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PRINCIPLES  by  Ray  Dalio  *  Charts  and  Outlines  from  Hardcover  Edition                                                              Page     1  

 
 

 
 

 

PRINCIPLES  by  Ray  Dalio  *  Charts  and  Outlines  from  Hardcover  Edition                                                              Page     2  

 
 
 
 
 
 
 
 
 
 

 

PRINCIPLES  by  Ray  Dalio  *  Charts  and  Outlines  from  Hardcover  Edition                                                              Page     3  

 
 
 

 

PRINCIPLES  by  Ray  Dalio  *  Charts  and  Outlines  from  Hardcover  Edition                                                              Page     4  

 

 

 

 

PRINCIPLES  by  Ray  Dalio  *  Charts  and  Outlines  from  Hardcover  Edition                                                              Page     5  

 

 

PRINCIPLES  by  Ray  Dalio  *  Charts  and  Outlines  from  Hardcover  Edition                                                              Page     6  

 
 

 

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PRINCIPLES  by  Ray  Dalio  *  Charts  and  Outlines  from  Hardcover  Edition                                                              Page     8  

 
 

 

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SUM M ARY AN D TAB LE
O F LI F E PR I N CI PLE S



Think
for yourself to decide 1) what you want,
2) what is true, and 3) what you should do to
achieve #1 in light of #2, and do that with humility
and open-mindedness so that you consider the
best thinking available to you.

LIFE PRINCIPLES INTRODUCTION




Look
to the patterns of those things that affect you
in order to understand the cause-effect relationships
that drive them and to learn principles for dealing
with them effectively.

PART II : LIFE PRINCIPLES
1 Embrace Reality and Deal with It
1.1 Be a hyperrealist.
a.

Dreams + Reality + Determination = A Successful Life.

1.2
Truth—or, more precisely, an accurate understanding of reality
—is the essential foundation for any good outcome.
1.3 Be radically open-minded and radically transparent.
a.
b.
c.

Radical open-mindedness and radical transparency are
invaluable for rapid learning and effective change.
Don’t let fears of what others think of you stand in your way.
Embracing radical truth and radical transparency will bring
more meaningful work and more meaningful relationships.

1.4 Look to nature to learn how reality works.

Don’t get hung up on your views of how things “should” be
because you will miss out on learning how they really are.
b. To be “good” something must operate consistently with the
laws of reality and contribute to evolution of the whole; that
is what is most rewarded.
c. Evolution is the single greatest force in the universe; it is the
only thing that is permanent and it drives everything.
d. Evolve or die.

a.

LIFE PRINCIPLES

1.5 Evolving is life’s greatest accomplishment and its greatest
reward.
a.
b.
c.
d.
e.

The individual’s incentives must be aligned with the group’s
goals.
Reality is optimizing for the whole—not for you.
Adaptation

through rapid trial and error is invaluable.
Realize that you are simultaneously everything and nothing
—and decide what you want to be.
What

you will be will depend on the perspective you have.

1.6 Understand nature’s practical lessons.

Maximize your evolution.
Remember “no pain, no gain.”
c. It
is a fundamental law of nature that in order to gain
strength one has to push one’s limits, which is painful.

a.
b.

1.7 Pain + Reflection = Progress.
a.
b.

Go to the pain rather than avoid it.
Embrace tough love.

1.8 Weigh second- and third-order consequences.
1.9 Own your outcomes.
1.10 Look at the machine from the higher level.

Th ink of yourself as a machine operating within a machine
and know that you have the ability to alter your machines to
produce better outcomes.
b. By comparing your outcomes with your goals, you can
determine how to modify your machine.
c. Distinguish

between you as the designer of your machine
and you as a worker with your machine.
d. The biggest mistake most people make is to not see
themselves and others objectively, which leads them to
bump into their own and others’ weaknesses again and again.
e. Successful people are those who can go above themselves to see
things objectively and manage those things to shape change.
f. Asking others who are strong in areas where you are weak to help
you is a great skill that you should develop no matter what, as it will
help you develop guardrails that will prevent you from doing what
you shouldn’t be doing.
g. Because it is difficult to see oneself objectively, you need to
rely on the input of others and the whole body of evidence.
h. If you are open-minded enough and determined, you can
get virtually anything you want.
a.

