Principles

Principles holds the set of rules for work and life billionaire investor and CEO of the most successful fund in history, Ray Dalio, has acquired through his 40-year career in finance.

If you asked Ray why he thinks having principles is important, this is the answer he’d give you: “Principles are ways of successfully dealing with reality to get what you want out of life.”

When Ray was younger, he predicted that Mexico would default on its debt and, subsequently, the world would fall into an economic crisis. He even testified in front of the US Congress and talked about it on TV. While he was right, Mexico did default on its debt, the crisis never happened – stocks and businesses soared.

Because Ray had placed his financial bets accordingly, he lost all of his money and had to fire every one of his employees. This – his biggest failure – taught him that he should always think rationally, not emotionally. The tragedy of most peoples’ lives is that they hold on so desperately to their opinions that it becomes impossible to see reality.

That’s why Ray needed principles as the ultimate way of stress testing his, and later his employees’, opinions. Do they hold up in the real world? Instead of just thinking he was right, he asked: “How can I know I’m right?”

So, what you’re really doing when you begin to think about your own principles and which rules help you live truthfully, is removing errors from your brain that result in flawed thinking, one rule at a time.

While all of Ray’s principles have contributed to his success one way or the other, some have done so more than others. Here are two of his most important ones: Radical truthfulness. Imagine an environment in which you and everyone you know felt comfortable to honestly say what they think at all times. What a healthy way of living! What’s more, in a company this ensures mistakes are always uncovered, talked about and then learned from, rather than getting swept under the rug. Radical transparency. This is related to radical truthfulness, and helps enable it. The more candid you can be about what you have done, are doing and are going to do in the future, the more accurately can people weigh their feedback to you. In theory, most of us know these two ideas would help us and the people around us if we always lived them. The reason we often don’t is because it can be emotionally difficult and so we fool ourselves into believing that it’s “nicer not to say anything.” But how much more would your friends benefit if you honestly told them you…