Principles by Ray Dalio - Summary and Application

Updated: Feb 8

Here are my key takeaways from the book Principles by Ray Dalio. Out of all the books I've read and all the things I've learned in school and in life so far, the lessons from this book are in the top 10% that I repeatedly refer back to.



I try to write concisely, and this article is the longest book summary I've written, and that's because there's just so many gems from this book. I also reported on how I actually used the learnings in my own life so that it's not just empty knowledge.


This book is about the timeless principles for making decision. In our lives, we make decision after decision, and one could argue that the quality o your life is dependent on the quality of your decisions. Hence, honing your decision-making abilities is well-worth the effort.


The book has three parts. Part 1 is about the author’s journey, aimed at setting a context for his principles. Part 2 is about his life principles. Part 3 is about his work principles. The author states that Part 2 is the main focus on the book, and he wishes for everyone to read Part 2 fully.


For the sake of brevity, I will just go over the Part 2 (Life Principles) in this article. I don’t see Part 1 as needing any analysis or summary, and Part 3 is essentially the life principles applied to a workplace setting.


Here is a click-able table of contents to help you navigate the article.


Question 1: Why did the Author Write This Book?


Question 2: What are the Principles He Mentions?

  1. Embrace Reality and Deal With It

  2. Use The 5-Step Process for Success

  3. Be Radically Open-Minded

  4. Understand That People are Wired Very Differently

  5. Learn How to Make Decisions Effectively


Question 3: What are the Main Ideas of the Book?

  1. Pain + Reflection = Progress

  2. Success = Meaningful Work + Meaningful Relationships

  3. The Conscious and Subconscious Brains

  4. Overcome the Two barriers to Success

  5. Make Believability-Weighted Decisions

  6. People are Have Different and Objective Strengths and Weaknesses

  7. The 5-Step Process to Success

  8. Make Effective Decisions


Question 4: How Have I Applied This Book in My Life?

  1. Pain + Reflection = Progress

  2. Success = Meaningful Work + Meaningful Relationships

  3. The Conscious and Subconscious Brains

  4. Overcome the Two barriers to Success

  5. Make Believability-Weighted Decisions

  6. People are Have Different and Objective Strengths and Weaknesses

  7. The 5-Step Process to Success

  8. Make Effective Decisions


Conclusion


Q1: Why did the author write this book?

Ray Dalio has had tremendous success, both by outward measures and by his intrinsic measures. Outwardly, he has achieved tremendous wealth and fame. Inwardly, he has built meaningful work and strong relationships with family, friends, and colleagues. At the age of 68 when the book was published, Ray is now at a stage in his life where he wants to help others be successful rather than to be more successful himself.

For his employees at Bridgewater, he hopes this book will pass down his principles for decision-making and empower future employees to thrive without him. For everyone else, he wants them to find meaningful work and build meaningful relationships, which are the two things his principles focus on.

Although he offers his list of principles, readers don’t have to adopt each and every one of them. In fact, he wants every reader to thoughtfully choose which, if any, principles to adopt for themselves. He also wants people to discover their own principles and write them down, thereby improving their decisions and lives.


Q2: What are the Principles he mentions?

If you’re like me, you read the title “Principles” and wondered, “So, what are the principles he mentions anyway?” Here’s an extremely high-level summary.

Here are the five major principles from the book:

Principle 1: Embrace reality and deal with it.

We need to face our weaknesses and the difficulties of our situation rather than turning a blind eye towards them. To embrace reality, we need to observe the rules of life and nature. For example, anything in excess becomes unfavorable. To deal with reality, we need to own our outcomes and focus on the things in our control rather than complaining about things outside our control.

Principle 2: Use the 5-Step Process to get what you want out of life.

Here’s the 5-Step Process:

  1. Have clear goals

  2. Identify the problems that stand in your way

  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


Principle 3: Be radically open-minded.

Let go of your ego, which is controlled by the amygdala in your brain. This takes conscious effort, but it does get easier with practice. Being open-minded means instead of focusing on being right, you focus on finding the truth, even if it means you were wrong. It also means having thoughtful and productive disagreements with people rather than emotion-heavy unproductive ones.

Principle 4: Understand that people are wired very differently.

Know the strengths and weaknesses of yourself and others. Just as we all have different physical attributes, we also all have different mental attributes. When you know yourself and others, you can better predicate their behavior and how well they will do certain things.

Principle 5: Learn how to make decisions effectively.

Use principles to systematize your decisions. When you have documented principles, you’ll see new situations as “just another one of those” to which you can apply a relevant principle. Logic is your best tool for understanding reality, while the biggest enemy is harmful emotions. For many decisions, we should also seek about other people who are credible on the topic of the decision.

When making decisions, we need to remember to connect the low-level details to the big picture. Never lose sight of why you’re doing something. In terms of getting information, there are typically 5-10 important factors to consider for any decision. Understand those factors really well and don’t waste time on more. The best choices are ones that have more pros than cons, not those that don’t have any cons at all.


Q3: What are the main ideas of the book?

There are 8 big lessons that I took away from this book:

  1. Pain + Reflection = Progress

  2. Success = Meaningful Work + Meaningful Relationships

  3. The Conscious and Subconscious Minds

  4. Overcome the Two barriers to Success

  5. Make Believability-Weighted Decisions

  6. People are Have Different and Objective Strengths and Weaknesses

  7. The 5-Step Process to Success

  8. Make Effective Decisions

Lesson 1: Pain + Reflection = Progress

"I have largely gotten past the pain of my mistake making and instead enjoy the pleasure that comes with learning from it."

—Ray Dalio


Like most people, I don’t like pain. It’s a natural biological response. For example, I hate having arguments because they’re emotionally painful. But if I avoid communicating about important topics because I’m scared of pain, then it’s very unhelpful.

So the first big takeaway for me is that life will always have (emotional) pain, and I need to embrace it if I want to move forward. Painful truth is better than comfortable delusion. That temporarily comfortable delusion will eventually come back to bite us.

The good news is that pain + reflection = progress, and progress is pleasurable. We can train ourselves to form a habit of reflecting on pain, difficulties, and challenges. After reflection, we need to take responsibility for the things in our control instead of complaining about the things outside our control. Only then will we be back on the path to success and happiness.


"If you can reflect deeply about your problems, they almost always shrink or disappear, because you almost always find a better way of dealing with them."

—Ray Dalio

Lesson 2: Success = Meaningful Work + Meaningful Relationships

“Meaningful work and meaningful relationships aren’t just nice things we choose for ourselves, they are genetically programmed into us.”

—Ray Dalio


Ray Dalio explains in the book, using evidence from neuroscientists and spiritual leaders, how the human brain is evolutionarily programmed to seek and enjoy social cooperation (meaningful relationships) and to benefit the group (meaningful work). When we do these two things, we enjoy life, and success comes as a byproduct.

"Meaningful work and meaningful relationships were and still are my primary goals and everything I did was for them. Making money was an incidental consequence of that." 

—Ray Dalio


Lesson 3: The Conscious and Subconscious Mind

When we understand our conscious and subconscious minds, we are able to overcome emotional hijacking, connect the two minds, and create productive habits.


"Be aware of your subconscious—of how it can both harm you and help you, and how by consciously reflecting on what comes out of it, perhaps with the help of others, you can become happier and more effective."

—Ray Dalio