If there is one book you need to carry with you, read and reread in different unit of time, I’d say that book would be “Principles” by one of the legendary investors/entrepreneurs: Ray Dalio.
In the book, Ray says “I’m passing along these principles because I am now at the stage in my life in which I want to help others be successful rather than to be more successful myself. Because these principles have helped me and others so much, I want to share them with you. It’s up to you to decide how valuable they really are and what, if anything, you want to do with them.”
I’d like to walk you through today, some ‘golden nuggets’ I picked up along the way, hope you find value and implement to your own life, that’s how we learn and master, and that’s my purpose here at Upminded!
Ray VS McNuggests
Ray VS McNuggestsMany of you probably don’t know that Ray actually helped to put out McDonald’s new product – McNuggests in 1983. Around that time, McDonald’s had been planning this new product for a period of time but they were hesitant to bring it to the market because of their concern that chicken prices might rise and squeeze their profit margins. (Yeah! Chick price matters!) Chicken producers like Lane wouldn’t agree to sell to them at a fixed price because of the same concern.
Ray back in the days thought about this problem, he knew that in economic terms a chicken can be seen as a simple machine consisting of a chick plus it’s feed. The most volatile coast that the chicken producer needed to worry about was feed prices. Ray showed Lane how to use a mix of corn and soymeal futures to lock in coast so they could quote a fixed price to McDonald’s. Having greatly reduced its price risk, McDonald’s introduced the McNuggests in 1983.
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, you get a gem in the form of a principle that helps me avoid the same sort of problem in the future.” -Ray Dalio
Collecting these ‘gems’ continually improves Ray’s decision making, so he is able to ascend to higher and higher levels.
People who are super successful and progress driven deeply understand the “law of cause-effect” that governs our reality and develop principles for using them to get what they want. The opposite is also true: Idealists who are not well grounded in reality create problems, not progress.
Evolve or Die
Evolution is the greatest force in the universe; it is the only thing that is permanent and it drives everything. Everything from the smallest subatomic particle to the entire universe is evolving. While everything apparently dies or disappears in time, the truth is what it all just gets reconfigured in evolving forms. Remember that energy can’t be destroyed – it can be only be transformed. The force behind this is evolution.
The evolutionary cycle is not just for people but for countries, companies, economies, for pretty much everything. And it is naturally self-correcting as a while, though not necessarily for its parts. For instance, if there is too much supply and waste in the market, prices will go down, companies will go out of business, and capacity will be reduced until the supply falls in line with the demand, at which time the cycle will start to move in the opposite direction.
5-Step process to get what you desire
According to Ray, if you can do these five things well, you will certainly be successful in life:
- Have clear goals.
- Identify and don’t tolerate the problems that stand in the way of your achieving those goals.
- Accurately diagnose the problems to get at their root causes.
- Design plans that will get you around them.
- Do what’s necessary to push these designs through to results.
You have to pick a clear goal that will go will after. Your choice of goals will determine your direction. As you move toward in life, you will encounter problems and challenges. Some of those problems will bring you down against your own weaknesses. How you react to the pain that causes is totally up to you. If you want to achieve your goals, you must be calm and analytical so that you can accurately diagnose your issue, come up with a plan that will get you around them, and do what what’s necessary to push through to results. Then you will look at the new outcomes and go through the process over and over again. To evolve quickly, you will have to do this fast and continuously, setting your goals successively higher.
How to Make Decisions Effectively
Ray Dalio has spent his whole life studying how to make decisions effectively and has constantly looked for rules and systems that will improve the odds of being right and ending up with more of whatever it is that he is after.
One of the most important things he’s come to understand is that most of the processes that go into everyday decision making are subconscious and more complex than is widely understood. To make good decisions, you have to recognize that:
- The biggest threat to good decision making is harmful emotions
- Decision making is a 2-step process (first learn then decide)
Learning must come before deciding. You brain stores different types of learning in your subconscious, your rote memory bank, and your habits. But no matter how you acquire your knowledge or where you store it, what’s most important is that what you know paints a true and rich picture of the realities that will affect your decision. That’s why it always pays to be radically open-minded and find information that you believe as you do your learning. Many people have trouble doing this emotionally and block the learning that could help them make better decisions. Remind yourself that it’s never harmful to at least hear na opposing point of view.
80/20 Rule
Remember the 80/20 rule and know what the key 20% is. The 80/20 rule states that you get 80% of the value out of something from 20% of the information or effect. (It’s also true that you’re likely to exert 80% of your effect getting only 20% of value.) Understanding this rule saves you from getting bogged down in unnecessary detial once you’ve gotten most of the learning you need to make a good decision.
Technique: Synthesize the Situation Through Time
To see how the dots connect through time you must collect, analyze and sort different types of information, which isn’t easy. For example, let’s imagine a day in which eight outcomes occur. Some are good, some are bad. Let’s illustrate this day as shown, with each type of event represented by a letter and the quality of the outcome represented by its heights.
In order to see the day this way, you must categorize outcomes by type (signified by letter) and quality (the higher up the graph, the better), which will require synthesizing a by-and-large assessment of each. (To make the example more concrete, imagine you’re running an ice cream shop and the W’s represent sales, the X’s represent press and reviews, the Z’s represent staff engagement, etc) Keep in mind that our example is a relatively simple one: just 8 occurrences over one day.
From the chart on the right, you can see that it was a great day for sales (because the W’s are at the top) and a bad day for customer experience (the X’s at the bottom). You might conjecture why – maybe a crowd generated sales but produced long lines.
People who are good at pulling out such patterns of events are rare and essential, but as with most abilities, synthesizing through time is only partially innate; even if you’re not good at it, you can get better through practice. You’ll increase your chances of succeeding at it if you follow the next principles.
Final Thought
This book by Ray is a result of his encounters with reality over many years. Ray’s goal is to pass along these principles that worked well for him; what you do with them is totally up to you. Of course, we aren’t done with our struggles until we die.
“I feel a certain sense of relief to have gotten these principles out to you, and a sense of contentment as I end this book and turn my attention to passing along my economic and investment principles.” -Ray Dalio
Think for yourself:
- What do you want in life?
- What is truth?
- What are you going to do about it?
This masterpiece by Ray Dalio is worth reading and rereading in different unit of time, it’s packed with valuable information and technique to help you achieve your goals in life. You can purchase your copy at Amazon or get your Free Summary and Table of Life Principles below.
[FREE] Bonus PDF
If you’d like to receive a free copy of “Summary and Table of Life Principles“, simply leave your email below and we will deliver a copy to you right away:
