Bridgewater-Associates-Ray-Dalio-Principles

©2011RayDalioPrinciplesbyRayDalioWhatfollowsarethreedistinctpartsthatcanbereadeitherindependentlyorasaconnectedwhole.Part1isaboutthepurposeandimportanceofhavingprinciplesingeneral,havingnothingtodowithmine.Part2explainsmymostfundamentallifeprinciplesthatapplytoeverythingIdo.Part3,explainsmymanagementprinciplesastheyarebeinglivedoutatBridgewater.Sincemymanagementprinciplesaresimplymymostfundamentallifeprinciplesappliedtomanagement,readingPart2willhelpyoutobetterunderstandPart3,butit’snotrequired—youcangodirectlytoPart3toseewhatmymanagementprinciplesareandhowBridgewaterhasbeenrun.OnedayI’dliketowriteaPart4onmyinvestmentprinciples.Ifyouareinlookingtogetthemostbangforyourbuck(i.e.,understandingfortheeffort),IsuggestthatyoureadParts1and2,andthebeginningofPart3(throughtheSummaryandTableofPrinciples)whichwillgiveyounearlythewholepicture.It’sonlyabout55pagesofanormalsizebook.Aboveallelse,Iwantyoutothinkforyourself—todecide1)whatyouwant,2)whatistrueand3)whattodoaboutit.Iwantyoutodothatinaclear-headedthoughtfulway,sothatyougetwhatyouwant.Iwrotethisbooktohelpyoudothat.Iamgoingtoaskonlytwothingsofyou—1)thatyoubeopen-mindedand2)thatyouhonestlyanswersomequestionsaboutwhatyouwant,whatistrueandwhatyouwanttodoaboutit.Ifyoudothesethings,Ibelievethatyouwillgetalotoutofthisbook.Ifyoucan’tdothesethings,youshouldreflectonwhythatis,becauseyouprobablyhavediscoveredoneofyourgreatestimpedimentstogettingwhatyouwantoutoflife. Introduction……2 Part1:TheImportanceofPrinciples……4 Part2:MyMostFundamentalLifePrinciples……6 Part3:MyManagementPrinciples……38 Introduction2©2011RayDalioIntroductionPrinciplesareconceptsthatcanbeappliedoverandoveragaininsimilarcircumstancesasdistinctfromnarrowanswerstospecificquestions.Everygamehasprinciplesthatsuccessfulplayersmastertoachievewinningresults.Sodoeslife.Principlesarewaysofsuccessfullydealingwiththelawsofnatureorthelawsoflife.Thosewhounderstandmoreofthemandunderstandthemwellknowhowtointeractwiththeworldmoreeffectivelythanthosewhoknowfewerofthemorknowthemlesswell.Differentprinciplesapplytodifferentaspectsoflife—e.g.,thereare“skiingprinciples”forskiing,“parentingprinciples”forparenting,“managementprinciples”formanaging,“investmentprinciples”forinvesting,etc—andthereareover-arching“lifeprinciples”thatinfluenceourapproachestoallthings.And,ofcourse,differentpeoplesubscribetodifferentprinciplesthattheybelieveworkbest.IamconfidentthatwhateversuccessBridgewaterandIhavehadhasresultedfromouroperatingbycertainprinciples.Creatingagreatculture,findingtherightpeople,managingthemtodogreatthingsandsolvingproblemscreativelyandsystematicallyarechallengesfacedbyallorganizations.Whatdifferentiatesthemishowtheyapproachthesechallenges.Theprincipleslaidoutinthepagesthatfollowconveyouruniquewaysofdoingthesethings,whicharethereasonsforouruniqueresults.Bridgewater’ssuccesshasresultedfromtalentedpeopleoperatingbytheprinciplessetouthere,anditwillcontinueiftheseorothertalentedpeoplecontinuetooperatebythem.Likegettingfit,virtuallyanyonecandoitiftheyarewillingtodowhatittakes.Whatiswrittenhereisjustmyunderstandingofwhatittakes:mymostfundamentallifeprinciples,myapproachtogettingwhatIwant,andmy“managementprinciples,”whicharebasedonthosefoundations.Takentogether,theseprinciplesaremeanttopaintapictureofaprocessforthesystematicpursuitoftruthandexcellenceandfortherewardsthataccompanythispursuit.IputtheminwritingforpeopletoconsiderinordertohelpBridgewaterandthepeopleIcareaboutmost.Untilrecently,Ididn’twriteouttheseprinciplesbecauseIfeltthatitwaspresumptuousformetotellotherswhatwouldworkbestforthem.Butovertime,IsawthepeoplewhoIcaredaboutmoststrugglingwithproblemsandwantedtohelpthem;Ialsofoundthattheirproblemswerealmostalwaystheresultofviolatingoneormoreoftheseprinciples,andthattheirproblemscouldbesolvedbyapplyingtheseprinciples.SoIbeganwritingdownthetypesofproblemsandthebrokenprinciplesthatcausedthem.WhenIbegan,Ididn’tknowhowmanyprinciplesIwouldendupwithbut,throughthisprocess,Idiscoveredthatabout200principlesprettymuchcoveralltheproblems.1I’msurethatIwillcomeupwithmoreasIlearnmore.WhenIsaythatthesearemyprinciples,Idon’tmeanthatinapossessiveoregotisticalway.IjustmeanthattheyareexplanationsofwhatIpersonallybelieve.IbelievethatthepeopleIworkwithandcareaboutmustthinkforthemselves.Isettheseprinciplesoutandexplainedthelogicbehindthemsothatwecantogetherexploretheirmeritsandstresstestthem.WhileIamconfidentthattheseprinciplesworkwellbecauseIhavethoughthardaboutthem,theyhaveworkedwellformeformanyyears,andtheyhavestooduptothescrutinyofthehundredsofsmart,skepticalpeople,Ialsobelievethatnothingiscertain.Ibelievethatthebestwecanhopeforishighlyprobable.Byputtingthemoutthereandstresstestingthem,theprobabilitiesoftheirbeingrightwillincrease.                                                             1SinceIlearnedtheseprinciplesbyencounteringrealityandreflectingonmyencounters,andIamstilldoingthesethings,Iexpecttherearemoreprinciplestocome.SoIamstillcreatingthisdocumentbythrowingvariousthoughtsdownwhentheyoccurtome,tryingtoputtheminsomesensibleorderandtryin