Inside Book Review: Principles: Life and Work

From a two-bedroom apartment in 1975, a young man founded and ran a business he named “Bridgewater Associates”. Initially starting off as a half-hearted commodities company whose goal was to sell commodities from the US to other countries, the business turned out unsuccessful, and by 1975 little remained of the company.

Eventually, he decided to take a half-turn and make Bridgewater Associates into what it is today- one of the world’s most successful investment firms of all time that handles some of the world’s largest hedge funds.

That is the story of Ray Dalio, a man often referred to as “the Steve Jobs of investing” and author of the highly acclaimed book, a #1 New York Times Bestseller: Principles: Life and Work, in which he shares with us some of his methods, or principles, for turning Bridgewater Associates over forty years into the successful company it is today.

Principles by Ray Dalio. Photo: Principles.com

It attempts to explain how a worse-than-ordinary middle class student, with a bad rote memory, the only son of a jazz musician and a stay-at-home mom, worked his way up to handle some of the world’s largest money funds, all thanks to, as Ray puts it himself, “principles that helps me find out what’s true and what to do about it”.

Ray insists that he is nothing but an ordinary man and that anyone who follows a set of good principles can achieve success in life.

Ray insists that he is nothing but an ordinary man and that anyone who follows a set of good principles can achieve success in life.

According to Ray, Principles are “fundamental truths that serve as the foundations for behavior that gets you what you want in life. They can be applied again and again in similar situations to help you achieve your goals”. Basically, the principles are a set of rules one can live by, and that hopefully will make life more fulfilling.

The principles are to assist you in becoming more effective in dealing with situations that are similar to each other, almost like blueprints that constantly change and improve depending on the outcome your different actions yield, until you have found an optimal principle of handling a certain type of situation that gives the results you want.

Ray Dalio speaks at TED2017. Photo: Bret Hartman / TED

The book provides an interesting perspective on how many things we experience in life, such as financial crises, victories and defeats, love and heartbreaks, are things that happen over and over again, in almost like an endless circle, and thus by analysing the factors deciding these outcomes one can grasp a better hold of reality and (hopefully) understand what needs to be done to achieve certain types of results.

It is easy to read and split in three sub-book that have in total 16 higher-level principles, which can be considered chapter titles. These 16 higher-level principles consist of mid-level principles, which are again followed by sub-principles, and all of the principles have explanations following them.

The first sub-book titled Where I’m coming from is about Ray’s background story, where he shares his experiences, such as his failures, that led him to discover many of the principles he personally uses.

Ray emphasizes that it’s often through failures that we are able to learn and grow, and by not reflecting on our mistakes we are missing out an opportunity to improve ourselves and risk doing the same things that caused the mistake in the first place. It was his biggest failures that humbled Ray and taught him to go from an “I know I’m right”-attitude to asking himself “How do I know I’m right?”.

It was his biggest failures that humbled Ray and taught him to go from an “I know I’m right”-attitude to asking himself “How do I know I’m right?”.

In his second sub-book Life Principles, Ray goes on to explain in more detail the principles that dictate his everyday life, and how they apply in our private lives, relationships, and business. It is in this book he shares his “5-step Process” for making effective choices and reaching one’s goals.

The last sub-bookWork Principles, is about the famous work culture at Bridgewater and how its idea meritocracy is one of the pillars of its success. It explains how radical transparency and radical truth help create meaningful work and meaningful relationships, and make an organization much more effective if implemented correctly.

Photo: Principles.com

However, it is important to keep in mind that since we are all different people, we all have different principles, whether that be from what we have learned from our own experience or by others, or through legal frameworks or religion- and they affect us all the time. They govern how you act and what you think is important, and how you handle challenges and setbacks in life.

This is something even Ray Dalio himself expresses in his book. He tells us that people are different and have different principles and values, and that it’s up to us to decide whether or not his principles are something we want to adopt and that we should make an attempt to discover what principles we want in our lives.

In other words, the 16 Higher-level principles are not blueprints that are chiseled in stone on how to achieve a successful and happy life. They might contain valuable and relevant information that, if interpreted in a good way, may lead to a happier and better life, but to follow them religiously like some indisputable divine commandments, because one’s star-struck by Ray Dalio’s impressive achievements, is probably not optimal.

It is important to look at the context and try to see where the principles are coming from, their purpose and intention, all with a critical eye, instead of unquestioningly obeying them without ever asking yourself “why?”.

It is important to look at the context and try to see where the principles are coming from, their purpose and intention, all with a critical eye, instead of unquestioningly obeying them without ever asking yourself “why?”.

Among some of the principles Ray has written in his book, there has been criticism towards a couple of them. It is especially Ray’s seemingly commitment to complete honesty and transparency at work, that has fallen under the spotlight of criticism. For instance, in his book, Ray explains how he believes that having a ranking-system of Bridgewater’s employees and their performance has helped the company improve.

This system also included the use of a system similar to collectible baseball-cards. For instance, if Bob, an employee at Bridgewater, is better at coding than Alice is, he would have a higher score in “coding”, and if Alice was better at analysing data, she would have a higher score in that.

This system of constantly rewarding and punishing employees depending on their actual performance may have proven beneficial to Bridgewater and it’s success, but many other companies that have tried it haven’t had the same fortunate rate of return. Microsoft tried a similar system, but had to scrap it and settle lawsuits after some of its employees claimed that the ranking system lead to a discriminatory working environment.

At the same time, according to a 2011 survey conducted by the Institute for Corporate Productivity, there was found to be a decline in the number of high performing companies using the approach.

Pain + Reflection = Progress. Photo: Principles.com

On the other hand, maybe it was the fact Bridgewater had implemented the Baseball Card and other similar ranking systems early enough for it to become an integrated part of its work culture, that the systems became so integrated into its foundation that people working in the company did not see the need or desire to change it.

It makes one wonder if too swift and sudden changes could have been the reason why other large companies that have tried to implement systems like it later on, such as Microsoft, Ford, and Goodyear failed to maintain the systems.

This perhaps goes to show that the context of a situation has a lot to say in which method or principle one should use to face it.

Overall, Principles: Life and Work is a good read, and it can wholeheartedly be recommended to anyone who is wanting to make the most out of life, looking for ways to hone their productivity-skills, or wants suggestions on how to better handle whatever life throws at you. Most of the principles laid out by Ray are understandable and logical, and one can easily see how their application would benefit one’s life in a positive way.

Although being an almost 600-page-long book, the valuable lessons learned in the book will suck you right up and you will not have much problem reading from one end to the other.

This is definitely not a book you read once and put back onto the shelves, but rather a book that would be wise to have by the nightstand or somewhere easily accessible for frequent revision and study. It doesn’t matter if you’re just fresh out of high school, studying at BI, or seventy-five years old- it’s never too late to learn techniques on how to live a more fulfilling life.

 

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