Why People Make Bad Decisions

Most people make bad decisions because they are so certain that they're right that they don't allow themselves to see the better alternatives that exist.

Radically open-minded people know that coming up with the right questions and asking other smart people what they think is as important as having all the answers.

Understand How People Came By Their Opinions

Our brains work like computers: they input data and process it in accordance with their wiring and programming. Any opinion you have is made up of these two things: the data and your processing or reasoning.

When someone says, "I believe X," ask them: What data are you looking at? What reasoning are you using to draw your conclusion? Dealing with raw opinions will get you and everyone else confused; understanding where they come from will help you get to the truth.

Two People Who Collaborate Well (1+1=3)

Two people who collaborate well will be about three times as effective as each of them operating independently, because each will see what the other might miss—plus they can leverage each other’s strengths while holding each other accountable to higher standards.

Principle Of The Day: Teams Should Operate Like Those In Professional Sports

Teams should operate like those in professional sports, where different skills are required to play different positions. Excellence in each is mandatory, the success of the mission is uncompromisable, and members that don’t measure up may need to be cut.

Thoughts on Bitcoin

I think that Bitcoin (and some other digital currencies) have, over the last ten years, established themselves as interesting gold-like asset alternatives, with similarities and differences to gold and other limited-supply, mobile (unlike real estate) store holds of wealth.

As far Bitcoin relative to gold, I have a strong preference for holding those things which central banks are going to want to hold and exchange value in when they are trying to transact.

Successful People Learn From Mistakes

Everyone makes mistakes. The main difference is that successful people learn from them and unsuccessful people don’t. By creating an environment in which it's okay to safely make mistakes so that people can learn from them, you’ll see rapid progress and fewer significant mistakes.

What Does A Successful Life Look Like?

People who achieve success and drive progress deeply understand the cause-effect relationships that govern reality and have principles for using them to get what they want. The converse is also true: Idealists who are not well grounded in reality create problems, not progress.

What does a successful life look like? We all have our own deep-seated needs, so we each have to decide for ourselves what success is... Each of us needs to decide what we value most and choose the paths we take to achieve it.

 

How To Focus On A Goal

If you're focused on the goal, excited about achieving it, and recognize that doing some undesirable tasks to achieve the goal is required, you will have the right perspective and will be appropriately motivated.

If you're not excited about the goal that you're working for, stop working for it. Personally, I like visualizing exciting new and beautiful things that I want to make into realities.

The excitement of visualizing these ideas and my desire to build them out is what pulls me through the thorny realities of life to make my dreams happen.

Peace & Prosperity

In the new chapter of my series, The Changing World Order, I explore the timeless and universal principles that drive the big cycle of order and disorder within nations, especially as they relate to what’s happening in the US now.

Principles: People, Culture and Transparency

Being Radically Transparent

Understanding what is true is essential for success, and being radically transparent about everything, including mistakes and weaknesses, helps create the understanding that leads to improvements.

A Great Organization Has Both Great People And A Great Culture

Companies that get progressively better over time have both. Nothing is more important or more difficult than to get the culture and the people right.

Reforming The System

If we cannot agree on a path that both increases the size of the pie by maximizing human productivity and divides the pie well so there is something approaching equal opportunity, we will fight each other and not be productive which will hurt most everyone. There is no system that has proven better than capitalism in providing incentives, ideas and products. And it can easily be reformed to work better for most people. What’s the better choice?

Following Principles

Following principles is for me simply like following good recipes that get me what I want. However, when operating in a principled way one can see things from a higher level so that one wants to operate with a high standard of behavior. 

Principle Of The Day: Fail Well

Everyone fails. Anyone you see succeeding is only succeeding at the things you’re paying attention to—I guarantee they are also failing at lots of other things. The people I respect most are those who fail well. I respect them even more than those who succeed. 

That is because failing is a painful experience while succeeding is a joyous one, so it requires much more character to fail, change, and then succeed than to just succeed. People who are just succeeding must not be pushing their limits. Of course the worst are those who fail and don’t recognize it and don’t change.

