Author: Ray Dalio
Date started & finished: November 2018
Notes written on: 2019 June 17th
Why I choose this book:
I heard about this book through the Tim Ferriss Podcast. Plus it kept creeping up in conversations. Then it made it onto my reading list. Which when I go to a book store, bring out and buy a few books.
Book theme/ message:
Ray Dalio shares his life principles. Those that have made him who he is. And brought him his success.
Personal connection: How does the book relate to me to me or my experiences?
Including my highlights passages and or quote.
I’m interested how people work, reason and do things. Plus I learn from others. Ray Dalio is successful in what he does. So I figured I could pick up one or two things from him.
It taught me the importance of risk control, because I never wanted to experience that pain again. It enhanced my fear of being wrong and taught me to make sure that no single bet, or even multiple bets, could cause me to lose more than an acceptable amount.
In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep the money.
I other words, I just want to be right – I don’t care if the right answer comes from me. So I learned to be radically open minded to allow others to point out what I might be missing. I saw that the only I could succeed would be to:
1. Seek out the smartest people who disagreed with me so T could try to understand their reasoning
2. Know when not to have an opinion
3. Develop, test, and systemise timeless and universal principles.
4. balance risks in ways that keep the big upside while reducing the downside.
In other words, rather than forecasting changes in the economic environment and shifting positions in anticipation of them, we pick up these changes as they’re occurring and move our money around to keep in those markets which perform best in that environment.
Having a few good uncorrelated return streams is better than having just one, and knowing how to combine return streams is even more effective than being able to choose good ones (though of course you have to do both).
I realised then how essential it is that people in relationships must be crystal clear about their principles for dealing with each other.
1. Put our honest thoughts out 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 (e.g., voting, having clear authorities) if disagreements remain so that we can move beyond them without resentments.
A shaper is someone who comes up with a unique and valuable vision and builds them out beautifully, typically over the doubts and opposition of others.
… China’s Wang Qishan, who has been a remarkable force for good for decades. … Wang is an historian, a very high level thinker, and a very practical man. … A leading shaper of the Chinese economy for decades who is also responsible for eliminating corruption, he is known to be a no-nonsense man who can be trusted to get stuff done.
THE HERO’S JOURNEY
You -> call to adventure -> (Adventure time) crossing the threshold -> … the road of trials… -> abyss -> metamorphosis -> the ultimate boon (end of adventure) -> returning the boon. REPEAT
1- Embrace reality and deal with it
2- Use the 5 step process to get what you want out of life
3- Be radically open minded
4- Understand that people are wired very differently
5- Learn how to make decision effectively
1.6.c It is a fundamental law of nature that in order to gain strength one has to push one’s limits, which is painful
1.7.a go to the pain rather than avoid it
1.7.b embrace tough love … No matter what you want in life, your ability to adapt and move quickly and efficiently through the process of personal evolution will determine your success and your happiness. If you do it well, you can change your psychological reaction to it so that what was painful can become something you crave.
1.8 Weight second- and third- order consequences
For example, the first-order consequences of exercise (pain and time spent) are commonly considered undesirable, while the second-order consequences (better health and more attractive appearance) are desirable)
1.9 Own your outcomes … My point is simply this: Whatever circumstances life brings you, you will be more likely to succeed and find happiness if you take responsibility for making your decisions well instead of complaining about things being beyond your control.
1.10.c Distinguish between you as the designer of your machine and you as the worker with your machine. … Most people remain stuck in the perspective of being a worker within the machine. … Instead of having this strategic perspective, most people operate emotionally and in the moment… .
2. Use the 5-step process to get what you want out of life
Step 1- Have clear goals
Step 2- Identify and don’t tolerate the problems that stand in the way of your achieving those goals.
Step 3- Accurately diagnose the problems to get at their root causes.
Step 4- Design plans that will get you around them
Step 5- Do what’s necessary to push these designs through to results
Goals -> Problems -> Diagnosis -> Design -> Doing
3.2 Practice radical open-mindedness … In other words, if you can recognise that you have blind spots and open-mindedly consider the possibility that others might see something better than you – and that the threats and opportunities they are trying to point out really exist – you are more likely to make good decisions.
3.3 Appreciate the art of thoughtful disagreement … In thoughtful disagreement, your goal is not to convince the other party that you are right – it is to find out which view is true and decide what to do about it.
3.5 Recognise the signs of closed-mindedness and open-mindedness that you should watch out for.
1. Closed- don’t want their ideas challenged
Open- are more curious about why there is a disagreement
2. Closed- are more likely to make statements than ask questions
Open- genuinely believe they could be wrong; the questions that they ask are genuine.
3. Closed- focus more on being understood than on understanding others
Open- always feel compelled to see things through other’s eyes
4. Closed- say things like ” I could be wrong… but here’s my opinion.”
Open- know when to make statements and when to ask questions
5. Closed- block others from speaking
Open- are always more interested in listening than in speaking.
6. Closed- have trouble holding two thoughts simultaneously in their mind
Open- can take in the thoughts of others without losing their ability to think well.