PRINCIPLES

2
Use the 5-Step Process to Get What You Want
Out of Life
2.1 Have clear goals.
a.
b.
c.
d.
e.
f.
g.
h.

Prioritize: While you can have virtually anything you want,
you can’t have everything you want.
Don’t confuse goals with desires.
Decide

what you really want in life by reconciling your
goals and your desires.
Don’t mistake the trappings of success for success itself.
Never

rule out a goal because you think it’s unattainable.
Remember

that great expectations create great capabilities.
Almost nothing can stop you from succeeding if you have
a) flexibility and b) self-accountability.
Knowing how to deal well with your setbacks is as important
as knowing how to move forward.

2.2 Identify and don’t tolerate problems.
a.
b.
c.
d.
e.
f.

View painful problems as potential improvements that are
screaming at you.
Don’t avoid confronting problems because they are rooted in
harsh realities that are unpleasant to look at.
Be
specific in identifying your problems.
Don’t mistake a cause of a problem with the real problem.
Distinguish

big problems from small ones.
Once

you identify a problem, don’t tolerate it.

2.3 Diagnose problems to get at their root causes.
a.
b.
c.

Focus on the “what is” before deciding “what to do about it.”

Distinguish
proximate causes from root causes.
Recognize

that knowing what someone (including you) is
like will tell you what you can expect from them.

2.4 Design a plan.
a.
b.
c.
d.
e.
f.

Go back before you go forward.
Think about your problem as a set of outcomes produced
by a machine.
Remember

that there are typically many paths to achieving
your goals.
Think of your plan as being like a movie script in that you
visualize who will do what through time.
Write

down your plan for everyone to see and to measure
your progress against.
Recognize

that it doesn’t take a lot of time to design a
good plan.

2.5 Push through to completion.
a.
b.
c.

Great planners who don’t execute their plans go nowhere.
Good work habits are vastly underrated.
Establish

clear metrics to make certain that you are
following your plan.

LIFE PRINCIPLES

2.6 Remember that weaknesses don’t matter if you find solutions.
a.
b.

Look at the patterns of your mistakes and identify at which
step in the 5-Step Process you typically fail.
Everyone has at least one big thing that stands in the way
of their success; find yours and deal with it.

2.7 Understand your own and others’ mental maps and humility.

3 Be Radically Open-Minded
3.1 Recognize your two barriers.
a. Understand

your ego barrier.
two “yous” fight to control you.
c. Understand your blind spot barrier.
b. Your

3.2 Practice radical open-mindedness.
a.
Sincerely

b.
c.
d.
e.

f.
g.

believe that you might not know the best possible
path and recognize that your ability to deal well with “not
knowing” is more important than whatever it is you do know.

Recognize that decision making is a two-step process:
First take in all the relevant information, then decide.
Don’t

worry about looking good; worry about achieving
your goal.

Realize that you can’t put out without taking in.

Recognize
that to gain the perspective that comes from
seeing things through another’s eyes, you must suspend
judgment for a time—only by empathizing can you properly
evaluate another point of view.
Remember that you’re looking for the best answer, not
simply the best answer that you can come up with yourself.
Be clear on whether you are arguing or seeking to understand,
and think about which is most appropriate based on your and
others’ believability.

3.3 Appreciate the art of thoughtful disagreement.

3.4 Triangulate your view with believable people who are willing
to disagree.
a.
Plan

for the worst-case scenario to make it as good as
possible.

3.5 Recognize the signs of closed-mindedness and
open-mindedness that you should watch out for.

3.6 Understand how you can become radically open-minded.
a.
Regularly

use pain as your guide toward quality reflection.
being open-minded a habit.

Get
to know your blind spots.

