Reflection on the Principles

Principles (by Ray Dalio) Book Review#

TL;DR#

This book consists of three parts. The first part tells the story of the author Ray Dalio's entrepreneurial experience. The second part is about the author's personal principles in life, and the third part is about the author's principles for managing and operating a company.

Here are the key principles I have summarized:

Clearly understand what you want and the current reality.
Failure + pain + reflection = progress.
Maintain an extremely open mind and attitude. No one is perfect, and people generally have difficulty accepting their own mistakes and weaknesses. We need the help of complementary abilities.
Select the best ideas - the ideal state of democracy.
Understand the differences between people and let the right people do the right things.
View things from a higher perspective of right and wrong.

Clearly understand what you want#

The author introduces the first principle right at the beginning, which is to clearly understand what you want. Some people always say they just want more money, but the author points out that money is not what you truly want. It is only one of the things you need to achieve your desires. By first understanding what you truly want, you can set clear goals and avoid unnecessary detours.

A smarter approach is to first determine what you truly want and what your true goals are, and then think about what you need to do to achieve those goals. Money is just one of the things you need, but once you have the money you need to achieve what you truly want, money is no longer the only thing you need, and certainly not the most important thing.

Think independently and decide: (1) what you want, (2) what the facts are, and (3) how to achieve your desires in the face of the facts.

Overcoming inherent weaknesses#

I believe that the core principles mentioned by the author later can be summarized as understanding and overcoming human weaknesses. The author believes that no one is perfect, and everyone has their own strengths and weaknesses. It is almost impossible for anyone to make the right decision every time on their own.

Usually, when we follow our natural inclinations, we may not consider our own weaknesses, which will lead us to failure.

Failure + pain + reflection = progress#

If you have not experienced failure, it means you have not made efforts to push your limits. And if you do not make efforts to push your limits, you cannot fully tap into your potential. Pushing your limits sometimes leads to failure and sometimes leads to success, but it always brings benefits.

Failure and pain are not to be feared. Pursuing excellence requires challenging your limits, and challenging your limits can often lead to failure and pain. What is important is what you do after failure. The saying "failure is the mother of success" applies here.

Successful people change their approach, which allows them to continue to leverage their strengths and compensate for their weaknesses. Unsuccessful people do not do this.

Most people are unwilling to reflect when they are in pain, and once the pain subsides, their attention shifts, making it difficult for them to benefit from reflection.

The author also mentions that most people have the tendency to avoid reflection, not accepting their own mistakes and failures. The author proposes the concept of "right failure," which means being able to learn important lessons from painful failures and avoid "wrong failure," which means being kicked out because of failure. If you fail without reflecting, you are likely to fail in the same way again.

Five-step process to achieve desires#

How do you take action? The author provides a five-step process that he believes can help you gradually approach your goals by continuously identifying problems and changing your approach:

Have clear goals.
Identify the problems that hinder you from achieving these goals.
Diagnose the problems and find their root causes.
Plan solutions to solve the problems.
Implement the solutions and achieve results.

Maintain extreme openness#

The author believes that everyone has two major obstacles: "self-awareness barrier" and "blind spot barrier," which means people have difficulty accepting their own mistakes and cannot understand what they cannot see.
To overcome these two barriers, relying solely on oneself is difficult. The author suggests that we should maintain an extremely open mind and attitude and seek help from trustworthy individuals and complementary abilities to handle the "unknown."

Sincerely believe that you may not know the best solution and realize that it is more important to handle the "unknown" than what you know.

First, "know that you don't know" and consider whether you are only looking at the problem from your own perspective, while also judging your credibility on the issue.
The author mentions the criteria for trustworthy individuals: they have repeatedly found answers in related fields (at least three times) and can explain their views well when held accountable.

Examine your views with trustworthy individuals who are willing to express differences.

Disagreement is not conflict. The purpose of our discussions is not to make others believe that we are right, but to figure out who is right and decide what to do.

How to achieve extreme openness#

Based on what the book says, I personally summarize it as follows:

Recognize and record your common blind spots.
Listen to others' advice. If many trustworthy people have different opinions from you, consider whether you have been biased.
Present evidence and logic instead of defending yourself.
Discuss with trustworthy individuals to clarify the truth.
Meditation (uncertain: The author highly recommends meditation, but there are different opinions on its effectiveness).

Understanding the differences between people and letting the right people do the right things#

Visionary people roughly envision what needs to be done and hope that detail-oriented people will find solutions on their own. When the latter cannot find a solution, the former thinks they lack imagination, while the latter thinks the former has not figured it out.

