Ray Dalio’s Principles is two books in one. It is half autobiography and half instruction manual for living a meaningful life, both at home and at work. This book is more about philosophy, personal values and self-improvement than financial markets. Supposedly Dalio is working on a second book about investment principles, however.
For those who may be unfamiliar with Ray Dalio, he is the founder of Bridgewater Associates, one of the most successful investment firms of all time. Bridgewater more or less invented risk parity strategies with its All Weather Fund.
What I did not realize until reading this book was that Dalio went through an extremely difficult period in the early 1980s, where he was on the edge of bankruptcy in the wake of a bad macro bet. This experience informed much of his personal development, and it shows in the book.
The essence of Principles comes through in the following lines:
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 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 games gets harder and the stakes become ever greater.
All sorts of emotions come to me while I am playing and those emotions can either help me or hurt me. If I can reconcile my emotions with my logic and only act when they are aligned, I make better decisions.
The book lays out a model for living a meaningful life, however you choose to define “meaningful.”
Who Should Read This Book
There is something here for everyone, regardless of whether you have any interest in Ray Dalio, Bridgewater Associates or financial markets. You could skip the autobiography and go straight to the principles themselves if you prefer, though I felt they were more impactful with the autobiographical details in mind.
Investment nerds will enjoy delving into he history of Bridgewater from Dalio’s point of view, as well as some high level insight into Bridgewater’s investment process and culture.