If a number of different believable people say you are doing
something wrong and you are the only one who doesn’t see
it that way, assume that you are probably biased.
Meditate.

Be evidence-based and encourage others to be the same.

b.
Make
c.

d.

e.
f.

PRINCIPLES

g.
Do
h.
i.

everything in your power to help others also be
open-minded.
Use

evidence-based decision-making tools.

Know when it’s best to stop fighting and have faith in your
decision-making process.

4 Understand That People Are Wired Very Differently
4.1 Understand the power that comes from knowing how you
and others are wired.
a.

We are born with attributes that can both help us and hurt
us, depending on their application.

4.2 Meaningful work and meaningful relationships aren’t just
nice things we chose for ourselves—they are genetically
programmed into us.

4.3 Understand the great brain battles and how to control them
to get what “you” want.

Realize that the conscious mind is in a battle with the
subconscious mind.
b. Know that the most constant struggle is between feeling
and thinking.
c. Reconcile

your feelings and your thinking.
d. Choose your habits well.
e. Train

your “lower-level you” with kindness and persistence
to build the right habits.
f. Understand

the differences between right-brained and
left-brained thinking.
g. Understand how much the brain can and cannot change.
a.

4.4 Find out what you and others are like.

Introversion vs. extroversion.
Intuiting vs. sensing.
c. Thinking

vs. feeling.
d. Planning vs. perceiving.
e. Creators

vs. refiners vs. advancers vs. executors vs. flexors.
f. Focusing

on tasks vs. focusing on goals.
g. W PI characteristics.
h. Shapers are people who can go from visualization to
actualization.
a.

b.

4.5 Getting the right people in the right roles in support of your
goal is the key to succeeding at whatever you choose to
accomplish.
a.

Manage yourself and orchestrate others to get what you want.

5 Learn How to Make Decisions Effectively
5.1 Recognize that 1) the biggest threat to good decision making
is harmful emotions, and 2) decision making is a two-step
process (first learning and then deciding).

LIFE PRINCIPLES

5.2 Synthesize the situation at hand.

One of the most important decisions you can make is
who you ask questions of.
b. Don’t believe everything you hear.
c. Everything

looks bigger up close.
d. New is overvalued relative to great.
e.
Don’t oversqueeze dots.
a.

5.3 Synthesize the situation through time.
a.
Keep
b.
c.
d.

in mind both the rates of change and the levels of
things, and the relationships between them.

Be imprecise.

Remember
the 80/20 Rule and know what the key
20 percent is.

Be an imperfectionist.

5.4 Navigate levels effectively.
a. Use

b.

the terms “above the line” and “below the line” to
establish which level a conversation is on.

Remember that decisions need to be made at the
appropriate level, but they should also be consistent
across levels.

5.5 Logic, reason, and common sense are your best tools for
synthesizing reality and understanding what to do about it.
5.6 Make your decisions as expected value calculations.
a.
Raising
b.
c.

the probability of being right is valuable no matter
what your probability of being right already is.

Knowing when not to bet is as important as knowing what
bets are probably worth making.
The best choices are the ones that have more pros than cons,
not those that don’t have any cons at all.

5.7 Prioritize by weighing the value of additional information
against the cost of not deciding.
a.
All
b.

c.

of your “must-dos” must be above the bar before you
do your “like-to-dos.”

Chances are you won’t have time to deal with the
unimportant things, which is better than not having
time to deal with the important things.
Don’t

mistake possibilities for probabilities.

5.8 Simplify!

5.9 Use principles.
5.10 Believability weight your decision making.
5.11 Convert your principles into algorithms and have the
computer make decisions alongside you.
5.12 Be cautious about trusting AI without having
deep understanding.

SU M M ARY AN D TABLE
O F WORK PR I N CI PLE S
I’m including this summary and table of Work Principles here so that you
have the choice of skimming them all, finding the ones you’re most interested
in, or skipping this section and continuing your reading on page 296.

