Jun 7, 2020

The Principles for Success by Ray Dalio!

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The Author believes an idea meritocracy is the best decision-making system because it requires honesty and leads to continual improvement.

He explained it by dividing his principles into Life Principles and Work Principles. The life principles apply to individual success, and the work principles guide group success.

Raymond Thomas Dalio (born August 8, 1949) is an American billionaire hedge fund manager and philanthropist who has served as co-chief investment officer of Bridgewater Associates since 1985. He founded Bridgewater in 1975 in New York. Within ten years, it was infused with a US$5 million investment from the World Bank's retirement fund.

The Author shares his life journey in the book and based on the lessons he learned from life he divided the principles into two categories such as Life Principles and Work Principles.

The Author has struggled in life and went through many failures before he reach massive success, from those failures he learned the concept that there are principles to everything. His major failure was in 1982, when he bet everything he had on a depression in stocks and the market never come back and he lost everything he had and from this failure it gave him the humility he needed to balance his aggressiveness and shift mind set from thinking "I'm right" to asking "how do I know I'm right?"

He believes, everything on the Universe, the planet, the earth, the occurrence of an events, the 24 hours in a days that we have, our mind and body how it operates are all is based on some specific principles and if we learn those principles, then we can achieve great success in life.

The 5-Step Principles for Getting What You Want in Life
  1. Set clear goals.
  2. Identify problems and don’t tolerate them.
  3. Diagnose your problems to find root causes.
  4. Design solutions to get around problems.
  5. Do the tasks required to completion.

1.Set clear goals.
The first step is to set a clear goal in mind what you really want.

For Example like you want an income of say of a specific amount every month or  year after 20 years or 30 years from now.
Divide it into small goals in order to reach the greatest goal in life.

2. Diagnose your problems to find root causes
The second step would be what things you need to do to archive those goals?
What are the obstacle’s you may face to achieve those goals?
Analyse the root cause for those obstacles?

Just like a doctor or an IT professional, when they find the problem in hand they try to diagnose the root cause of it that is creating the problem.

3. Design solutions to get around problems.
When diagnosing your problems and the root cause is analysed or identify, think for the solutions to overcome those problem areas. Analyse the your weakness and where you or somebody is lacking.

4. Fix your mistakes:   
Design and implement the solution to the problem and the road towards your goal will be started with one small goal at a time.  

5. Do the tasks required to completion.
You have to push through to results, and if you keep doing that over and over again, you will inevitably succeed,

These 5 steps form a loop. Once you complete one turn of the loop, then you’ll look at your results and go through the process again, setting new, higher goals.

The author says "You do it over and over again because you have determination — you will inevitably succeed."

People may usually give up when they find any obstacles or when find it difficult, then identify what your weakest steps are. Then get better at them, or find someone who can help you compensate for them, so that you can accomplish the small goals.

The Author while implementing the above steps asked to look into the points before making any decisions.

Find the Truth and Embrace Your Mistakes

Finding the truth is the most important thing before making any decisions, you can make the best, Find the Truth and Embrace Your Mistakes
Finding the truth is the most important thing before making any decisions, you can make the best decisions gets you closer to your goals.

Two things may come as an obstacle in your way to find the truth:
1) Your ego and emotions
2) Your blind spots.

1. Your Ego

What holds a lot of people back from the truth is their ego. Many people’s egos centre around being right and looking smart. But everyone is wrong a good portion of the time, and ignoring this is blinding yourself to your mistakes and ways to improve yourself.
Instead of declaring “I’m right,” ask, “How do I know I’m right?” You can’t be sure of everything, there are always risks involved, that can hurt you badly, even in the safest-looking bets. Always assume you’re missing something.

2. Embrace Your Mistakes

People commonly ignore is their weaknesses and mistakes, by ignoring your weaknesses and mistakes, you are eliminating the chances of achieving your goals.
Mistakes happen all the time. It’s more important to recognize mistakes and learn from them than to cover them up and make your problems worse.
You must reflect on your mistakes and design solutions to your problems to evolve.
Dalio sums it up in his equation, “Pain + Reflection = Progress.”
Treat each mistake like a puzzle that, after you solve it, reveals a gem. Each gem continuously makes you stronger, and more gems help you ascend to higher levels of play where the challenges get greater.

Principles help you deal with the complexity of life:
Principles are the fundamental truths that determine how you behave. behave. They reflect your inner character and values.