7. Closed- lack a deep sense of humility
Open- approach everything with a deep-seated fear that they may be wrong.
4.2. Meaningful work and meaningful relationships aren’t just nice things we chose for ourselves – they are genetically programmed into us.
The spiritual brain
Beyond religion by the Dalai Lama
4.3.a Realise that the conscious mind is in a battle with the subconscious mind. … As with animals, many of our decision-making drivers are below the surface. An animal doesn’t “decide” to fly or hunt or sleep or fight in the way we go about making many of our own choices of what to do – it simply follows the instructions that come from the subconscious parts of it’s brain. These same sorts of instructions come to us from the same parts of our brains, sometimes for good evolutionary reasons and sometimes to our detriment. … Our greatest moments of inspiration often “pop” up from our subconscious. We experience these creative breakthroughs when we are relaxed and not trying to access the part of the brain in which they reside, which is generally th neocortex. … Many people only see the conscious mind and aren;t aware of the benefits of connecting it to the subconscious. They believe that the way to accomplish more is to cram more into the conscious mind and make it work harder, but often this is counterproductive.
4.3.d Choose your habits well. Habit is probably the most powerful tool in your brain’s toolbox.
4.4.e Creators vs refiners vs advancers vs executors vs flexors
“team dimensions profile” test (TDP
Creators: generate new ideas and original concepts. They prefer unstructured and abstract activities and thrive on innovation and unconventional practices.
Advancers: communicate these new ideas and carry them forward. They relish feelings and relationships and manage the human factor. They are excellent at generating enthusiasm for work.
Refiners: challenge ideas. They analyse projects for flaws, then refine them with focus on objectivity and analysis. They love facts and theories and working with a systematic approach.
Executors: can also be thought of as Implementors. They ensure that important activities are carried out and goals accomplished; they are focused on details and the bottom line.
Flexors: are a combination of all four types. They can adapt their styles to fit certain needs and are able to look at a problem from a variety of perspectives.
4.4.h Shapers are people who can go from visualisation to actualisation. To me, it seems that Shaper = Visionary + Practical Thinker + Determined
5.2 Synthesise the situation at hand
5.2.a One of the most important decisions you can make is who you ask questions of. Make sure they’re full informed and believable
5.2.b Don’t believe everything you hear
5.2.c Everything looks bigger up close
5.2.d New is overvalued relative to great
5.2.e Don’t oversqueeze dots
5.7 Prioritise by weighing the value of additional information against the cost of not deciding.
5.7.a All of your “must-dos” must be above the bar before you do you “like-to-dos”
5.7. Don’t mistake possibilities for probabilities. Anything is possible. It’s the probabilities that matter.
5.10 Believability weight your decision making
Thinking -> Principles -> Algorithms -> Great Decisions
To Get The Culture Right
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 sync
5- Believability weight your decision making
6- Recognise how to get beyond disagreement
To Get The People Right
7- Remember that the WHO is more important than the what
8- Hire right, because the penalties for hiring wrong are huge
9- Constantly train, test, evaluate, and sort people
To Build And Evolve Your Machine
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- And for heaven’s sake, don’t overlook governance!
An organisation is a machine consisting of two major parts” culture and people.
3.2 Don’t worry about looking good – worry about achieving your goals.
9.1.b Understand that training guides the process of personal evolution.
9.1.d Realise that experience creates internalised learning that book learning can’t replace.
9.4.a Recognise that while most people prefer compliments, accurate criticism is more valuable.
“Tough love is both the hardest and the most important type of love to give”
10.1.c Build great metrics. metrics show how the machine is working by providing numbers and setting off alert lights in a dashboard.
12.1 To diagnose well, ask the following questions:
1. Is the outcome good or bad?
2. Who is responsible for the outcome?
3. If the outcome is bad, is the Responsible Party incapable and/or is the design bad?
13.10.b Constantly think about how to produce leverage. … you’re looking for ways to achieve more with less.
13.11 Remember that almost everything will take more time and cost more money than you expect.
14.2 Recognise that everyone has too much to do. … there are three ways to fix the problem: 1) having fewer things to do by prioritising and saying no, 2) finding the right people to delegate to, and 3) improving your productivity
14.3 Use checklists
14.4 Allow time for rest and renovation
14.5 Ring the bell. When you and your team have successfully pushed through to achieve your goals, celebrate!
What impact or impression has this book made on me?
When I read a book about how others works it reminds of what I need to work on. And keeping an open mindset. There is an unlimited amount of ways to do something and this is one. I have a few. It feels a refresher in a way that I think: “oh, I can try this”
How can I use this?
re-reading this every now and then as a check up
Why must I use this?
It can inspire me to come up with new solutions
When will I use this?
When planning for my business
My recommendation of this book: [low 1 … 10 high]
I took a fair bit from this book, and I read because it was new and people where talking about it. It was interesting. And I will apply what I learned for sure. Will I recommend this book as a must read, nope. Ray Dalio has an interesting mindset, values and principles. If you are a fan of his or what to open up your mind drastically then sure read it.
You may also like: Owning Who You Are