“It seems to me that if you look back on yourself a year ago and aren’t shocked by how stupid you were, you haven’t learned much.” That is just one example of the kind of “tough love” Ray Dalio matter-of-factly offers throughout his new book, Principles. If that strikes you as a bit harsh, wait until you read the rest of the book. Principles has a lot more.
Principles isn’t meant to be a harsh book. It’s meant to help people get what they want out of life, make better decisions, and navigate challenges more effectively. It’s just that it happens to argue that a big part of doing this is opening ourselves to brutal unblinking honesty as we assess our weaknesses.
Part investment story, part personal memoir, and part self-help book, Principles is a lengthy treatise on the fundamental principles Dalio developed over four decades of investing and running a company.
For those of you who don’t know, Dalio is the founder of the world’s largest hedge fund Bridgewater Associates, which he startedin his two-bedroom New York apartment in 1975. Since then, Bridgewater has grown into one of the country’s most important private companies and Dalio has become one of its most influential investment thinkers.
While many respect Dalio and Bridgewater for their bold, independent investment views, many also see them as arrogant and a little weird. That’s because under Dalio’s principles of “radical truth” and “radical transparency,” Bridgewater employees practice a kind of extreme truthfulness that’s been described as “cult-like.” Bridgewater employees are taught never to filter their opinions, but to tell it the way they see it. They subject themselves to brutal personal criticisms and open confrontations on ideas. Most meetings get recorded so that all employees can see how things transpire and then make their own judgments. And every employee’s track record is kept on a “baseball card” that displays the individual’s strengths and weaknesses instead of batting averages.
No one at Bridgewater is exempt from criticism -- including Dalio himself. As a small example in the book, Dalio reproduces an email he once received from a subordinate that begins with the words, “Ray – you deserve a ‘D-’ for your performance today in the ABC meeting, and everyone that was in the room that saw you agrees on that harsh assessment.” A bigger example is when his closest lieutenants tell him that he is making employees feel “incompetent, unnecessary, humiliated, overwhelmed, belittled, oppressed, or otherwise bad . . .” Apparently, Dalio says, “I wasn’t paying them enough money to put up with my crap.” While learning this was extremely painful for him, it is also what drove the learning and reflection that led him to make positive changes.
Dalio’s book has three parts. The first briefly recounts his life and career, providing a fascinating window into the way he learned to systematically gather and categorize information on economic and financial events. The second looks at his “Life Principles,” which focus on strategies for getting past the ego and blind spots that can distort our views. The third section on “Work Principles” is what he first wrote as a manual for Bridgewater employees. The main idea here is that the best way for groups to make decisions is neither authoritarian rule nor democracy, but an “idea meritocracy” where people are trained to assert their own views and then follow a clear process for coming to agreement so that they can implement the group’s very best ideas.
The book’s lack of emotion may turn some people off, and many no doubt will find it downright strange. But its 550-some pages do offer useful insights for those who want to reach their goals and forget about looking good in front of others. Andrew Ross Sorkin of The New York Times says he found the book “surprisingly moving,” and I must say that I agree. There are times when Dalio’s generosity and humility shine through. Plus, it’s always a good idea for investors to learn about ways to reduce the chances of being wrong – which in many ways is what this book is all about.