If you consistently operate by a set of principles, then you are a principled person. People know what you stand for and how you behave. In contrast, if you don’t have clear principles and have inconsistent behavior, then you’ll lose people’s trust and respect for you.

Fundamental principles help you figure out what situation you’re facing and how to deal with the situation.

Radical Open-Mindedness:
To realize the truth, you must have the courage to admit that you are wrong and relentlessly find ways to increase the chances that you are right.

The author calls this a Radical Open-Mindedness. Taking in more information, especially from other highly credible people, can only allow you to make better decisions, which will take you closer to your goal. 

The author say's, “In a thoughtful disagreement, your goal is not to convince the other party that you are right — it is to find out which view is true and then decide what to do about it.” –Ray Dalio

People who are open minded try to learn something are the winners, where as those who stubbornly refuse to learn are the losers.

Here are six indicators of closed-minded versus open-minded people:

  • When there’s disagreement, closed-minded people get angry; Open-minded people get curious.
  • Closed-minded people make statements; Open-minded people ask questions out of curiosity.
  • Close-minded people focus on being understood; Open-minded people focus on understanding the other person.
  • Closed-minded people block others from speaking; Open-minded people prefer listening.
  • Closed-minded people have trouble holding two opposing thoughts in their minds; Open-minded people can take in other people’s thoughts without losing the ability to think well.
  • Close-minded people are confident that they’re right. Open-minded people fear that they may be wrong.

Have a higher perspective of yourself and the world.
The author explains it as thinking of reality as a machine. You have your goals, and you need to work the machine of reality to achieve those goals. That means you need to understand how that machine (reality) works, and you need to understand how you work as the executor of the machine.

The key result we want from having a higher perspective is to be less emotional and more logical in evaluating of life. Without this higher perspective, people live moment to moment, always react emotionally. By having this higher perspective, you’re more focused on the cause-and-effect relationships that created your outcome rather than being unhappy about it.

Meaningful Work + Meaningful Relationships= Success

“Meaningful work and meaningful relationships aren’t just nice things we choose for ourselves, they are genetically programmed into us.” — Ray Dalioents 

“Meaningful work and meaningful relationships were co related and still should be the primary goals and everything the author says he did was for the relationships.

Making money was an incidental consequence of that meaningful relationship in life” — Ray Dalio

Cyclic recurrence of the Specific Event: 

The author explains that the specific events recurrence and we need to learn from it and developed the principles from this specific event's recurrence.

As per the author each and each and every events does recurred in our life in a cycle. There are similarities and a pattern observed in the recurrence of the events.

Based on those events, we need to learn and develop the principles that worked, So that when the same events recurred in the future, by applying those principles we keep ourselves protected.

For example the 1929 stock market crash was the beginning of the worst economic contraction in recent history, and the 2008 crisis was similar in magnitude. The Economist tells us, “The shock that hit the world economy in 2008 was on a par with that which launched the Depression. 

Ray Dalio— Predicts that the coming economic downturn resembling the effects of the great depression that happened in the year 1929 to 1933 and it was rewarded as the worst economic crisis and depression.

It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers.

HISTORICAL stock charts seem to show that it took more than 25 years for the market to recover from the 1929 crash — a dismal statistic that has been brought to investors' attention many times in the current downturn. The market crash main reason was Federal Bank printing the money out of thin air without being backed by gold and silver, which lead to the bubble burst of the economy and it leads to market crash and same is happening now as well.

So you can expect a great depression in near future.

To survive such crisis, one should keep some investment in gold and silver as they are precious metal whose prices rises during the time of inflation and it can be used in any part of the world unlike the currency.

The same thing suggested by Robert Kyosaki too, as he is also expecting a great depression to come in near future.

  Key Take-away on the book:
1.     Pain + Reflection = Progress.
2.     Have a higher perspective of yourself and the world.
3.     Success = Meaningful Work + Meaningful Relationships.
4.     Overcome your two barriers to success, Ego and Blind spots.
5.     Be radically open-minded to be successful.
6.     Follow the looping 5-step process to get to success.
7.     Know your objective strengths and weaknesses and those of others.
8.     Find people with complementary strengths to help you along the 5-step process.
9.     Make weighted decisions by considering the thoughts and credibility of other people.
10.      Use the 5 principles to systematize your decision making.

11.         Navigate levels of a decision effectively.

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