You Must Stretch Yourself

It’s a basic law of nature: You must stretch yourself if you want to get strong. You and your people must act with each other like trainers in gyms in order to keep each other fit. Force yourself and the people who work for you to do difficult things.

Principle of the Day: Meaningful Work & Relationships

I asked if people were finding Principles useful in guiding them through this time and I was so glad that a large number of folks said they were. Over the next few weeks, I’d like to pass along some of the principles that people said they were finding most helpful.

Principle of the Day:

Meaningful relationships are invaluable for building and sustaining a culture of excellence, because they create the trust and support that people need to push each other to do great things.

Video: Principles For Success

Join me on a thought-provoking adventure in my new animated mini-series, Principles for Success. I've taken my book Principles, and distilled it into a 30 minute ultra mini series that focuses on the life principles that have helped me the most.

1+1=3

Two people who collaborate well will be about three times as effective as each of them operating independently, because each will see what the other might miss—plus they can leverage each other’s strengths while holding each other accountable to higher standards.

How Our Current Situation Compares To The 1930s

I want to clarify my comments from yesterday’s Ted Talks describing how our current situation compares to the 1930s. As I have often shared with you, I believe that that time period is the most analogous to what we’re seeing today.

Best Principles

I asked if people were finding Principles useful in guiding them through this time and I was so glad that a large number of folks said they were. Over the next few weeks, I’d like to pass along some of the principles that people said they were finding most helpful.

There is nothing more important than understanding how reality works and how to deal with it. The state of mind you bring to this process makes all the difference. I have found it helpful to think of my life as if it were a game in which each problem I face is a puzzle I need to solve. By solving the puzzle, I get a gem in the form of a principle that helps me avoid the same sort of problem in the future. Collecting these gems continually improves my decision making, so I am able to ascend to higher and higher levels of play in which the game gets harder and the stakes become ever greater.

Distinguishing Big Problems From Small Ones

You only have so much time and energy; make sure you are investing them in exploring the problems that, if fixed, will yield you the biggest results. But at the same time, make sure you spend enough time with the small problems to make sure they’re not symptoms of larger ones.

A New World Order

The last period of destroying and restructuring happened in 1930-45, which led to the new period of building that began in 1945. More specifically, the 1930-45 depression, which was due to the breakdown and restructuring of the money and credit system, led to the new US dollar-based global monetary system (Bretton Woods) that was created in 1944. The large wealth gaps that came about in the Roaring ’20s were narrowed by the depression and war, which led to radical changes in how wealth and power were distributed, and the global war changed world leadership and the world order.  

So, in 1945 there was a new beginning with a new money and credit system that was US dollar-based and a new world order that was the American world order. That new American world order was the natural consequence of the US being the richest country (it then had 80% of the world’s gold stock and gold was then money), the dominant economic power (it then accounted for half of world production), and the dominant military power (it then had a monopoly on nuclear weapons and had the strongest conventional forces). It is now 75 years later and conditions have evolved in a number of measurable ways that we will explore in subsequent chapters. That will bring us up to date. Then we can attempt to squint into the future.

Principle of the Day: Knowing When Not To Bet

You can significantly improve your track record if you only make the bets that you are most confident will pay off. Knowing when not to bet is as important as knowing what bets are probably worth making.

How To Raise The Probability Of Being Right

By questioning experts individually and encouraging them to have thoughtful disagreement with each other that I can listen to and ask questions about, I both raise my probability of being right and become much better educated. Triangulate your view with believable people who are willing to disagree.

Our Performance

In order to make things clear about Bridgewater’s performance, I am sharing the note that I sent to Bridgewater’s clients just yesterday so that you can know what the real story is. Most investment managers and companies have not yet done that. You should expect that when they do there will be some very big shocking results. 

In brief summary, the performance results, while disappointing, are consistent with prior poor performing periods that we expect to happen about once every 10-15 years under extraordinary circumstances. Additionally the risk control processes that we have put into place are working as expected, which are reducing our losses in comparison to the broader market and many other investment managers. 

