Principles For Success by Ray Dalio (In 30 Minutes)

0:00 [Narrator] Principles For Success.

0:02 An ultra mini-series adventure in 30 minutes, and in eight episodes.

0:07 Episode one, The Call to Adventure.

0:12 Before we begin, let me just establish the fact that I

0:15 don't know much relative to what I need to know.

0:19 Whatever success I've had in life has had more to do

0:22 with my knowing how to deal with my not knowing than anything I know.

0:27 That I should be telling other people what

0:29 to do sounds kind of presumptuous to me, but I'm going to do it,

0:33 because I believe that the principles that have made

0:36 me successful could help others achieve their own goals.

0:40 I'm now at a stage in my own life in which it is much more important to me

0:44 to pass along what I've learned about how

0:47 to be successful than to seek more success for myself.

0:51 What you choose to do with these principles is up to you.

0:55 You have to be an independent thinker,

0:57 because only you can develop your own principles based on your own values.

1:03 This brings me to my first and most fundamental principle,

1:06 which is that you need to think for yourself about what is true.

1:11 So let's get started.

1:13 Early on, I discovered I needed principles.

1:16 Principles are smart ways for handling things

1:18 that happen over and over again in similar situations.

1:21 There are principles for everything,

1:23 from skiing to parenting to cooking, and so on.

1:28 I'm going to share some of my most important, overarching,

1:31 life principles that influence how we approach everything that we do.

1:37 I didn't start out with principles.

1:40 I acquired them over a lifetime of experiences.

1:44 Mostly, from making mistakes and reflecting on them.

1:48 My life principles are simple, but they're not complete.

1:52 I still struggle to make the best decisions,

1:55 and I still make mistakes and learn new principles all the time.

1:59 This is the reality.

2:02 At the beginning, I needed to escape the conventions that surrounded me,

2:07 which meant that I needed to think for myself.

2:09 Unless you want to have a life that is directed by others,

2:13 you need to decide for yourself what to do,

2:17 and you need to have the courage to do it.

2:21 But I didn't know that at first.

2:23 I only learned that from going on my adventure.

2:26 Looking back on my own journey, I now see that time is like a river that carries

2:31 us forward into encounters with reality that require us to make decisions.

2:37 We can't stop our movement down this river, and we can't avoid the encounters.

2:42 We can only approach them in the best possible way.

2:46 In your lifetime, you will face millions of decisions.

2:50 The quality of your decisions will determine the quality of your life.

2:54 Over the course of my lifetime,

2:56 the most valuable things I've learned were the results of mistakes I reflected

3:01 on to help form principles so I wouldn't make the same mistakes again.

3:06 These principles took me from being a very ordinary middle class kid

3:10 from Long Island to becoming very successful as judged by conventional measures.

3:15 They also gave me the meaningful work and meaningful

3:18 relationships that I value even more than these conventional successes.

3:23 People often ask me how I did it.

3:25 I can assure you it wasn't because of my uniqueness as a person.

3:29 It was the result of a unique approach

3:31 to life I believe almost anybody can adopt.

3:35 It starts with embracing reality and dealing with it.

3:40 The path you take in life is your most important decision.

3:44 In my case, I wanted my life to be great,

3:47 and I feared boredom and mediocrity more than I feared failure.

3:52 Since I didn't start out with money,

3:54 and I didn't need much more than a bed to sleep in and food to eat,

3:57 I could skew my decisions to pursue my adventures.

4:01 So ever since I was a kid,

4:03 I ran after the things I wanted, crashed, got up and ran again,

4:09 and crashed again, and each time I crashed,

4:12 I learned something, got better, and crashed less.

4:16 By doing that over and over again,

4:18 I learned to love this process, even the crashing part of it.

4:23 Through it, I encountered reality, and I learned how to deal with it,

4:28 which inspired another one of my most fundamental principles which

4:33 is that truth is the essential foundation for producing good outcomes.

4:39 By truth, I don't mean anything more than the way the world works.

4:43 I believe that we were given the laws of reality by nature.

4:47 Humans didn't create them,

4:49 but we can use them to foster our own evolution and achieve our goals.

