Corentin Derbré


Principles – Ray Dalio

ISBN: 1501124021
Date read: 2018-03-05
How strongly I recommend it: 9/10
(See my list of books, for more.)

Go to the Amazon page for details and reviews.

The open mindedness and algorithmic/rational approaches are a lifetime of work! This book is rich in useful and inspiring information, but also not directly actionable.

my notes

Systemize your decision making.

To do exceptionally well you have to push your limits and that, if you push your limits, you will crash and it will hurt a lot.

One has many more supposed friends when one is up than when one is down, because most people like to be with winners and shun losers. True friends are the opposite.

Whether you own a hotel, run a technology company, or do anything else, your business produces a return stream. Having a few good uncorrelated return streams is better than having just one, and knowing how to combine return streams is even more effective than being able to choose good ones (though of course you have to do both).

To me, the greatest success you can have as the person in charge is to orchestrate others to do things well without you. A step below that is doing things well yourself, and worst of all is doing things poorly yourself.

45 and 28 percent in our two Pure Alpha funds and close to 18 percent in All Weather.

When faced with a choice between achieving their goal or pleasing (or not disappointing) others, they would choose achieving their goal every time.

Having a lot and being on top are not nearly as great as most people think. Having the basics—a good bed to sleep in, good relationships, good food, and good sex—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.

What I have seen is that the happiest people discover their own nature and match their life to it.

I realized that passing on knowledge is like passing on DNA—it is more important than the individual, because it lives way beyond the individual’s life.

This is my attempt to help you succeed by passing along to you what I learned about how to struggle well.

Individually, we are machines made up of different machines.

Stretching for big goals puts me in the position of failing and needing to learn and come up with new inventions in order to move forward.

Radical open-mindedness and radical transparency are invaluable for rapid learning and effective change.

Don’t let fears of what others think of you stand in your way.

I have found that it typically takes about eighteen months, which is how long it takes to change most habits.

History has shown that all species will either go extinct or evolve into other species, though with our limited time window that is hard for us to see.

It is a fundamental law of nature that in order to gain strength one has to push one’s limits, which is painful.

If you don’t let up on yourself and instead become comfortable always operating with some level of pain, you will evolve at a faster pace.

Most people remain stuck in the perspective of being a worker within the machine. If you can recognize the differences between those roles and that it is much more important that you are a good designer/manager of your life than a good worker in it, you will be on the right path. To be successful, the “designer/manager you” has to be objective about what the “worker you” is really like, not believing in him more than he deserves, or putting him in jobs he shouldn’t be in.

You shouldn’t be upset if you find out that you’re bad at something—you should be happy that you found out, because knowing that and dealing with it will improve your chances of getting what you want.

Asking others who are strong in areas where you are weak to help you is a great skill that you should develop no matter what, as it will help you develop guardrails that will prevent you from doing what you shouldn’t be doing. All successful people are good at this.

Don’t let pain stand in the way of progress.

Don’t blame bad outcomes on anyone but yourself.

What you think is attainable is just a function of what you know at the moment.

If you limit your goals to what you know you can achieve, you are setting the bar way too low.

Be specific in identifying your problems. You need to be precise, because different problems have different solutions. If a problem is due to inadequate skill, additional training may be called for; if it arises from an innate weakness, you may need to seek assistance from someone else or change the role you play. In other words, if you’re bad at accounting, hire an accountant. If a problem stems from someone else’s weaknesses, replace them with someone who is strong where it’s needed. That’s just the way it is.

Don’t mistake a cause of a problem with the real problem. “I can’t get enough sleep” is not a problem; it is a potential cause (or perhaps the result) of a problem.

Distinguish big problems from small ones.

A good diagnosis typically takes between fifteen minutes and an hour, depending on how well it’s done and how complex the issue is.

It involves speaking with the relevant people and looking at the evidence together to determine the root causes.

Think of your plan as being like a movie script in that you visualize who will do what through time.

Write down your plan for everyone to see and to measure your progress against.

Remember: Designing precedes doing!

Good work habits are vastly underrated.

Establish clear metrics to make certain that you are following your plan. Ideally, someone other than you should be objectively measuring and reporting on your progress.

Ask others where they’d place you.

I define believable people as those who have repeatedly and successfully accomplished the thing in question—who have a strong track record with at least three successes—and have great explanations of their approach when probed.

Regularly use pain as your guide toward quality reflection.