Here’s the full letter: Our Performance

Being Hyperrealistic

Understanding, accepting, and working with reality is both practical and beautiful. I have become so much of a hyperrealist that I’ve learned to appreciate the beauty of all realities, even harsh ones, and have come to despise impractical idealism. 

Don’t get me wrong: I believe in making dreams happen. My point is that people who create great things aren’t idle dreamers: They are totally grounded in reality. Being hyperrealistic will help you choose your dreams wisely and then achieve them.

U.S. Corporate Losses Will Hit $4 Trillion

"What’s happening with the coronavirus pandemic has not happened in our lifetimes before. What we have is a crisis. U.S. corporate losses from the coronavirus will hit $4 trillion."

 -  Ray Dalio, Bridgewater Associates

Related trading instruments: SPDR S&P 500 Trust ETF (SPY)

A Lesson In Risk Management

“We did not know how to navigate the virus and chose not to because we didn't think we had an edge in trading it. So, we stayed in our positions and in retrospect we should have cut all risk. We’re disappointed because we should have made money rather than lost money in this move the way we did in 2008.” 

- Ray Dalio speaking to the Financial Times

Periods of Turbulence: Risks & Opportunities

Periods of turbulence provide both large risks and large opportunities, so after you make sure that you and your people are safe from the risk of ruin, look for the opportunities. It is because at such times most people pay the most attention to the risks than the opportunities.

The Economic Impact Of The Coronavirus Outbreak Will Be Big

The negative economic impact of the coronavirus outbreak will probably be big, monetary policy will be of little use to counteract it, and co-ordination between political leaders and central bankers is both essential and unlikely.

Force Yourself To Do Difficult Things

It’s a basic law of nature: You must stretch yourself if you want to get strong. You and your people must act with each other like trainers in gyms in order to keep each other fit.

WORK PRINCIPLE:

Force yourself and the people who do work for you to do difficult things. 

Don’t Mistake Possibilities For Probabilities

“Don’t mistake possibilities for probabilities. Anything is possible. It’s the probabilities that matter. Everything must be weighed in terms of its likelihood and prioritized.Believe it or not, your pain will fade and you will have many other opportunities ahead of you.” 

- Ray Dalio

Ask Questions To Gain Perspective

Sometimes asking questions to gain perspective can be misperceived as being weak and indecisive. Of course it’s not. It’s necessary in order to become wise and it is a prerequisite for being strong and decisive. 

Always seek the advice of wise others and let those who are better than you take the lead. The objective is to have the best understanding to make the best possible leadership decisions. 

Be open-minded and assertive at the same time and get in tight sync with those who work with you, recognizing that sometimes not all or even the majority of people will agree with you.

Five Sunday Quotes (by Ray Dalio)

“If you’re not failing, you’re not pushing your limits, and if you’re not pushing your limits, you’re not maximizing your potential.” – Ray Dalio

“Having the basics, a good bed to sleep in, good relationships, good food – is most important, and those things don’t get much better when you have a lot of money or much worse when you have less. And the people one meets at the top aren’t necessarily more special than those one meets at the bottom or in between.” – Ray Dalio

“Listening to uninformed people is worse than having no answers at all.” – Ray Dalio

“Time is like a river that carries us forward into encounters with reality that require us to make decisions. We can’t stop our movement down this river and we can’t avoid those encounters. We can only approach them in the best possible way.” – Ray Dalio

To-do Lists

Good work habits are vastly underrated. People who push through successfully have to-do lists that are reasonably prioritized, and they make certain each item is ticked off in order.

Decide What You Really Want In Life

Take passion, for example. Without passion, life would be dull; you wouldn’t want to live without it. But what’s key is what you do with your passion.

LIFE PRINCIPLE: Decide what you really want in life by reconciling your goals and your desires. 

Life Principle: Success

Achievement orientation is important, but people who obsess over a $1,200 pair of shoes or a fancy car are very rarely happy because they don’t know what it is that they really want and hence what will satisfy them. 

LIFE PRINCIPLE: Do not mistake the trappings of success for success itself.