Learn from the best is what most of us aspire to do.
So no wonder that when people like Ray Dalio, the founder of Bridgewater Associates, decides to put his life principles into a book, you simply cannot not buy that book.
Principles (Life and Work) is Ray Dalio’s personal explanation of his life work and how came up with the principles that he uses in making decisions.
Given Bridgewater Associates is one of the top companies in the world, clearly he has a lot to share what success looks like and how he has used these principles in driving that success.
What’s refreshing of the book is that Ray explains how he gained his insights of the markets, in particular commodities, and how he started understanding global markets and supply chains, and how in those processes he develop particular ways of doing things that turned out to be hugely successful.
The importance of having decision principles
Decision principles are there to help you to identify a situation, an outcome, and make decisions towards your goals and aspirations in a way that gets you where you want to go:
“Having a good set of principles is like having a good collection of recipes for success. All successful people operate by principles that help them to be successful, though what they chose to be successful at varies enormously, so their principles vary” (p. x)
But this is not just about being successful and going from win to win.
In fact, and perhaps not unsurprisingly to some of us at least, Ray puts a lot of focus on understanding failure and how these two are related:
“I believe that the key to success lies in knowing how to both strive for a lot and fail well. By failing well, I mean being able to experience painful failures that provide big learnings without failing badly enough to get knocked out of the game” (p. xiv)
We often see other people as having followed straight lines to success, but in this book Ray shares so many examples of where he and others have failed, sometimes in rather gigantic ways.
Reading these experiences also helped me to reflect on some of mine, and perhaps being more graceful towards myself through deeper reflections on what I have actually learned from these situations.
In Ray’s words, every experience and situation is a type of something.
Unless you reflect and learn, that something will keep coming at you, again and again.
So rather than banging your head against the wall each time it happens (because it will), why not develop a way to recognise the situation or experience for what it is (a type of X), and learn to deal with it in a way that is successful?
Understand and map your decision principles
The basic message of the book is that most of us have developed decision principles, the way we decide that is specifically based on our experience and insights.
But most of us could not be able to articulate those if we were asked what those are.
Decision principles are useful because otherwise you would always need to start from scratch in justifying why and how you are making a decision and what outcome you’d need or want.
You would also not really learn from your experience if you didn’t develop at least some formats and types of situations where you prefer to act in a certain way.
These principles are personal heuristics or “rules of thumb” that we all use in making decisions.
If you want to understand your decision-making principles and whether they actually work, it is pretty simple: write them down with a justification why you make a particular decision and then also record the outcome.
By keeping a scorecard on your decisions and how they turned out will enable you to do what Ray did: to refine the decision principles so that you can turn your experience and insights into useful ways of making decisions.
This does not just mean writing down a particular situation and your decision, but also spending more time in reflecting afterwards what the particular outcome was, and whether there was something in your decision that did or did not deliver the assumed benefit you were aiming for.
It is this reflection and feedback loop that helps you to hone your principles and over time being able to understand which principles work best in which contexts.
Respect your staff and the diversity of principles
As noted in the beginning of this post, many successful people have their own principles and because they are each different with different goals, they are bound to vary.
This means also that your stuff is likely to operate from a very diverse sets of decision principles on daily basis at work based on their own life experience, their goals and vision.
A good leader understands that and finds ways of bringing forth these through transparency of sharing information but also by enabling the staff to voice these different thinking styles:
“managers who do not understand people’s different thinking styles cannot understanding how the people working for them will handle different situations, which is like a foreman not understanding how his equipment will behave” (p. 74)
At Bridgewater Associates, one of the key principles that everyone who works there should share however is radical transparency just because of this reason.
Given that people have different decision principles, they need to be able to be shared and heard so that other people understand (and can debate) why a particular decision has been or should be taken that way.
Being transparent about decision-making processes and opening up the venues for communications across the whole company has been painful at times as not all employees embrace frank conversations.
But it has resulted in a very distinct company culture that is hard to find (or replicate) somewhere else where people are expected to be real and clear about their opinions and principles.
At Bridgewater, this radical transparency has in fact helped to correct many false assumptions about other people’s views or about the rationale of particular decisions before it has been too late for example to change the course.
Key messages for climate adaptation
There are several key messages in this book that really resonated with me when I thought about climate adaptation and how we make decisions how to adapt.
Much of this knowledge is really embedded in project evaluations and people’s lived experience on how they make and have made decisions to adapt.
If we were to track the aim of a project for adaptation, analyse its outcomes from multiple angles, and try to map the key decision principles of that process (and then aggregate many of these kinds of principles), I believe we could develop a much more robust understanding what “successful” adaptation to climate change looks like.
Partly this is what my current project is (Re-evaluating climate adaptation principles for a more resilient Australia) and the Adaptation Science Research Theme at Cities Research Institute.
It is about developing an in-depth understanding of key decision principles around adaptation, interrogating their relevance and robustness, and trying to provide more nuanced and helpful perspectives into how these can help us in adapting to climate change.
But what if we would all write down our adaptation decision principles? What kind of knowledge could we construct and develop worldwide?
One of the issues we face with climate adaptation is that most of this discussion is set far in the future.
Yet, as Ray notes, the most important thing for any fund or company is not knowing with full certainty what happens exactly in the future: it is “knowing how to react appropriately to the information available at each point in time” (p. 40).
So having a more robust understanding of the current information, combined of course with tracking of future trends and potential scenarios, is more important than waiting for full certainty of an uncertain future.
But most of all, reflecting and writing down decision principles will be key in unlocking a better understanding not only of climate adaptation but also of ourselves.