Get to know your blind spots.


Be evidence-based and encourage others to be the same.

The biggest difference between people who guide their own personal evolution and achieve their goals and those who don’t is that those who make progress reflect on what causes their amygdala hijackings.

The four main assessments we use are the Myers-Briggs Type Indicator (MBTI), the Workplace Personality Inventory, the Team Dimensions Profile, and Stratified Systems Theory.

Getting the right people in the right roles in support of your goal is the key to succeeding at whatever you choose to accomplish.

Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored.

To synthesize well, you must 1) synthesize the situation at hand, 2) synthesize the situation through time, and 3) navigate levels effectively.

Everything looks bigger up close. In all aspects of life, what’s happening today seems like a much bigger deal than it will appear in retrospect.

New is overvalued relative to great. For example, when choosing which movie to watch or what book to read, are you drawn to proven classics or the newest big thing?

Keep in mind both the rates of change and the levels of things, and the relationships between them.

Because our educational system is hung up on precision, the art of being good at approximations is insufficiently valued.

Use the terms “above the line” and “below the line” to establish which level a conversation is on. An above-the-line conversation addresses the main points and a below-the-line conversation focuses on the sub-points. When a line of reasoning is jumbled and confusing, it’s often because the speaker has gotten caught up in below-the-line details without connecting them back to the major points. An above-the-line discourse should progress in an orderly and accurate way to its conclusion, only going below the line when it’s necessary to illustrate something about one of the major points.

Logic, reason, and common sense are your best tools for synthesizing reality and understanding what to do about it.

Successful organizations have cultures in which evidence-based decision making is the norm rather than the exception.

It’s worth repeating that realizing that almost all “cases at hand” are just “another one of those,” identifying which “one of those” it is, and then applying well-thought-out principles for dealing with it.

While this sounds scary to many people, at Bridgewater we have been combining radical transparency with algorithmic decision making for more than thirty years and have found that it produces remarkable results. In fact, I believe that it won’t be long before this kind of computerized decision making guides us nearly as much as our brains do now.

People still make the most important decisions better than computers do. To see this, you need look no further than at the kinds of people who are uniquely successful. Software developers, mathematicians, and game-theory modelers aren’t running away with all the rewards; it is the people who have the most common sense, imagination, and determination.

At Bridgewater, we use our systems much as a driver uses a GPS in a car: not to substitute for our navigational abilities but to supplement them.

When you get down to it, our brains are essentially computers that are programmed in certain ways, take in data, and spit out instructions. We can program the logic in both the computer that is our mind and the computer that is our tool so that they can work together and even double-check each other. Doing that is fabulous.

In fact, we may be too hung up on understanding; conscious thinking is only one part of understanding. Maybe it’s enough that we derive a formula for change and use it to anticipate what is yet to come.

Work Principles is about people working together. Because the power of a group is so much greater than the power of an individual, the principles that follow are likely even more important than those we covered up to this point.

Having clear processes for resolving disagreements efficiently and clearly is essential for business partnerships, marriages, and all other forms of partnership.

For most people, being part of a great community on a shared mission is even more rewarding than money.

Bridgewater is not about plodding along at some kind of moderate standard, it is about working like hell to achieve a standard that is extraordinarily high, and then getting the satisfaction that comes along with that sort of super-achievement.

Our overriding objective is excellence, or more precisely, constant improvement, a superb and constantly improving company in all respects.

Teamwork and team spirit are essential, including intolerance of substandard performance.

“How do you know that you’re not the wrong one?”

“What process would you use to draw upon these different perspectives to make the best decisions?”

in most companies people are doing two jobs: their actual job and the job of managing others’ impressions of how they’re doing their job.

We’ve found that bringing everything to the surface 1) removes the need to try to look good and 2) eliminates time required to guess what people are thinking.

No set of rules can ever substitute for common sense.

It is a fundamental law of nature that you get stronger only by doing difficult things.

bosses generally think it’s bad to create uncertainty among employees. We believe the opposite: that the only responsible way to operate is truthfully and transparently, so that people know what’s really going on and can help us sort through any issues that arise.

It’s a real asset that people know they can trust what we say.

If you’re sick, it’s natural to fear your doctor’s diagnosis—what if it’s cancer or some other deadly disease? As scary as the truth may turn out to be, you will be better off knowing it in the long run because it will allow you to seek the most appropriate treatment. The same holds for learning painful truths about your own strengths and weaknesses

Thinking solely about what’s accurate instead of how it is perceived pushes you to focus on the most important things. It’s also fairer to those around you: Making judgments about people so that they are tried and sentenced in your head, without asking for their perspective, is both unethical and unproductive.