4:54 Realizing that made me a hyper-realist, by which I mean I became someone who

5:00 has discovered the great rewards of deeply understanding,

5:04 accepting, and working with reality as it is, and not as I wish it would be.

5:11 When I say I'm a hyper-realist,

5:14 people sometimes think I'm saying that dreams can't come true.

5:18 That's absolutely not true.

5:20 Without pursuing dreams, life is mundane.

5:24 What I mean is that, to me,

5:26 hyper-realism is the best way to choose one's dreams and then achieve them.

5:31 Having big dreams, plus embracing reality,

5:35 plus having lots of determination will bring you a successful life.

5:40 I believe this formula is true for everyone.

5:44 But what does a successful life look like?

5:46 We each have to decide for ourselves what success is.

5:50 I don't care whether you want to be a master

5:53 of the universe or to live under a palm tree, or anything else.

5:56 I really don't.

5:59 Each of us chooses goals based on our values

6:02 and decides on the best path to achieve them.

6:05 But we all need approaches to making decisions that work well,

6:10 especially when facing problems, mistakes, and weaknesses that stand in our way.

6:15 To succeed, we must embrace all our realities,

6:18 especially the harsh realities that we wish weren't true.

6:22 At first, looking at these harsh realities caused me a lot of pain.

6:26 But I learned that this pain was just psychological,

6:30 and that my seeing things differently made all the difference.

6:34 I came to view problems like puzzles that would reward me if I could solve them.

6:39 They would help me deal with the problem at hand,

6:41 and they would give me principles

6:43 for dealing with similar problems in the future.

6:47 I learned to treat pain as a cue that a great learning opportunity is at hand,

6:53 which led me to realize that pain plus reflection equals progress.

7:00 Meditation has been invaluable in helping me see things that way.

7:05 I found that when I calmed myself down and embraced my realities,

7:09 and dealt with them, the rewards brought me pleasure, and the pain faded.

7:15 Each of us has the unique capability to think logically,

7:19 to reflect on ourselves, and our circumstances,

7:22 and to direct our own personal evolution.

7:25 Doing this well is just a matter of following a simple five-step process.

7:32 (warm music) We've discussed how important it

7:35 is to reflect carefully after experiencing pain.

7:39 When I did this, I was usually able to discover principles

7:43 that would prevent me from repeating the same mistakes in the future.

7:46 And I could see that being successful simply consisted of five steps.

7:51 Step one is to know your goals and run after them.

7:55 What is best for you depends on your nature,

7:58 so you need to really understand yourself

8:00 and know what you want to achieve in life.

8:03 Step two is to encounter the problems that stand

8:06 in the way of getting to your goals.

8:08 These problems are typically painful.

8:10 If handled badly, some of them can lead to your ruin.

8:14 But to evolve, you need to identify those problems and not tolerate them.

8:19 Step three is to diagnose these problems to get at their root causes.

8:24 Don't jump too quickly to solutions.

8:27 Take a step back and reflect in order

8:30 to really distinguish the symptoms from the disease.

8:33 Step four is to design a plan to eliminate the problems.

8:38 This is where you will determine what you need to do to get around them.

8:42 And step five is to execute those designs,

8:45 pushing yourself to do what's needed to progress toward your goal.

8:49 A successful life essentially consists of doing

8:52 these five steps over and over again.

8:54 This is your personal evolution, and you see this process everywhere.

8:59 It's just a law of nature.

9:01 Think of any product, any organization, or any person you know,

9:05 and you will see that this is true for them.

9:08 Evolution is simply a process of either adapting, or dying.

9:14 Conceptually, it looks just like the five-step process I've described.

9:19 As you push through this often painful process,

9:22 you'll naturally ascend to higher and higher levels of success.

9:26 I found that when I did it better, my struggling never became easier,

9:31 because the more capable I became, the greater the challenges I would take on.

9:37 Because different people are strong and weak at different things,

9:40 most people can't do all five steps well.

9:43 Not facing this reality means you could stretch further than you should.

9:48 And as the heights get greater, your falls could also be greater.