PART III : WORK PRINCIPLES



organization is a machine consisting of two
An
major parts: culture and people.
a.
A
b.
c.



great organization has both great people and a great
culture.

Great people have both great character and great
capabilities.
Great

cultures bring problems and disagreements to the
surface and solve them well, and they love imagining and
building great things that haven’t been built before.


Tough
love is effective for achieving both great
work and great relationships.
a.
In

order to be great, one can’t compromise the
uncompromisable.



believability-weighted idea meritocracy is the
A
best system for making effective decisions.




Make
your passion and your work one and the
same and do it with people you want to be with.

TO GET THE CULTURE RIGHT . . .
1 Trust in Radical Truth and Radical Transparency
1.1 Realize that you have nothing to fear from knowing the truth.
1.2 Have integrity and demand it from others.
a.

b.

Never say anything about someone that you wouldn’t say to
them directly and don’t try people without accusing them
to their face.
Don’t let loyalty to people stand in the way of truth and
the well-being of the organization.

WORK PRINCIPLES

1.3 Create an environment in which everyone has the right to
understand what makes sense and no one has the right
to hold a critical opinion without speaking up.
a.
Speak

up, own it, or get out.
extremely open.

Don’t be naive about dishonesty.

b.
Be

c.

1.4 Be radically transparent.
a.
Use

transparency to help enforce justice.
the things that are hardest to share.

Keep
exceptions to radical transparency very rare.

Make sure those who are given radical transparency
recognize their responsibilities to handle it well and to
weigh things intelligently.
Provide

transparency to people who handle it well and
either deny it to people who don’t handle it well or remove
those people from the organization.

Don’t share sensitive information with the organization’s
enemies.

b.
Share

c.

d.

e.

f.

1.5 Meaningful relationships and meaningful work are mutually
reinforcing, especially when supported by radical truth and
radical transparency.

2 Cultivate Meaningful Work and Meaningful
Relationships
2.1 Be loyal to the common mission and not to anyone who is not
operating consistently with it.
2.2 Be crystal clear on what the deal is.
a.
Make
b.
c.
d.

sure people give more consideration to others than
they demand for themselves.

Make sure that people understand the difference between
fairness and generosity.
Know

where the line is and be on the far side of fair.

Pay for work.

2.3 Recognize that the size of the organization can pose a threat
to meaningful relationships.
2.4 Remember that most people will pretend to operate in your
interest while operating in their own.
2.5 Treasure honorable people who are capable and will treat
you well even when you’re not looking.

3 Create a Culture in Which It Is Okay to Make
Mistakes and Unacceptable Not to Learn from
Them
3.1 Recognize that mistakes are a natural part of the evolutionary
process.
a.
Fail

well.

PRINCIPLES

b.
Don’t

feel bad about your mistakes or those of others.
Love them!

3.2 Don’t worry about looking good—worry about achieving
your goals.
a.
Get

over “blame” and “credit” and get on with “accurate”
and “inaccurate.”

3.3 Observe the patterns of mistakes to see if they are products
of weaknesses.
3.4 Remember to reflect when you experience pain.
a.
Be
b.
c.

self-reflective and make sure your people are
self-reflective.

Know that nobody can see themselves objectively.

Teach
and reinforce the merits of mistake-based learning.

3.5 Know what types of mistakes are acceptable and what types
are unacceptable, and don’t allow the people who work for
you to make the unacceptable ones.

4 Get and Stay in Sync
4.1 Recognize that conflicts are essential for great relationships
because they are how people determine whether their
principles are aligned and resolve their differences.
a.

Spend lavishly on the time and energy you devote to getting
in sync, because it’s the best investment you can make.

4.2 Know how to get in sync and disagree well.
a.
Surface

b.
c.

areas of possible out-of-syncness.
Distinguish between idle complaints and complaints meant
to lead to improvement.
Remember

that every story has another side.

4.3 Be open-minded and assertive at the same time.
a.
Distinguish
b.
c.
d.
e.
f.
g.
h.

open-minded people from closed-minded
people.

