Justin Smith
By: Justin Smith June 1, 2018
Principles By Ray Dalio Book Review

When I noticed an advertisement for Principles by Ray Dalio I immediately went to Amazon to pre-order a copy. For those who don’t know, Dalio founded the largest and most successful hedge fund in the history of the world: Bridgewater Associates. He’s one of the most wealthy and influential people of our time, and not just monetarily. He’s an out-of-the-box free-thinker with a passion for living up to his fullest potential, and for empowering his friends, family, extended family (Bridgewater Associates), and everyone else who’s willing to live up to theirs. In Principles, you’ll read about Dalio’s trials and the process he’s used to come about his Life & Work Principles. You’ll learn how to get the most out of failure, and how to embrace and live by the positive attitudes of Honesty, Caring, Willingness, Open-Mindedness, Objectivity, Humility, Gratitude, and responsibility.

 

In the books’ introduction, Dalio explains, “Whatever success I’ve had in life has had more to do with my knowing how to deal with my not knowing than anything I know. The most important thing I learned is an approach to life based on principles that helps me find out what’s true and what to do about it.”

 

 

Back in 2007 or 2008 I got one of my first real economics lessons from an investor named Kai Olderog. Kai was a property owner/investor, and I was the Vice President of the real estate and property management company that managed his portfolio in Florida. I was fresh out of college and I didn’t know squat about economics. I had a vague understanding of the markets, supply and demand and the GDP. But nothing I couldn’t learn in Economics 101. In a three hour conversation with Kai over Chipotle Bowls, he started drawing charts and graphs on napkins, doing his best to make sure I took something of value away from that conversation. I remember being kindly asked to leave the restaurant because they were closing, and continuing our conversation in the parking lot for another hour. I mention this because Kai worked at Bridgewater Associates, Ray Dalio’s company. Turning the pages of Principles, I was anxiously hoping to see Kai’s name, and it didn’t come up. Of course, that was probably silly of me considering Bridgewater has thousands of employees. Though, I couldn’t help thinking back to our conversation and recognizing why Kai would belong at Bridgewater. He was radically open-minded and objective. He clearly operated by a set of principles similar to those defined in Dalio’s book. Kai truly impressed me with his willingness to help me understand, and Ray Dalio has impressed me in a very similar fashion.

 

The first hundred and twenty one pages offers a look into the life experience, successes and failures of Ray Dalio. He explains, “Over the course of our lives, we make millions and millions of decisions that are essentially bets, some large and some small. It pays to think about how we make them because they are what ultimately determine the quality of our lives.” In the first few chapters you’ll look at many of Dalio’s encounters, the choices he made along the way and their first, second and third level consequences. You’ll see what he gained from these encounters and the principles he developed for how to handle similar encounters more successfully in the future.

 

One story that really stood out to me in the Life Principles section of the book was when Dalio thought he had Barrett’s Esophagus with high-grade dysphasia. He was on a stressful emotional rollercoaster that went from bad to worse. It wasn’t until he got multiple opinions, and triangulated those opinions with believable professionals, that he learned he didn’t have a medical concern at all. Had he trusted one professional, he’d very well be dead right now. He shared that story in the book to highlight the importance of triangulation with believability-weighted people. It saved his life and if I had to guess, it’s a big part of the reason Bridgewater has been so successful.

 

The other story that I found interesting was a major life event that happened that resulted in Dalio setting out to learn as much as he possibly could about the human brain. His son Paul smashed a computer in the lobby of his hotel, was arrested and later admitted into a psychiatric hospital, where he was diagnosed with bipolar disorder. This struggle sparked an ambitious desire in Dalio to understand how people were wired, and to learn to work with each in a way that makes sense. He concluded, “Everyone is like a Lego set of attributes, with each piece reflecting the workings of a different part of their brain. All these parts come together to determine what each person is like, and if you know what a person is like, you’ll have a pretty good idea of what you can expect from them.”

 

Ray Dalio Principles Quote Expectations

Ray Dalio – Principles Author & Bridgewater Associates Founder

 

Something else I really enjoyed in the Life Principles section of the book was the lesson on evolution. More specifically, how the oldest and most primitive components of our brain is where the Amygdala resides. The Amygdala is responsible for basic emotion. The most evolved region of the brain is the neocortex. It’s responsible for our logic and reason. He explains that the conscious mind is constantly at war with the subconscious. By default, our animalistic nature is to “feel.” However, there are thoughts that precede our feelings, and by taking the time to identify those thoughts, we tend to make better choices in life. Now when I hear someone saying, “I feel like he did that because,” I interject with “think… you THINK he did that because.” I then explain how our thoughts result in feelings and our feelings result in action. I explain the benefits of having my I (intellect) over my E (emotion), and the disadvantage of having the E over the I. I’ve benefitted immensely by understanding that no one can make me feel any type of way. Something happens, I think something about what happened, as a result of my thinking I feel something, then I take action and experience whatever consequences that come with my action. Nothing has the power to make me think, feel, or behave irrationally, and that is extremely liberating.