Having nothing to hide relieves stress and builds trust.

Never say anything about someone that you wouldn’t say to them directly and don’t try people without accusing them to their faces.

Managers should not talk about people who work for them if they are not in the room.

For example, don’t believe most people who are caught being dishonest when they say that they’ve seen the light and will never do it again because chances are they will.

Share the things that are hardest to share.

Provide transparency to people who handle it well and either deny it to people who don’t handle it well or remove those people from the organization.

Fairness and generosity are different things. If you bought two birthday gifts for two of your closest friends, and one cost more than the other, what would you say if the friend who got the cheaper gift accused you of being unfair? Probably something like, “I didn’t have to get you any gift, so stop complaining.” At Bridgewater, we are generous with people (and I am personally generous), but we feel no obligation to be measured and equal in our generosity.

It seems to me that if you look back on yourself a year ago and aren’t shocked by how stupid you were, you haven’t learned much.

The fastest path to success starts with knowing what your weaknesses are and staring hard at them.

People who suppress minor conflicts tend to have much bigger conflicts later on, which can lead to separation, while people who address their mini-conflicts head on tend to have the best and the longest-lasting relationships.

And everyone must understand the most fundamental principle for getting in sync, which is that people must be open-minded and assertive at the same time.

Recognize that conflicts are essential for great relationships.

It is never acceptable to get upset if the idea meritocracy doesn’t produce the decision that you personally wanted.

Being open-minded is much more important than being bright or smart.

Very simple tricks—like repeating what you’re hearing someone say to make sure you’re actually getting it—can be invaluable.

Asking questions to make sure that someone hasn’t overlooked something isn’t the same thing as saying that he or she has overlooked it (“watch out for the ice” vs. “you’re being careless and not looking out for the ice”). Yet I often see people react to constructive questions as if they were accusations. That is a mistake.

Utilize the “two-minute rule” to avoid persistent interruptions.

If you find you can’t reconcile major differences—especially in values—consider whether the relationship is worth preserving.

The most believable opinions are those of people who 1) have repeatedly and successfully accomplished the thing in question, and 2) have demonstrated that they can logically explain the cause-effect relationships behind their conclusions.

If you can’t successfully do something, don’t think you can tell others how it should be done.

The best way to make great decisions is to know how to triangulate with other, more knowledgeable people.

Think about people’s believability, which is a function of their capabilities and their willingness to say what they think. Keep their track records in mind.

If someone hasn’t done something but has a theory that seems logical and can be stress-tested, then by all means test it.

Don’t pay as much attention to people’s conclusions as to the reasoning that led them to their conclusions.

Everyone should be up-front in expressing how confident they are in their thoughts.

“Let’s agree that I am a dumb shit but I still need to make sense of this, so let’s move slowly to make sure that happens.”

Don’t hold opinions about things you don’t know anything about.

Pay more attention to whether the decision-making system is fair than whether you get your way.

I believe that the ability to objectively self-assess, including one’s own weaknesses, is the most influential factor in whether a person succeeds, and that a healthy organization is one in which people compete not so much against each other as against the ways in which their lower-level selves get in the way.

My ultimate goal is to create a machine that works so well that I can just sit back and watch beauty happen.

At a high level, we look for people who think independently, argue open-mindedly and assertively, and above all else value the intense pursuit of truth and excellence, and through it, the rapid improvement of themselves and the organization.

In order to match a person to the design, start by creating a spec sheet so that there will be a consistent set of criteria that can be applied from recruiting through performance reviews. Bridgewater’s spec sheets use the same bank of qualities as our Baseball Cards.

Don’t design jobs to fit people; over time, this almost always turns out to be a mistake.

Think through which values, abilities, and skills you are looking for (in that order).

We value people most who have what I call the three C’s: character, common sense, and creativity.

If you’re less than excited to hire someone for a particular job, don’t do it.

Remember that people tend to pick people like themselves, so choose interviewers who can identify what you are looking for.

Think of your teams the way that sports managers do: No one person possesses everything required to produce success, yet everyone must excel.

Largely because they are the easiest to measure, memory and processing speed tend to be the abilities that determine success in school, so school performance is an excellent gauge of these qualities.