9:52 (wind howling) Sometimes terrible things happen to all of us in life.

9:57 They can ruin us, or they can profoundly

10:00 improve us depending on how we handle them.

10:03 Something like this happened to me in 1982.

10:08 We progress forward until we encounter setbacks.

10:12 Whether or not we get out of them and continue forward or spiral

10:16 downward depends on whether or not

10:18 we're willing to face the failure objectively,

10:21 and make the right decisions to turn the loop upward again.

10:25 Something terrible happened to me in 1982,

10:29 when I bet everything on a depression that never came.

10:34 (crashing) (birds chirping) The period between 1979

10:38 and 1982 was one of extreme turbulence,

10:41 for the global economy, the markets, and for me.

10:46 And I believed that the US economy,

10:48 with the world economy tied to it, was headed toward a catastrophe.

10:53 This view was extremely controversial.

10:56 I wanted the great upside,

10:58 and very publicly took a big risk and was wrong, dead wrong.

11:03 After a delay, the stock market began a big bull market that lasted 18 years,

11:09 and the US economy enjoyed the greatest growth period in its history.

11:13 This experience was like a blow to my head with a baseball bat.

11:17 I had to cut my losses so that my company,

11:20 Bridgewater, was left with one employee, me.

11:24 (door slams) (paper shuffles) I was so broke,

11:26 I had to borrow $4,000 from my dad to pay my bills.

11:30 But even worse was having to let go the people I cared so much about.

11:36 I wondered whether I should give up my dream

11:38 of working for myself and play it safe by working

11:41 for someone else in a job that would require

11:44 me to put on a tie and commute everyday.

11:46 Though I knew that for me, taking less risk would mean having a less great life.

11:52 Being so wrong, and especially being so publicly wrong, was painfully humbling.

11:58 I am still shocked and embarrassed by how arrogant I

12:02 was in being totally confident in a totally incorrect view.

12:08 Though I had been right much more than I had been wrong,

12:11 I let one bad bet erase all my good ones.

12:14 (dramatic orchestral music) I thought very hard

12:17 about the relationship between risk and reward, and how to manage them.

12:22 But I couldn't see a path forward that would

12:25 give me the rewards I wanted without unacceptable risk.

12:29 This kind of experience happens to everyone.

12:33 It will happen to you.

12:35 You will lose something, or someone you think you can't live without.

12:40 Or you will suffer a terrible illness or injury,

12:44 or your career will fall apart before your eyes.

12:48 You might think that your life is ruined, and there's no way to go forward.

12:53 But it will pass.

12:55 I assure you that there is always a best path forward,

13:00 and you probably just don't see it yet.

13:03 You just have to reflect well to find it.

13:06 You have to embrace your reality.

13:12 Sometimes things happen that are hard to understand.

13:15 Life often feels so difficult and complicated,

13:18 it's too much to take in all at once.

13:21 My deep pain led me to reflect deeply on my circumstances.

13:25 It also led me to reflect on nature,

13:27 because it provides a guide for what's true.

13:30 So I thought a lot about how things work,

13:33 which helped to put me, and my own circumstances, in perspective.

13:39 I saw that at the big bang,

13:41 all the laws and forces of the universe were created and propelled forward,

13:46 interacting with each other as a perpetual motion machine,

13:49 in which all the bits and pieces coalesce into machines that work for a while,

13:55 fall apart, and then coalesce into new machines.

13:58 This goes on into eternity.

14:01 I saw that everything is a machine.

14:03 The structure and evolution of galaxies, the formation of our own solar system,

14:08 the make-up of earth's geography and ecosystems,

14:12 our economies and markets, and each of us.

14:16 We individually are machines, made up of different machines.

14:20 Our circulatory system, our nervous system,

14:23 that produce our thoughts, our dreams,

14:26 our emotions, and all the other aspects of our distinct characters.

14:30 All of these different machines evolve together through

14:33 time to produce the realities we encounter every day.

14:37 And I realized that I was just one tiny bit in one nanosecond,

14:41 deciding what I should do.

14:44 While that perspective might sound very philosophical,

14:47 I found that it was very practical,

14:50 because it showed me how I could deal with my own realities in a better way.