 

Dalio took things to a whole new level when he explained using psychometric testing such as the Myers-Briggs to evaluate and profile each of his employees. He realized that everyone is weaker and stronger in different areas, that people have different personalities, and that we all typically fit in one of five categories: Creators, Refiners, Advancers, Executors, and Flexors. The attributes of each employee go on their individual “Business Card,” which helps construct teams on the fly or delegate to the individuals that are best suited for each task. He concludes that, “Some decisions you should make yourself and some you should delegate to someone more believable. Using self-knowledge to know which are which is the key to success. No matter what it is you are trying to do.”

 

I flew through the first 272 pages of Principles. Then came the Work Principles, which essentially expanded upon the Life Principles. I found everything in the Work Principles section to be hugely beneficial. I slowed down and treated the balance of the book as a study guide, highlighting key principles I believe in, questioning others and ultimately coming to a set of rules for how I will manage myself and my extended family at Serpify. I only want to work with people who have both great character and great capabilities. I will be transparent and open-minded. I will never let my loyalty to people stand in the way of truth and the well-being of the organization as a whole. I understand that many people will pretend to operate in my interest while operating in their own. I will always be on the far side fair, and I aim to create a culture where it’s perfectly okay to make mistakes and unacceptable not to learn from them. Now, when something doesn’t go as planned, I write it down and reflect on it and try learn as much as I can from it. I understand and welcome conflict that results in thoughtful disagreement. I hold myself and others accountable and I appreciate them for holding me accountable. These are just a few of the many principles defined in the Work Principles section of the book that I’m totally on board with.

 

I’ve operated consistently with many of Dalio’s Principles, but seeing them in algorithmic form on paper has helped me see many of my shortcomings and implement processes to be the best that I can be. I got more out of ‘Principles by Ray Dalio’ than any other book I’ve read in 2017. I enjoyed it so much I had Roshan buy a copy and insisted that multiple copies be made available on the bookshelves in both our Orlando and Mumbai offices. I’ve implemented a Friday “Morning Meeting” ritual with eight segments to help our team get and stay in sync. I am patiently awaiting the rest of the tools in the Principles app to put them to use at Serpify. The tools mentioned in the book include: Coach, Dot Collector, Baseball Cards, Issue Log, Pain Button, Dispute Resolver, Daily Update Tool, and the Contract Tool. Thankfully we are in our infancy as an organization with very few employees. That said, defining and operating by our principles early in the game will surely give us an advantage that I’m looking forward to.

 

Ray, if you’re reading this, thank you for taking the time to compile this extraordinary list of principles and for sharing your life experience that preceded their discovery. Oh, and I figured I’d let you know that on page 340 you said, “I felt that it was their own responsibility to protect their teeth.” I think you THOUGHT it was their responsibility to protect their teeth, right? But all joking aside, this book has truly changed my life for the better. Words cannot express my appreciation for this book. To express my gratitude, I commit to continually identify and define my own principles, and to operate consistently with those values. I look forward to your next book on Investment Principles, I have so much to learn!

 

To anyone else who’s thinking about picking up a copy of Principles by Ray Dalio, this book review will simply not suffice. Don’t think twice about it, go get a copy today. I’ve read hundreds of self-help books and business books and this is my new go-to resource. Principles is truly a fantastic read and belongs on any serious readers bookshelf.

  • 227
    Shares

8
Leave a Reply

avatar
6 Comment threads
2 Thread replies
1 Followers
 
Most reacted comment
Hottest comment thread
7 Comment authors
Peter StokesPeter HewittSimonJustinWilliam C Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
Sophie
Guest
Sophie

I ordered my copy of Principles three weeks ago and I haven’t started reading it yet. I am really looking forward to it though.

Pat Hewitt
Guest
Pat Hewitt

Thanks for taking the time to write your take on the book. I’m most impressed by Ray Dalio’s ability to not only stay above the water when all the other major hedge funds were in deep trouble but to thrive. There must be something unique about the way he does things. I think I’m more interested in the follow-up to the life and work principles, as it’s about trading and investing, but I’m going to read them both.

Peter Stokes
Guest
Peter Stokes

You’re a great writer yourself. When are you going to write a book? I’ll be the first to preorder!

Justin
Guest
Justin

I wouldn’t say I’m a great writer, but thank you for the compliment. I doubt I’ll have time to write a book anytime soon, maybe later in life, when I have something of value to share with the world. Thanks again 🙂

Simon
Guest
Simon

Great review. I saw an article for this book in a magazine recently and went to the website and bookmarked it, but haven’t ordered it yet. I think I’ll order a copy.

Peter Hewitt
Guest
Peter Hewitt

I think I know Kai, I don’t think he worked for Bridgewater associates though…

William C
Guest
William C

You really think he’s going to share his trade secrets in a book? There’s no way he’s going to give you his secret sauce on a silver platter. But you fools will read anything. lol

Justin
Guest
Justin

Someone’s struggling with being open minded. 😛 And I’d have to thoughtfully disagree. I’ve read the book and I agree with just about all the principles mentioned throughout. Trust me it’s worth the read.

Follow on Feedly