Don’t hire people just to fit the first job they will do; hire people you want to share your life with.

Look for people who have lots of great questions.

In the end, accuracy and kindness are the same thing.

Don’t hide your observations about people.

A weakness that is due to a lack of experience or training can be fixed, while a weakness that is due to a lack of ability can’t be. Failing to distinguish between these causes is a common mistake among managers, because managers are often reluctant to appear unkind or judgmental.

Always ask yourself if you would have hired them for that job knowing what you know now. If not, get them out of the job.

Evaluate employees with the same rigor as you evaluate job candidates.

Remember that if you are expecting people to be much better in the near future than they have been in the past, you are probably making a serious mistake.

Be willing to “shoot the people you love.”

Most people get caught up in the blizzard of things coming at them. In contrast, successful people get above the blizzard so they can see the causes and effects at play.

Remember that for every case you deal with, your approach should have two purposes . . . . . . 1) to move you closer to your goal, and 2) to train and test your machine (i.e., your people and your design). The second purpose is more important than the first because it is how you build a solid organization that works well in all cases.

Everything is a case study.

Exceptions should be extremely rare because policies that have frequent exceptions are ineffective.

Learn how much confidence to have in your people—don’t assume it.

The people who work for you should constantly challenge you, so that you can become as good as you can be. In doing so, they will understand that they are just as responsible for finding solutions as you are.

Avoid staying too distant.

Use daily updates as a tool for staying on top of what your people are doing and thinking.

If problems take you by surprise, it is probably because you are either too far removed from your people and processes or you haven’t adequately visualized how the people and processes might lead to various outcomes.

Pull all suspicious threads.

Think like an owner, and expect the people you work with to do the same.

It’s a basic reality that if you don’t experience the consequences of your actions, you’ll take less ownership of them.

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

You must stretch yourself if you want to get strong.

Don’t treat everyone the same—treat them appropriately.

It’s often said that it is neither fair nor appropriate to treat people differently. But in order to treat people appropriately you must treat them differently.

It is more practical to be honest about one’s uncertainties, mistakes, and weaknesses than to pretend they don’t exist. It is also more important to have good challengers than good followers.

Distinguish between a failure in which someone broke their “contract” and a failure in which there was no contract to begin with.

Every problem you find is an opportunity to improve your machine.

People have a strong tendency to slowly get used to unacceptable things that would shock them if they saw them with fresh eyes.

Encourage people to bring problems to you.

  1. Is the outcome good or bad?
  2. Who is responsible for the outcome?
  3. If the outcome is bad, is the Responsible Party incapable and/or is the design bad?

But this is when the conversation often gets dragged into gobbledygook, where someone goes into a detailed explanation of “what they did.” Remember: It’s your job to guide the conversation toward an accurate and clear synthesis.

Importantly, ask yourself this question: If X attribute is done well next time, will the bad outcome still occur?

“What should a quality person have known and done in that situation?”

Remember that a root cause is not an action but a reason. Root causes are described in adjectives, not verbs, so keep asking “why” to get at them.

Most problems happen for one of two reasons: 1) It isn’t clear who the Responsible Party is, or 2) The Responsible Party isn’t handling his/her responsibilities well.

It typically takes about twice as long to build a machine as it does to resolve the task at hand, but it pays off many times over because the learning and efficiency compound into the future.

Create great decision-making machines by thinking through the criteria you are using to make decisions while you are making them.

Use “double-do” rather than “double-check” to make sure mission-critical tasks are done correctly.

What are the most important things that a leader needs to do in order to get their organizations to push through to results? Most importantly, they must recruit individuals who are willing to do the work that success requires.

While there might be more glamour in coming up with the brilliant new ideas, most of success comes from doing the mundane and often distasteful stuff, like identifying and dealing with problems and pushing hard over a long time.

How to do more than we think we can is a puzzle we all struggle with. Other than working harder for longer hours, there are three ways to fix the problem: 1) having fewer things to do by prioritizing and saying no, 2) finding the right people to delegate to, and 3) improving your productivity.

An idea meritocracy requires people to do three things: 1) Put their honest thoughts on the table for everyone to see, 2) Have thoughtful disagreements where there are quality back-and-forths in which people evolve their thinking to come up with the best collective answers possible, and 3) Abide by idea-meritocratic ways of getting past the remaining disagreements (such as believability-weighted decision making).

© 2018 Corentin Derbré.