Sometimes, our differences are not caused by poor communication, but by fundamentally different ways of thinking.
Sometimes, we may think that other people's decisions are completely wrong, but in reality, they are just making decisions based on their own way of thinking. They may also think that we are wrong. There may not necessarily be a right or wrong. We need to understand each other and view things from a higher perspective, objectively understanding things.
Different ways of thinking may be inherent, such as the division of labor between the left and right brain. Some people have left-brain thinking, while others have right-brain thinking. For example, the recent popular MBTI personality test shows that people in different categories may have very different tendencies in their decision-making.
The author mentions some tests they often use: MBTI, Workplace Personality Inventory, Team Orientation Survey, and Stratified Systems Theory.

Regardless of your goals, letting the right people do the right things to support your goals is the key to success.

The superiority of idea meritocracy#

The author highly praises the idea meritocracy implemented in Bridgewater, which is a weighted democracy where everyone participates in decision-making, but those who are good at decision-making have more influence.
Personally, I think this is an ideal state of democracy, which is a good idea within a small scope. It solves the problem of making mistakes easily in autocratic decision-making and the problem of difficulty in reaching consensus and the influence of people who are not good at decision-making in one person, one vote. Essentially, it is similar to the decision-making process of a few elites in mainland China and Singapore during the reform and opening up period. Deng Xiaoping and Lee Kuan Yew are also leaders that the author admires.

Viewing right and wrong from a higher perspective#

For some things, even trustworthy individuals may not be able to reach a consensus, or there may not be a theoretical right or wrong. The author presents his perspective on how to view such things, which I personally agree with.
The author believes that we should view things from the perspective of evolution in nature to determine what is good or bad. The goodness or badness of things should not be based on our own perspective or the perspective of a certain group of people, but from the perspective of the entire human race and even nature. If it conforms to objective laws and promotes overall evolution and progress, then it is good.

Most people consider things that are unfavorable to themselves or those they care about as bad things, ignoring the greater good.

For something to be "good," it must conform to the laws of reality and promote overall evolution, which brings the greatest rewards.

Other thoughts#

Why do we need principles and machines?#

Every day, each of us faces a variety of situations that require us to react. Without principles, we will be forced to react in isolation to the various unexpected events in life, as if we are encountering them for the first time.

Good principles are effective ways to deal with reality.

If you have good principles that can guide you in implementing your values into daily operational decisions, but you have not systematized them to implement them regularly, their impact will be minimal. You must turn your most important principles into habits and help others do the same. Bridgewater has such a culture, and we have also designed some tools to promote it.

The so-called principles, I believe, are essentially "summarizing lessons learned + life philosophy, values," and the so-called machines are systematizing principles and practicing them in life and work.

Knowing oneself, understanding others, and cooperating with each other#

From the author's entrepreneurial experience and the third part about his work principles, I feel the importance of knowing oneself and others. Achieving great things requires a good team, and team members need to be able to complement each other's weaknesses. In our communication and cooperation, we also need to consider who we are, what our thinking style is, and what the other person's thinking style is. This makes communication easier and reduces unnecessary conflicts.

Accepting failure and anxiety with a positive mindset#

It is important to have the right mindset towards failure and anxiety and adjust oneself. "Feeling Good: The New Mood Therapy" is a book that helps people overcome anxiety.

In every investor's career, there are moments of anxiety when your expectations for the future do not match what actually happens, and you do not know whether you are facing a great opportunity or a catastrophic mistake.

I found that if you want to pursue excellence, you must challenge your limits, and challenging your limits can sometimes make you feel overwhelmed. You may feel that you have failed, but it is not necessarily a failure unless you give up. Whether you believe it or not, your pain will gradually dissipate, and you will have many other opportunities in the future, even if you cannot see them at the time. The most important thing you can do is to summarize the lessons provided by these failures, learn humility and extreme openness, increase your chances of success, and then continue to challenge your limits.

When I started looking at reality from the perspective of understanding the laws of reality, rather than thinking that reality is wrong, I found that almost everything that initially seemed "bad," such as rainy days, shortcomings, and even death, was due to my preconceived notions of what I wanted to have. I gradually realized that I had these initial reactions because I did not put things into the context of the bigger picture, that is, the structure of reality is designed to achieve the best overall, not to try to achieve my desires.

Conclusion#

Overall, this book is very good. The author's logic is very rigorous. It can be said to be a summary and reflection of his entrepreneurial experience throughout his life. In addition to the principles mentioned in this article, the book also contains many detailed explanations of various principles. Of course, I believe that everyone has different opinions and may not fully agree with his views, but he has achieved great success, and I believe his principles are definitely worth reading and worth our consideration.
The third part about work principles resonates less with me because I do not have much work experience. It may resonate more with executives and entrepreneurs. I hope to revisit it when I have the opportunity to become a manager myself.
Many of the principles are actually common sense and intuitive truths, so they are not difficult to understand. However, reflecting on myself, although I understand these common sense principles, I have not systematically recorded and reminded myself of them, nor have I truly understood them, let alone put them into practice. For example, everyone knows that people are different, but how many of us study these personality tests, apply their theories in life, and how many conflicts do we have because we do not understand the different ways of thinking of others?