Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge-fund firm, lives by a set of rules that, he’d be first to admit, aren’t for everyone.
That’s perfectly OK with him. All Dalio wants is for people to try them on and see what fits, which led to his writing more than 550 pages of business, investing and life lessons in a book titled, simply, “Principles: Life and Work.”
Part record, part reckoning, “Principles” landed with a splash a year ago, not surprisingly, given its author’s ability to influence financial markets with a cable television appearance or a tweet. But since the medium is the message, Dalio wanted another way to reach people who likely would appreciate the book’s encouraging “you’ve got this” message, but frankly wouldn’t take the time to read it — that might mean you, career-minded 20-somethings just starting out in the working world.
So in May, about the time when college students were tossing graduation caps into the air, Dalio dropped on YouTube a 30-minute animated video, which he narrates, condensing what he determines are his book’s most important principles into eight digestible soundbites of a few minutes each.
I watched the YouTube video recently, since we’re about to hear a lot more from Dalio. His latest book, “A Template for Understanding Big Debt Crises,” is due next week to mark the 10th anniversary of the 2008 global financial crisis. The book shares the tools and practices that helped Bridgewater anticipate and navigate the 2008 meltdown. Dalio’s hope is that by studying historical patterns that led to financial-market earthquakes and understanding their triggers, investors will be better prepared to weather the next major crisis. (Looking further out, fans of Dalio’s approach may see an app based on the “Principles” book, and there’s a promise of a second volume of the book covering the economy and investing.)
Dalio’s new book is about avoiding and managing financial pain, and the YouTube animation, focused on career- and life-coaching, deals with avoiding and managing personal pain. His rules of the road apply to both.
Expecting the unexpected
Dalio, to put it mildly, is obsessive about expecting the unexpected. If well-prepared people keep a Plan B, Dalio seems like a guy with a Plan Z. The YouTube animation is an open invitation to practice his uber-realistic world view — an East/West melding of values-based mindfulness with his trademark “radical open-mindedness.” Or as Dalio puts it in Episode 1 of the animation: “Principles are smart ways for handling things that happen over and over again in similar situations.”
In this opening episode, Dalio explains that making mistakes and reflecting on them has been a tough, but valuable, teacher. The key is to allow yourself to make mistakes without self-condemnation, and to be willing to learn from them so you don’t repeat the same ones. “I ran after the things I wanted, crashed, got up and ran again,” Dalio says. “Each time I crashed, I learned something.”
From there, Dalio talks about becoming a “hyper-realist” in business and his life. Here, the key is to let go of the expectations that people by nature often have. This doesn’t mean abandoning your dreams; quite the contrary. Dreams are more likely to come true when we set realistic goals and check them off step-by-step, without worrying about the outcome. Living your dream consciously and awake, as it unfolds, is more likely to bring, if not success, then satisfaction and a lot less disappointment.
Secrets to success
“Without pursuing dreams, life is mundane,” Dalio says. “Hyper-realism is the best way to choose one’s dreams and then achieve them.” There are “great rewards,” he adds, from “deeply understanding, accepting and working with reality as it is and not as I wish it would be.”
In the next segment, Dalio offers a secret to his success: a five-step process applied repeatedly to investing, management and just getting through 24 hours. These are:
1. Know your goals and run after them.
2. Identify and face the problems, however painful, that stand in the way of your goals.
3. Diagnose the root causes of these problems.
4. Design a plan to get around these obstacles.
5. Execute on your plan, pushing yourself to do whatever is needed.
“You will lose something or someone you think you can’t live without,” Dalio says. “You might think your life is ruined and there’s no way to go forward. But it will pass. There’s always a best path forward; you just don’t see it yet.”
Dalio’s own rude awakening came in the early 1980s, the fallout from a devastating wrong-way bet on a global economic depression that never came. His business was ruined, and, Dalio believed at the time, so was he. He clawed his way back from his bottom, vowing never to revisit it again. He began looking at financial markets with a sharp eye for repetitive patterns and linear connections. History may not repeat, but it rhymes, and Dalio studied stanza after stanza so that surprises — and money-losing bets — would be rarer and less painful.
Need to be right all the time
But Dalio the technician has to contend with Dalio the man, who, like everyone, fights bouts of fear, ego and emotional blind spots. Here’s Dalio’s explanation in the video of how people too often react, rather than respond, to adversity and challenge; see if you relate:
“Your deepest-seated needs and fears reside in areas of your brain that control your emotions and are not accessible to your higher-level conscious awareness,” Dalio says. “And because our need to be right can be more important than our need to find out what’s true, we like to believe our own opinions without properly stress-testing them.
“We especially don’t like to look at our mistakes and weaknesses,” he adds. “We are instinctively prone to react to explorations of them as though they’re attacks. We get angry, even though it would be more logical for us to be open to feedback from others. This leads to our making inferior decisions, learning less, and falling short of our potential.”
‘Radical open-mindedness’
That’s fear and ego working us over but good. Emotional blind spots also keep us from making productive decisions. Says Dalio: Because of how our brains are wired differently, everyone perceives the world around them differently. By doing what comes naturally to us, we fail to account for our weaknesses, and we crash. Either we keep repeating this or we change.”
There’s a pathway through this thicket, Dalio says, but you probably won’t like it.
There’s a pathway through this thicket, Dalio says, but you probably won’t like it: radical open-mindedness.
“I needed to replace the joy of being proven right with the joy of learning what’s true,” Dalio explains.
How this works involves you seeking out smart people who disagree with your best thinking and, importantly, tell you why. That’s radical, because most of us just want to hear what we want to hear, and open-minded, because we choose to be willing to entertain opposing points of view — to consider the elephant from another blind man’s perspective.
Says Dalio: “Let go of your attachment to having the right answers yourself, and use your fear of being wrong to become open-minded to these other views. In this way, you can point out the risks and opportunities that you would, individually, miss.”
Struggle = growth
You may be thinking: “All this is easy for Dalio; he’s successful and wealthy, and successful and wealthy people gravitate to him.” This is indeed true, but it wasn’t always so. Dalio is asking folks to become just a little bit more honest, open-minded, and willing, and see what happens.
It’s a struggle, no question. But most things worthwhile involve struggle.
Dalio is a compelling motivational speaker. His principles, applied to investing and risk-taking across the global financial markets, have made him a billionaire several times over. But neither his book nor the animated video is about adding zeros to your net worth.
The thing to know about Dalio is that he wants you to be wealthy, but in more than monetary terms. The wealth effect here is being more intentional and fully formed, which in time can lead to a richer, more eventful life.
If as a result you become the next Jeff Bezos, or even the next Ray Dalio, good for you. Dalio’s most important lesson about making money is first to do whatever brings you satisfaction. Do what you love. Learn from mistakes — yours and others’. Be exhausted from the exhilaration of hard, honest work that makes you come alive. The money will follow. Not billions, most likely, and probably not even millions, but enough — and sometimes more than enough.
Related: If Ray Dalio’s 1937 comparison continues tracking, the market is in big trouble
