Life Principles

In this part, Ray discusses various principles in life that will help us succeed. Let’s begin to learn them one by one.

Embrace Realty and Deal with it

According to Ray Dalio, one should always be realistic. In this way he can visualize the things he wants to create and build them. As per him, one should not be afraid of mistakes but instead enjoy the pleasure that comes from learning from it. He calls this “mistake learner’s high”.

Be a hyperrealist

One should dream about achieving big stuffs, however just dreaming isn’t going to take you anywhere. You need to be grounded to reality, even harsh ones and think in a practical way as to what is possible to achieve given your expertise and circumstances.

Dreams + Reality + Determination = A Successful Life

It doesn’t matter whether you want to savor life or what to make an impact, working hard and working efficiently is required for each of them.

Truth—or, more precisely, an accurate understanding of reality—is the essential foundation for any good outcome.

Be open minded and transparent- Having a feedback loop is important in the process of learning. Being open minded enhances the efficiency of feedback loops and helps avoiding being deceived by yourself.

Don’t be afraid of what others think of you

Do things in a unique way and have an open mind to run the feedback loop.

Look to nature & learn how reality works

Don’t be biased on what is good for yourself

In this context, Ray defines how nature has created objects or events for the good of the whole rather than an individual. Think of a lion eating an innocent deer. One might think that this is a bad event or feel empathy for the deer. However, if you remember the food cycle, the process is important in order to maintain balance in the nature. Therefore, the author has advised us to do a second order or even third order thinking while analysing anything for good or bad.

Evolve or die

Evotion takes place in a non-linear trend. It is not always that better things come up with each passing evolutionary procedure, but with trial and error, things adapt. Similarly for companies, evolution is an important process, but nonlinear. There will always be times when a company evolves but it decreases the value instead of increasing it. However, if the management can learn from the mistakes and not repeat it, it would finally work out for the best. The key is to fail, learn and improve quickly.

Evolving is life’s greatest accomplishment and greatest reward

Individual’s incentives must be aligned to group’s goals.

Creation of an optimum incentive structure is a must. It should be such that the development or pleasure of an individual should be aligned to the interest of the group. This will create a health organization. Look for how the incentives of management/employees is aligned with the interest of the organization.

Adaptation through rapid trial and error is invaluable

There are three kings of learning the spur evolution:

1. Memory based learning (storing the information in ones mind, so that it can be recalled later)
2. Subconscious learning (the knowledge that is a take away from our experiences and affect our decision making)
3. Learning that occurs without thinking

Pain + Reflection = Progress

Quite beautifully stated, if you don’t fail, you’re not pushing your limits, similarly if you’re not pushing your limits, you’re not maximizing your potential. If you can push through the painful process of evolution, the chances of success increases.

The chapter details a lot of other principles as well for achieving the goals, however the most important ones are listed below:

1. Never confuse yourself with what is true and what you wish to be true. Hence be realistic.
2. Don’t try to please others, instead concentrate on achieving your goal.
3. First order thinking often is contrary to your goals. Therefore, focus on second and third-order ones, which basically means, think of the cause-and-effect relationship of each decision you take and what circumstances it can create in the future.
4. Don’t let pain stand in the way of progress.
5. Don’t play the blame game. Take responsibility for your own decisions.