The Bookworm Reads: Principles by Ray Dalio

Ray Dalio’s book Principles hit #1 on the NY Times bestseller list.  What’s all the hype?  Is there anything in here that you can use?

The book is multi-layered.  He starts with a framework for building a principle-based organization.  Then as the author layers on his own principles as examples, he includes some little gems of his own finding.

The core message is “build your list of operating principle as you go.  Every time you make a decision, define the principle you based it on.  Then create policies based on your principles.  Share your principles with your organization.”

I found this to be a unique view.  Backtracking your decisions into a set of principles.  And then creating transparency to your thought process for others to align with.  A sample of his principles are here: Sample Principles

The second layer is the principles themselves, which he divides into work and life principles. The principles themselves are not unique and hold little value as a standalone.  The value is in applying them as a decision-making tool as an organization.  Brilliant!

Mr. Dalio stresses the importance of coming us with your own principles, but he just can’t help but share his own in a way that kind of sounds like you should use his.  

There are quite a few gems in the book. Here are some of my favorites:

Shapers:  People with a vision who execute.   “Shapers score low on ‘concern for others’ in behavioral tests, though they spend their time helping people.  Why?  Given a choice between achieving a goal or pleasing others, they choose the goal.”
I love the Shaper concept.  However while Mr. Dalio frames Shapers as a select few, I feel that everyone can be a Shaper.  Stay tuned for my upcoming blogtoon on becoming a Shaper.

Policy Makers vs Investors.  “Policymakers come from environments that nurture consensus, not dissent, that train them to react to things that have already occurred, and that prepare them for negotiations, not placing bets.  Because they don’t benefit from the constant feedback about the quality of their decisions that investors get, it’s not clear who the good and bad decision makers among them are.  They also have to be politicians.”

Think about how this concept shows up in the corporate world.  Do we value an idea that can get an agreement with an idea that will be effective?

Build and Evolve your Machine.  Ray Dalio views his organization as a machine, and himself as the designer and operator of that machine.  He constantly maintains, diagnoses and repairs his machine.  

This is key thinking for dealing with problems.  When something goes wrong there is no emotion or blame.  It’s a problem with the machine, how can we tweak the machine so this doesn’t happen again.   For example, if someone makes an error, Ray would ask “How did the machine allow an incompetent person in this role?  Did we hire badly?  Was the training inadequate?  Are we lacking check and balances?”

Speak up, own it, or get out.  This is an example of a principle very specific to Ray Dalio’s company.  But it’s a great one.  He says that “everyone has the right to understand what makes sense and no one has the right to hold a critical opinion without speaking up.”  Let me repeat that last part, “No one has the right to hold a critical opinion without speaking up.”  

You have a right to disagree but you don’t have a right to keep it to yourself.  Wow.  I love this. So much time is wasted complaining behind closed doors.  I often ask people why they didn’t raise their concerns in the meeting.  Most companies have a culture of “going along to get along” and are discouraged from dissent.  A key to Ray Dalio’s success was encouraging dissent.

Have you read Principles?  What points did you find most enlightening?  We’d love to hear from you in the comments!