Principles Book Summary Review PDF | Ray Dalio

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Disclaimer: This is an unofficial summary and analysis.

About Ray Dalio

Ray Dalio is the founder, co-chairman, and co-chief investment officer of Bridgewater Associates. He started Bridgewater out of his two-bedroom apartment in New York in 1975. It is now the world’s largest hedge fund. According to Fortune Magazine, the firm has grown into the US’s fifth most important private company. RayDalio’s net worth is currently just under 17 billion dollars. He also holds a Bachelor of Science degree in finance from CW Post College and an MBA from Harvard Business School.

Introduction

Ray Dalio overcame an economic abyss to become one of the wealthiest men in America. In Principles, he shares the secrets to his success. The key to developing your principles is becoming a hyper-realist. Becoming a hyper-realist will allow you to view failures as learning opportunities rather than personal attacks. Principles recommends you consider your mistakes as minuscule compared to the machine that is the world. Then, you will stop using mistakes as excuses for giving up on your goals. 

StoryShot #1: Embrace the Call to Adventure

Dalio describes principles as ways to handle scenarios that repeatedly happen in similar situations. You will not start life with principles pre-installed. Instead, you must gain principles from your life experiences. Mistakes are essential for the development of your principles. You must reflect on these mistakes and change your principles accordingly. Think of this as a challenge and an adventure.

It’s easy to adopt the principles of others and conform to society’s foundational ideas. However, adopting this approach means others will direct your life. Your adventure is where you will learn how to live your life. Time is like a river that will carry you forward to these adventures. Once you reach these encounters, you have no choice whether you engage with them. Instead, your task is to ensure you respond well to these encounters. 

The quality of the decisions you make when you encounter these circumstances will determine your quality of life. Particularly, the way you incorporate your mistakes into your principles will determine whether you become a successful person. 

StoryShot #2: Embrace Reality and Deal with It

Ray Dalio is not unique. Instead, he attributes his success to a unique approach that anybody can adopt. The first step in adopting this unique approach is to embrace reality and deal with it. 

Embracing reality involves pursuing your adventures, no matter the sacrifices. For example, Dalio was willing to follow any adventure as long as he had a bed to sleep on and food to eat. This approach allowed him to pursue any positive adventure without fear of failure. He ran after the things he wanted and failed. However, he learned from these experiences and pushed on to the next adventure. After several failed attempts, Dalio got better at pursuing his adventures. Subsequently, these failures became less common. He started to enjoy this process as he saw progress. The essence of these experiences was that Dalio encountered reality. Then, through his failures, he learned how to deal with reality. 

StoryShot #3: Truth Is the Essential Foundation for Good Outcomes

Dalio describes truth as the way the world works. We can use our own evolution and the laws of nature to achieve our goals. Instead of working towards how he wanted the world to be, Dalio became a realist. He still pursued his dreams. However, he based his dreams on the reality of the world. Subsequently, Dalio became more likely to achieve his goals. Creating realistic goals and developing high levels of determination will bring you a successful life. 

StoryShot #4: Identify Your Successful Life

Success is a subjective concept. Decide for yourself what a successful life looks like. Society should not determine success. Instead, your own success is determined based on your goals and values. Plus, your success depends on your ability to embrace the harsh realities of life. 

Embracing the harsh realities of life is difficult. Dalio initially struggled to embrace his realities, but learned that the pain was purely psychological. Once he understood the rewards of facing these realities, he could better deal with the problems at hand. Dalio learned to treat pain as a cue that a great learning opportunity was available. Subsequently, he developed the formula:

Pain + Reflection = Progress

StoryShot #5: Follow the Five-Step Process

Based on his experience, Dalio identified five steps to success:

1. Know your goals and chase them. What is best for you depends on your nature. You need to understand yourself and know what you want to achieve in life.
2. Encounter problems that stand in the way of getting to your goals. These problems are painful. If poorly handled, some of them can lead to your ruin. But to evolve, you need to identify those problems and not tolerate them.
3. Diagnose these problems to get at their root causes. Don’t jump to solutions. Take a step back and reflect to distinguish the symptoms from the disease.
4. Design a plan to eliminate the problems. This is where you will determine what you must do to get around them.
5. Execute those designs, pushing yourself to do what’s needed to progress toward your goal.

A successful life involves repeatedly doing these five steps. This is your personal evolution.

Criticism

While many of Dalio’s points seem logical, you may disagree with his reliance on rational thinking that treats everything as a machine. Dalio notably neglects the emotional side of dealing with people and facing problems. Overcoming trauma from experiences can be complex. 

Dalio creates his philosophy entirely from his own experience and does not draw on any of the rich histories of philosophy and ethics that could have made this book more nuanced and rounded.  

Rating

We rate Principles 4.2/5.

How would you rate it?

Editor’s Note

This was first published in 2021. It was revised on 28/12/2022.

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