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Ray Dalio Principles Summary [All Principles in 10 Minutes]

Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life.

To be principled is to consistently operate with principles that can be clearly explained.

Adopting principles without giving them much thought can expose you to the risk of acting in ways inconsistent with your goals and your nature.

Think for yourself to decide:

  1. What you want
  2. What is true
  3. What you should do to achieve 1 in light of 2

To be a successful entrepreneur, you have to bet against the consensus, which means being painfully wrong a lot.

Systematize your decision making. Put it in the forms of algorithms you can put in computers.

The most important thing for you to do is write down your principles to clarify them.

Almost everyone expects the future to be a slightly modified version of the present, but it’s usually very different.

Dalio is big on transcendental meditation, learned at the Maharishi Mahesh Yogi ashram.

One lesson Dalio learned was that he was surprised by something only because it hadn’t happened in his lifetime. But it had happened in history.

When everyone thinks something is a sure bet, it’s already priced in, so betting on it will likely be a mistake.

“There are always risks out there that can hurt you badly, even in the seemingly safest bets, so it’s always best to assume you’re missing something.”

Dalio saw the only way to succeed would be to:

  1. Seek out the smartest people who disagreed with him so he could try to understand their reasoning
  2. Know when not to have an opinion
  3. Develop test, and systematize timeless and universal principles
  4. Balance risks in ways that keep the big upside while reducing the downside

Early on, Dalio wrote down the criteria he used to make a decision to take a position in the markets. Then, when he closed out a trade, he could reflect on how well those criteria had worked.

The best thing you can do to improve your thinking is to think through your principles for making decisions, write them out in words and computer algorithms, back test them if possible, then use them on a real-time basis to run in parallel with your brain’s decision making.

“If you work hard and think creatively, you can have just about anything you want, but not everything you want.” [48]

With fifteen to twenty good, uncorrelated return streams, you can dramatically reduce your risks without reducing your expected returns. The “Holy Grail of Investing.” [56]

Individual assets within an asset class are usually about 60% correlated with each other, so even if you think you’re diversified, you’re not. [57]

Making a handful of good uncorrelated best that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside. [58]

To solve disagreements:

  1. Put our honest thoughts on the table
  2. Have thoughtful disagreements in which people are willing to shift their opinions as they learn, and
  3. Have agreed-upon ways of deciding (voting, authorities, etc.) if disagreements remain so you can move on without resentment. [64]

Dalio’s book recommendationsThe Hero with a Thousand FacesThe Lessons of HistoryRiver Out of EdenOn the Role of the Individual in HistoryThe Spiritual BrainPower of Habit

People who attain their dreams early typically don’t end up happy unless they get excited about something else bigger and better to struggle for. [123]


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. [127]

If you write down every kind of encounter you have (loss of a job, personal disagreement, late for something) and compile them in a list, it would probably total just a few hundred items and only a few would be unique to you. You can develop principles for every kind of interaction. [128]

Creating Your Own Principles:

  1. Write down every kind of encounter you have and how you have, and should, handle it. Update these are you get more data and stress-test your assumptions.
  2. Record why you made certain decisions, then check in on that reasoning later.


Think of problems as puzzles you need to solve. By solving the puzzle, you get a gem in the form of a principle that helps you avoid the same sorts of problems in the future.

1. Embrace Reality and Deal With It

1.2: Truth, an accurate understanding of reality, is the essential foundation for any good outcome. [135]

1.4a: Don’t get hung up on your views about how things should be because then you’ll miss out on learning how they really are. [140]

1.4c: Evolution is the single greatest force in the universe; it is the only thing that is permanent and it drives everything. [142]

1.4d: Evolve or die.

