Ray Dalio, American billionaire hedge fund manager and philanthropist, and his mentee Diddy, as seen in the photograph above.
I’ve been reading the book “Principles” lately by Ray Dalio. Dazzled by the book’s front cover with positive comments from Bill Gates and The NY Times, I was curious to see why this book was so hyped up in both the literary and business communities. It turns out that this book changed my life. But first, a little bit about its author.
At the age of twelve, Ray Dalio tripled his first investment in Northeast Airlines because he thought the shares were “cheap.” Dalio, who turned 70 years old last August, is a tall and somewhat gaunt billionaire with an impressive stature. Always in a dark suit and a light collared-shirt, his natural and relaxed expressions give the impression of someone who is both assertive and open-minded, the attributes that Dalio urges everyone to have. After getting his Masters degree from Harvard Business School, he founded Bridgewater Associates, now the world’s largest hedge fund. He was adamant for the company to run on two principles: he wanted his company to be like a big family and function on an idea meritocracy. Those two principles soon evolved into hundreds of other principles and thousands of sub-principles that every employee at Bridgewater must understand and follow. According to Dalio, having good principles and sticking to them are pivotal towards a successful organization that runs on an idea meritocracy, such as the ones I’ve noted from the book below.
“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.” This theory is what Dalio said in his recently published book “Principles,” explaining to the reader why having principles is pivotal towards being successful in both life and work. His pragmatic approach to life is also apparent in his work, when he founded Bridgewater at the age of 26 in his two-bedroom Manhattan apartment. Ambitious from the start, he knew that the only way Bridgewater could be successful for the long term would be for the company to have clear goals operated on timeless principles in an idea meritocracy.
“Of all approaches to decision making, an idea meritocracy is the best.” In an interview with CNBC, Dalio says that an idea meritocracy is top on his list of “Principles.” It is so important that he attributes much of Bridgewater’s success to this system. An idea meritocracy is where everyone has the right to challenge everyone with thoughtful disagreements and then work together towards making the best all-round decision. Unlike many hierarchical companies where the people in charge have the ultimate power, Bridgewater discourages “levels” within and encourages all employees to voice their opinions and have “thoughtful disagreements” with each other, where the group then works together to make the best possible decision for the company. This freedom and right to voice opinions that urges meaningful relationships between people is what pushes Bridgewater a step beyond other companies, as minds working together is always stronger than a single mind on its own. When asked whether he accepts criticism easily in an interview with CNBC, Dalio passionately responded: “I love it!”, emphasizing that criticism is the only way for anyone to get better.
“To successfully manage your organization, you need to have clear-cut goals and ever-changing tasks to achieve those goals.” Dalio started Bridgewater with three goals in mind: collaboratively accomplish the chosen missions in big ways, form quality relationships that together make for a great community, and always have money that allows Bridgewater employees to buy what they need and want. This vision never changed as Bridgewater evolved from a one person company to a 1500-person company; what changed was the tasks Dalio had to undertake to continue to achieve these goals as the company expanded.
“Realize that almost all “cases at hand” are just “another one of those,” identify which “one of those” it is, and then apply well-thought-out principles to deal with it” is the theory that allowed Dalio to grow his empire. He reflects on every decision he makes both for himself and the company and probes deeply on the logic behind these decisions. He then records the guiding morals he used in different scenarios which worked and coded them into algorithms in a powerful computer so that it can help the company make better decisions without emotional bias. Ingeniously, instead of relying on either himself or the computer, Dalio chooses to work with both his team and the computer to make the best decision available in an idea meritocratic way. He writes that “Almost everything is like a machine.” His constant goal was to understand how the economic machine works, build his own replica, and strive to constantly improve on it. This constant act of probing information from both himself, his team, and his computers lead to deeply understanding the reasonings behind root causes and promoting Bridgewater’s massive continual success.
As a result of his principles, Dalio constantly pursues excellent relationships, but not in a stereotypical I-just-want-to-make-a-friend way. He’s a firm believer in tough love. “We’re tough on each other,” says Dalio when describing the meaningful relationships within Bridgewater, but truth be told, this rigorous pursuit of radical truth which leads to meaningful relationships is what drives Dalio and all Bridgewater Associates further on the path of excellence.
Although some of what Dalio says in “Principles” seem harsh and dramatic, his advice is actually very practical in the real world - I was always fascinated by what Dalio has to say about his life and work. I’ve even found myself relating to some of his morals, reflecting on past incidents and making my own principles. Furthermore, I’ve started seeing things as “a machine,” diagnosing the problems and probing deeply on how I can solve them, and then executing on that plan. In fact, this writing is a testament to that principle.
So, if someone asks me, “Are principles the key to success?”, I would respond with a yes... for the most part, because there are, of course, exceptions to every guideline. While my principles are not nearly as complete or timeless as Dalio’s, they’re certainly improving my life quality by systematically correcting my way of thinking when encountering “another one of those.”
BY: Danny Huang