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
Be imprecise.
Understand the concept of "by-and-large" and use approximations. Because our educational system is hung up on precision, the art of being good at approximations is insufficiently valued. This impedes conceptual thinking. For example, when asked to multiply 38 by 12, most people do it the slow and hard way rather than simply rounding 38 up to 40, rounding 12 down to 10, and quickly determining that the answer is about 400. Look at the ice cream shop example and imagine the value of quickly seeing the approximate relationships between the dots versus taking the time to see all the edges precisely. It would be silly to spend time doing that, yet that's exactly what most people do. "By-and-large" is the level at which you need to understand most things in order to make effective decisions. Whenever a big-picture "by-and-large" statement is made and someone replies "Not always," my instinctual reaction is that we are probably about to dive into the weeds--i.e., into a discussion of the exceptions rather than the rule, and in the process we will lose sight of the rule. To help people at Bridgewater avoid this time waster, one of our just-out-of-college associates coined a saying I often repeat: "When you ask someone whether something is true and they tell you that it's not totally true, it's probably by-and-large true."
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Does this mean rapid trial and error is more important than complex reasoning? How do we know when to use fast thinking and when to slow down and reason deeply?
Both are valuable.
In investing and research, details often matter a lot, so how do we know when to zoom into details and when to stay at the bigger “by-and-large” level?
Knowing when to focus on details versus the bigger picture is about understanding the context and objectives of your analysis. While all macro events are aggregates of micro transactions, precision matters when assessing specific investments or company health. For broader strategic directions or policy decisions, a wider perspective is crucial. Striking a balance allows you to be precise when necessary and flexible enough to adapt to changing circumstances. Consider the level at which you’re operating and the decisions you need to make to determine whether to delve into details or maintain a broader focus.
When you talk about “by-and-large”, are you saying we should redefine what “right” means or accept being wrong sometimes?
No. It means being imprecise is often ok and that being hung up with the precision can distract your attention from what's important. It is about acknowledging that not all decisions require absolute precision. Instead, it means understanding the broader context and making decisions that are good enough to move forward effectively. This doesn’t mean disregarding accuracy but rather recognizing when a decision is sufficiently precise for the situation at hand. In an idea meritocracy, it’s crucial to balance the need for precision with the need for progress.
Life Principle
Any person or organization can adopt Principles to better achieve their goals.
Learn what Principles are and how they are applied at Principles.com