Don’t have anything to do with closed-minded people.
Watch out for people who think it’s embarrassing not to know.

Make sure that those in charge are open-minded about the
questions and comments of others.
Recognize

that getting in sync is a two-way responsibility.
Worry more about substance than style.

Be reasonable and expect others to be reasonable.

Making
suggestions and questioning are not the same as
criticizing, so don’t treat them as if they are.

4.4 If it is your meeting to run, manage the conversation.
a.
Make
b.
c.

it clear who is directing the meeting and whom it is
meant to serve.

Be precise in what you’re talking about to avoid confusion.

Make
clear what type of communication you are going to
have in light of the objectives and priorities.

WORK PRINCIPLES

d.
Lead

the discussion by being assertive and open-minded.
between the different levels of the conversation.
f. Watch out for “topic slip.”
g.
Enforce the logic of conversations.
h. Be
careful not to lose personal responsibility via group
decision making.
i. Utilize the “two-minute rule” to avoid persistent
interruptions.
j. Watch out for assertive “fast talkers.”
k.
Achieve completion in conversations.
l. Leverage your communication.
e. Navigate


4.5 Great collaboration feels like playing jazz.
a. 1+1=3.

b. 3


to 5 is more than 20.

4.6 When you have alignment, cherish it.
4.7 If you find you can’t reconcile major differences—especially
in values—consider whether the relationship is worth
preserving.

5 Believability Weight Your Decision Making
5.1 Recognize that having an effective idea meritocracy requires
that you understand the merit of each person’s ideas.
a.
If
b.

you can’t successfully do something, don’t think you can
tell others how it should be done.

Remember that everyone has opinions and they are often
bad.

5.2 Find the most believable people possible who disagree with
you and try to understand their reasoning.
a.
Think
b.

c.
d.
e.
f.

about people’s believability in order to assess the
likelihood that their opinions are good.

Remember that believable opinions are most likely to come
from people 1) who have successfully accomplished the thing
in question at least three times, and 2) who have great
explanations of the cause-effect relationships that lead them
to their conclusions.
If someone hasn’t done something but has a theory that seems
logical and can be stress-tested, then by all means test it.
Don’t pay as much attention to people’s conclusions as to the
reasoning that led them to their conclusions.
Inexperienced

people can have great ideas too, sometimes far
better ones than more experienced people.

Everyone should be up-front in expressing how confident
they are in their thoughts.

5.3 Think about whether you are playing the role of a teacher,
a student, or a peer and whether you should be teaching,
asking questions, or debating.

PRINCIPLES

a.

b.
c.

It’s more important that the student understand the teacher
than that the teacher understand the student, though both
are important.
Recognize that while everyone has the right and responsibility
to try to make sense of important things, they must do so with
humility and radical open-mindedness.

5.4 Understand how people came by their opinions.
a.
If

b.
c.
d.

you ask someone a question, they will probably give
you an answer, so think through to whom you should
address your questions.

Having everyone randomly probe everyone else is an
unproductive waste of time.
Beware

of statements that begin with “I think that . . .”

Assess believability by systematically capturing people’s
track records over time.

5.5 Disagreeing must be done efficiently.
a.
Know
b.
c.

d.

when to stop debating and move on to agreeing
about what should be done.
Use believability weighting as a tool rather than a substitute
for decision making by Responsible Parties.
Since you don’t have the time to thoroughly examine
everyone’s thinking yourself, choose your believable
people wisely.
When you’re responsible for a decision, compare the
believability-weighted decision making of the crowd to
what you believe.

5.6 Recognize that everyone has the right and responsibility to try
to make sense of important things.
a.
Communications
b.

c.

aimed at getting the best answer should
involve the most relevant people.

Communication aimed at educating or boosting cohesion
should involve a broader set of people than would be needed
if the aim were just getting the best answer.
Recognize

that you don’t need to make judgments about
everything.

