by Ray Dalio
Simon & Schuster, New York, 2017
I don’t often read books by celebrity CEOs. They can be jejune; more a testament to the author’s ego and less about providing any real insight or substance. Principles by Ray Dalio is a partial exception. There’s ego here for sure, but a good amount of substance too.
Dalio is the founder of Bridgewater Associates, one of world’s largest investment management firms. It serves institutional customers like pension funds, foundations and even governments. Currently it manages about $160-billion in assets. Principles originated as internal company training material. Published last year, it was Amazon’s top selling business book for 2017.
Let’s clear up one thing from the start. To me, the word “principles” refers to a few fundamental rules that form a code of conduct or the foundation for some field of study. The Ten Commandments, Asimov’s Three Laws of Robotics, Peano’s five axioms, even Amazon’s fourteen Leadership Principles are all fine examples.
Well this book is not that.
Instead it’s a well thought-out, hierarchically organized set of a couple of hundred heuristics refined over Dalio’s forty year career that are designed to help you get the most out of your life and work – whatever your definition of “most.”
The core idea of the book is that we should live our lives in a continuous cycle of growth or evolution. We set goals and attempt to achieve them; sometimes we succeed but often we fail; we reflect on our failures and try to learn from them; we adjust our principles based on what we’ve learned; and finally set new (and bigger) goals. Most of the book, and most of the principles, are about how to do these things effectively.
Dalio encourages us to reflect on our experiences and to refine our own set of principles as we go through life. This requires developing a certain amount of detachment. He suggests thinking about ourselves as a machine. Most of the time we’re operating “inside” our machine, going through our daily lives, executing our plans, etc. But it’s important to take the perspective of the machine’s designer and “look down” on it from time to time. See how it’s working. Does it need repair, or a tune-up, or a complete redesign? As we embark on new goals, or evaluate our progress against existing ones, this dual perspective is really useful for evaluating our situations and deciding whether and what changes are needed.
But it’s the ideas of radical open-mindedness and radical transparency for which Dalio is most famous, or perhaps notorious. These two ideas – principles in their own right – reoccur throughout the book. To make the best decisions, we must seek out the best available information and advice. That means being open-minded enough to consider ideas that conflict with your own, or that you’ve completely missed. It also means being transparent, sharing your ideas and opinions openly knowing they might be criticized or contradicted, but knowing also that respectful debate and disagreement lead to ideas being sharpened, strengthened and improved. It’s essentially a call for humility that I wouldn’t normally expect from a powerful CEO.
In practice, however, it’s led to accusations that Dalio takes these ideas to extremes, running Bridgewater like a cult, with all meetings recorded and junior employees being publicly criticized in front of their peers.
The book is divided into three parts. This first third is a brief autobiography, well a hundred and twenty-odd pages anyway. The second part is covers life principles and the final part covers work principles. Apparently there’s a follow-on book that will focus on finance and economic principles.
I read about half the book. I skipped through most of the autobiography, read the life principles section in detail and skimmed the work principles section. Frankly you don’t need to read the whole thing either. Instead, I think you can treat it as a useful reference book, returning to it from time to time when you’re faced with new or difficult situations.
I can’t say I discovered any revolutionary ideas in Principles, but taken as a whole they form a solid framework for identifying and addressing work and life problem to help you meet your goals. I do wish this book had been available when I was younger though. Having a framework like this and developing the habits Dalio encourages early in life or career could have a dramatic effect over many years, kind of like compound interest. Older readers will probably have worked out many of Dalio’s principles for themselves, even if they haven’t codified or organized them as neatly as he has.
Principles web site
Mastering the Machine, a 2011 profile of Ray Dalio by John Cassidy