is responsible for the outcome (RP: Responsible Party)?
If the outcome is bad, is the RP incapable and/or is the design bad?
Just because someone else doesn’t know what to do doesn’t mean that you do know what to do.
Managers usually fail or fall short of their goals for one or more of five reasons:
They are too distant. They have problems perceiving bad quality. They have lost sight of how bad things have become because they have gotten used to it. They have such high pride in their work (or such large egos) that they are unable to solve their own problems. They fear adverse consequences from admitting failure.
Use the following drill down technique to gain an 80/20 understanding of a department or sub-department that is having problems
Step 1: List the problems, inventory all the core problems. Be specific. Name names. Don’t try to find solutions yet.
Step 2: Identify the root causes. Keep asking “Why?”.
Step 3: Create a plan that addresses the root causes.
Step 4: Execute the plan and transparently track its progress.
Understand that diagnosis is foundational to both progress and quality relationships

Don’t Overlook Governance

All organizations must have checks and balances
Make sure that no one is more powerful than the system or so important that they are irreplaceable

People who have common sense, imagination, and determination, who know what they value and what they want, and who also use computers, math, and game theory, are the best decision makers there are.