Principles are ways of successfully dealing with reality to get what you want out of life.
Ray Dalio, one of the world’s most successful investors and entrepreneurs, cites principles as his key to success.
In 1975, Ray Dalio founded Bridgewater Associates, out of his two-bedroom apartment in New York City. Over forty years later, Bridgewater has grown into the largest hedge fund in the world and the fifth most important private company in the United States (according to Fortune magazine), and Dalio himself has been named to TIME’s list of the 100 most influential people in the world. Along the way Dalio discovered unique principles that have led to his and Bridgewater’s unique success. It is these principles, and not anything special about Dalio, that he believes are the reason behind whatever success he has had. He is now at a stage in his life that he wants to pass these principles along to others for them to judge for themselves and to do whatever they want with them.
Life Principle
Recognize that 1) the biggest threat to good decision making is harmful emotions, and 2) decision making is a two-step process (first learning and then deciding).
Learning must come before deciding. As explained in Chapter One, your brain stores different types of learning in your subconscious, your rote memory bank, and your habits. But no matter how you acquire your knowledge or where you store it, what’s most important is that what you know paints a true and rich picture of the realities that will affect your decision. That’s why it always pays to be radically openminded and seek out believable others as you do your learning. Many people have emotional trouble doing this and block the learning that could help them make better decisions. Remind yourself that it’s never harmful to at least hear an opposing point of view.
Deciding is the process of choosing which knowledge should be drawn upon—both the facts of this particular “what is” and your broader understanding of the cause-effect machinery that underlies it—and then weighing them to determine a course of action, the “what to do about it.” This involves playing different scenarios through time to visualize how to get an outcome consistent with what you want. To do this well, you need to weigh first-order consequences against second- and third-order consequences, and base your decisions not just on near-term results but on results over time.
Failing to consider second- and third-order consequences is the cause of a lot of painfully bad decisions, and it is especially deadly when the first inferior option confirms your own biases. Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored. To prevent myself from falling into this trap, I used to literally ask myself questions: Am I learning? Have I learned enough yet that it’s time for deciding? After a while, you will just naturally and open-mindedly gather all the relevant info, but in doing so you will have avoided the first pitfall of bad decision making, which is to subconsciously make the decision first and then cherry-pick the data that supports it.
But how does one learn well?
LEARNING WELL
For me, getting an accurate picture of reality ultimately comes down to two things: being able to synthesize accurately and knowing how to navigate levels.
Synthesis is the process of converting a lot of data into an accurate picture. The quality of your synthesis will determine the quality of your decision making. This is why it always pays to triangulate your views with people who you know synthesize well. This raises your chances of having a good synthesis, even if you feel like you’ve already done it yourself. No sensible person should reject a believable person’s views without great fear of being wrong.
To synthesize well, you must 1) synthesize the situation at hand, 2) synthesize the situation through time, and 3) navigate levels effectively.
RECENT USER EXCHANGES
I love the saying “when emotion goes up, intelligence goes down.” Noticing this during decision‑making can be invaluable. My wife and I react differently—my emotion leans toward risk, hers away from it. When we spot this in each other, we know our emotions are influencing our judgment, and we make the decision together accordingly.
Well done! That’s a good example of how people who are different can work together to make a better decision and they can make individually.
What are harmful emotions?
They are the emotions that trigger you to do things you regret.
Life Principle
- Learn How to Make Decisions Effectively
Recognize that 1) the biggest threat to good decision making is harmful emotions, and 2) decision making is a two-step process (first learning and then deciding).
Any person or organization can adopt Principles to better achieve their goals.
Learn what Principles are and how they are applied at Principles.com