1.5: Evolving is life’s greatest accomplishment and its greatest reward. [147]

1.6b: Remember “no pain, no gain” Evolution won’t always feel good. [152]

1.7: Pain + Reflection = Progress. If you can develop a reflexive action to psychic pain that causes you to reflect on it rather than avoid it, it will lead to your rapid learning/evolving. If you push through this process of personal evolution, you will naturally ascend to higher and higher levels. Go towards the pain rather than avoid it. The quality of your life will depend on the choices you make at those painful moments.

1.8: Weigh second and third-order consequences. Often the first order consequences are the temptations that cost us what we really want, and can be the barriers that stand in our way. [156]

1.10a: Think of yourself as a machine operating within a machine and know that you have the ability to alter your machines to produce better outcomes. [157]

1.10c: Distinguish between you as the designer of your machine and you as a worker with your machine. [159]

When you encounter your weaknesses you have four choices:

  1. Deny them
  2. Accept them and work at them to convert them to strengths
  3. Accept them and find ways around them
  4. Change what you’re going after

To confront your own weaknesses: [162]

  1. Don’t confuse what you wish were true with what is really true.
  2. Don’t worry about looking good—worry instead about achieving your goals.
  3. Don’t overweight first-order consequences relative to second and third order ones.
  4. Don’t let pain stand in the way of progress.
  5. Don’t blame bad outcomes on anyone but yourself.

2. Use the 5-Step Process to Get What You Want Out of Life

The five-step process in short:

  1. Have clear goals.
  2. Identify and don’t tolerate the problems that stand in the way of you achieving those goals.
  3. Accurately diagnose the problems to get at their root causes.
  4. Design plans that will get you around them.
  5. Do what’s necessary to push these designs through to results.

Do each of these steps independently. Don’t think about how you will achieve your goals while you’re setting your goals.

2.1 Have Clear Goals [172]

2.2 Identify and Don’t Tolerate Problems [174]

2.3 Diagnose problems to get at their root causes [175]

2.4 Design a plan [176]

2.5 Push through to completion [177]

Those are the five steps, then there are a couple finer points…

2.6 Remember that all weaknesses don’t matter if you find solutions [178]

3. Be Radically Open Minded

3.1 Recognize your two barriers: your ego and your blind spots.

3.2 Practice radical open-mindedness

3.3 Appreciate the art of thoughtful disagreement

4. Understand that People are Wired Very Differently

5. Learn How to Make Decisions Effectively

Think about how you can make all of your decisions well, in a systematic, repeatable way, and then being able to describe the process so clearly and precisely that anyone else can make the same quality decisions under the same circumstances.

5.1: Recognize that the biggest threat to good decision making is harmful emotions, and the decision making is a two-step process (first learning, then deciding)

5.2: Synthesize the situation at hand

5.6 Make your decisions as expected value calculations [251]

5.7 Prioritize by weighing the value of additional information against the cost of not deciding. [254]

5.9 Use Principles

5.11 Convert your principles into algorithms and have the computer make decisions alongside you


“In order to be great, one can’t compromise the uncompromisable.” [305]

“Make your passion and your work one and the same and do it with people you want to be with.” [317]

1: Trust in Radical Truth and Radical Transparency

2: Cultivate Meaningful Work and Meaningful Relationships

3: Create a Culture in Which It Is Okay to Make Mistakes and Unacceptable Not to Learn From Them

4: Get and Stay in Sync

5: Believability Weight Your Decision Making

6: Recognize How to Get Beyond Disagreement

7: Remember that WHO is more important than WHAT

8: Hire Right, Because the Penalties for Hiring Wrong are Huge

9: Constantly Train, Test, Evaluate, and Sort People

10: Manage as Someone Operating a Machine to Achieve a Goal

11: Perceive and Don’t Tolerate Problems

12: Diagnose Problems to Get at Their Root Causes

13: Design Improvements to Your Machine to Get Around Your Problems

14: Do What You Set Out to Do

15: Use Tools and Protocols to Shape How Work is Done

16: Don’t Overlook Governance

Wrap up

Related: Changing World Order in Charts

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