Black and white portrait of Ray Dalio: Narrator and Creator of Life Principles

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.

Work Principle

Make your metrics clear and impartial.

To help you build your perpetual motion machine, have a clear set of rules and a clear set of metrics to track how people are performing against those rules--and predetermined consequences that are determined formulaically based on the output of those metrics.

The more clear-cut the rules are, the less arguing there will be about whether someone did something wrong. For example, we have rules about how employees can manage their own investments in a way that doesn't conflict with how we manage money for clients. Because these rules are clear-cut, there's no room for argument when a breach occurs.

Having metrics that allow everyone to see everyone else's track record will make evaluation more objective and fair. People will do the things that will get them higher grades and will argue less about them. Of course, since most people have a number of things to do that are of different importance, different metrics have to be used and weighted appropriately. The more data you collect, the more immediate and precise the feedback will be. That is one of the reasons I created the Dot Collector tool to work as it does (providing lots of immediate feedback); people often use the feedback that they get during a meeting to course-correct in the meeting in real time.

Once you have your metrics, you can tie them to an algorithm that spits out consequences. They can be as simple as saying that for every time you do X you will earn Y amount of money (or bonus points), or it can be more complex (for example, tying the weighted mix of metrics grades to various algorithms that provide the estimated compensation or bonus points).

While this process will never be exact, it will still be good in even its crudest form, and over time it will evolve to be terrific. Even when flawed, the formulaic output can be used with discretion to provide a more precise evaluation and compensation; over time it will evolve into a wonderful machine that will do much of your managing better than you could do it on your own.

Work Principle

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Learn to get more of what you want out of life.

Life Principles

Work Principles

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