Principles

Summary: 

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Bridgewater Associates was founded in 1975, in a two-bedroom apartment. After 40 years, Bridgewater is the most successful hedge fund in history. This book is about everything that the founder, Ray Dalio, has learned about life and work. The contents of the book include a melting pot of economics, management, human psychology, and the anecdotes of the Steve Jobs of investing. 

The cover of the book includes the following endorsement from Bill Gates enough said…

“Ray Dalio has provided me with invaluable guidance and insights that are now available to you in Principles.”

Favorite Passages:  

“Unattainable goals appeal to heroes,” 

“I learned that if you work hard and creatively, you can have just about anything you want, but not everything you want. Maturity is the ability to reject good alternatives in order to pursue even better ones.” 

“In trading, you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep the money.” 

“I saw that 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. You will think you have failed—but that won’t be true unless you give up.” 

From Henry David Thoreau: “If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however, measured or far away.”

“Listening to uninformed people is worse than having no answers at all.” 

“Imagine that in order to have a great life you have to cross a dangerous jungle. You can stay safe where you are and have an ordinary life, or you can risk crossing the jungle to have a terrific life. How would you approach that choice? Take a moment to think about it because it is the sort of choice that, in one form or another, we all have to make.” 

My Takeaways: 

Ray Dalio has a beautiful mind, which has been sculpted by a lifetime of incredible experience. Do yourself a favor and read this book. After finishing it, I felt like I had seen a sneak peek into a world I did not know existed. There are extremely smart individuals in this world who are teaming up to make significant amounts of money. There are lessons in these pages, which can be implemented to augment your life.  

For me, this book is a reminder that you are the average of the five people that you spend the most time with. I have found, being in a remote place, it difficult to surround myself with groups of people that I inspire to be like. I have addressed this by getting serious about education and learning by way of external sources including books, and podcasts. 

Some key concepts from the book include… 

“Idea Meritocracy” 

The concept means employing methods to ensure that the best ideas win in any environment. This is key in trading because, as Dalio explains, “You have to be an independent thinker who bets against the consensus – and be right.” For this reason, it is optimal to create a culture that is rooted in an idea meritocracy. Everyone must weigh in, ego removed, and as a group objectively arrive at the radical truth about who and what is most correct. 

“Believability” 

At Bridgewater, every employee has a believability rating, which is generated by the accumulation of decisions that the person has made with the company. This score depicts an employee’s believability of being right in the present by their judgment, reasoning, and behavior in the past. Bridgewater has prevented groupthink by inviting dissenting opinions from every employee in the company.

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