5.7 Pay more attention to whether the decision-making system is
fair than whether you get your way.

6 Recognize How to Get Beyond Disagreements
6.1 Remember: Principles can’t be ignored by mutual agreement.
a.
The

same standards of behavior apply to everyone.

6.2 Make sure people don’t confuse the right to complain, give
advice, and openly debate with the right to make decisions.
a.
When

challenging a decision and/or a decision maker,
consider the broader context.

6.3 Don’t leave important conflicts unresolved.

WORK PRINCIPLES

a.
Don’t
b.

let the little things divide you when your agreement
on the big things should bind you.

Don’t get stuck in disagreement—escalate or vote!

6.4 Once a decision is made, everyone should get behind it even
though individuals may still disagree.
a.
See

things from the higher level.
allow the idea meritocracy to slip into anarchy.

Don’t
allow lynch mobs or mob rule.

b.
Never
c.

6.5 Remember that if the idea meritocracy comes into conflict
with the well-being of the organization, it will inevitably suffer.
a.
b.

Declare “martial law” only in rare or extreme circumstances
when the principles need to be suspended.
Be wary of people who argue for the suspension of the idea
meritocracy for the “good of the organization.”

6.6 Recognize that if the people who have the power don’t want
to operate by principles, the principled way of operating
will fail.

TO GET THE PEOPLE RIGHT . . .
7 Remember That the WHO Is More Important than
the WHAT
7.1 Recognize that the most important decision for you to make
is who you choose as your Responsible Parties.
a.
Understand

that the most important RPs are those
responsible for the goals, outcomes, and machines at
the highest levels.

7.2 Know that the ultimate Responsible Party will be the person
who bears the consequences of what is done.
a.
Make

sure that everyone has someone they report to.

7.3 Remember the force behind the thing.

8 Hire Right, Because the Penalties for Hiring Wrong
Are Huge
8.1 Match the person to the design.
a.
Think
b.
c.
d.
e.

through which values, abilities, and skills you are
looking for (in that order).

Make finding the right people systematic and scientific.

Hear
the click: Find the right fit between the role and the
person.
Look for people who sparkle, not just “any ol’ one of those.”

Don’t
use your pull to get someone a job.

8.2 Remember that people are built very differently and that
different ways of seeing and thinking make people suitable
for different jobs.

PRINCIPLES

a.
b.

c.
d.

Understand how to use and interpret personality assessments.
Remember that people tend to pick people like themselves,
so choose interviewers who can identify what you are
looking for.
Look for people who are willing to look at themselves
objectively.
Remember that people typically don’t change all that much.

8.3 Think of your teams the way that sports managers do: No one
person possesses everything required to produce success,
yet everyone must excel.
8.4 Pay attention to people’s track records.
a.
Check

references.
that performance in school doesn’t tell you
much about whether a person has the values and abilities
you are looking for.
While it’s best to have great conceptual thinkers, understand
that great experience and a great track record also count for
a lot.

Beware of the impractical idealist.

Don’t
assume that a person who has been successful
elsewhere will be successful in the job you’re giving them.
Make sure your people have character and are capable.

b.
Recognize

c.

d.
e.
f.

8.5 Don’t hire people just to fit the first job they will do; hire people
you want to share your life with.
a.
Look

for people who have lots of great questions.
candidates your warts.

Play
jazz with people with whom you are compatible but
who will also challenge you.

b.
Show
c.

8.6 When considering compensation, provide both stability and
opportunity.
a.
Pay

for the person, not the job.
performance metrics tied at least loosely to
compensation.
Pay

north of fair

Focus more on making the pie bigger than on exactly how
to slice it so that you or anyone else gets the biggest piece.

b.
Have
c.
d.

8.7 Remember that in great partnerships, consideration and
generosity are more important than money.
a.
Be

generous and expect generosity from others.

8.8 Great people are hard to find so make sure you think about
how to keep them.

9 Constantly Train, Test, Evaluate, and Sort People
9.1 Understand that you and the people you manage will go
through a process of personal evolution.