14:54 For example, I observed that most everything happens

14:58 over and over again in slightly different ways.

15:01 Some in obvious short-term cycles that are easy to recognize,

15:05 so we know how to deal with them, like the 24-hour day.

15:09 Some so infrequently that they haven't occurred in our lifetimes,

15:13 and we're shocked when they do, like the once in a 100 year storm.

15:18 And some we know exist, but are encountering for the first time,

15:22 like the birth of our first child.

15:25 Most people mistakenly treat these situations as being unique,

15:29 and deal with them without having proper perspective

15:32 or principles to help them get through them.

15:35 I found that if instead of dealing with these events as one-offs,

15:38 I could see each as just another one of those, and approach

15:43 them in the same way a biologist might approach an animal.

15:47 First, identifying its species,

15:49 then drawing on principles for dealing with it appropriately.

15:53 Because I could see these events transpire

15:55 in pretty much the same ways over and over, I could more clearly see

16:00 the cause-effect relationships that govern their behaviors,

16:03 which allowed me to develop better principles

16:05 that I could express in both words and algorithms.

16:09 I learned that while most everyone expects the future

16:12 to be a slightly modified version of the present,

16:15 it is typically very different.

16:17 That's because people are biased by recent history,

16:20 and overlook events that haven't happened in a long time,

16:23 perhaps not even in their lifetime.

16:25 But they will happen again.

16:28 With that perspective, I realized that what I missed when I mistakenly called

16:32 for a great depression was hidden in the patterns of history,

16:36 and I could use my newfound knowledge

16:38 of these patterns to make better decisions in the future.

16:41 And when I thought about my challenge, balancing risk and reward,

16:46 I realized that risk and reward naturally go together.

16:50 I could see that to get the most out of life, one has to take more risk,

16:54 and that knowing how to appropriately balance risk

16:58 and reward is essential to having the best life possible.

17:02 Imagine you were faced with the choice of having a safe,

17:06 boring life if you stay where you are, or having a fabulous one if you take

17:11 the risk of successfully crossing a dangerous jungle.

17:15 That is essentially the choice we all face.

17:18 For me, the choice was clear,

17:20 but that doesn't mean the path forward was without challenges.

17:24 I still needed to face two big barriers that we all must face.

17:28 (peaceful music) I can't tell you which path in life is best for you,

17:34 because I don't know how important it is for you to achieve big goals relative

17:38 to how important it is for you to avoid the pains required to get them.

17:43 This is the courage I spoke of earlier,

17:46 and we each have to feel these things out for ourselves.

17:49 After my big mistake in calling for a depression,

17:52 I had come to one of life's forks in the road, as we all do.

17:56 If I made the choice to take a normal job and play it safe,

18:00 I would have ended up with a very different life than the one I had.

18:04 (door slams) (paper shuffles) But as long as I could pay the rent,

18:07 put food on the table, and educate my kids,

18:10 the only choice for me was to risk crossing

18:13 the jungle in pursuit of the best life possible.

18:16 My big mistake in betting on a depression gave me a healthy fear of being wrong.

18:22 In other words, it gave me deep humility, which was exactly what I needed.

18:28 At the same time, it didn't stop me

18:30 from aggressively going after the things I wanted.

18:33 To succeed, I needed to see more than I alone could see.

18:37 (strikes match) (flame hisses) But standing in my way

18:40 of doing that were the two biggest barriers everyone faces.

18:44 Our ego and blind spot barriers.

18:48 These barriers exist because of how our brains work.

18:51 First, let's explore the ego barrier.

18:54 When I refer to your ego barrier, I'm talking about the parts of your brain

18:58 that prevent you from acknowledging your weaknesses objectively,

19:02 so that you can figure out how to deal with them.

19:05 Your deepest seated needs and fears reside in areas of your brain

19:10 that control your emotions and are

19:12 not accessible to your higher-level conscious awareness.

19:16 And because our need to be right can be

19:18 more important than our need to find out what's true,

19:21 we like to believe our own opinions without properly stress-testing them.

19:26 We especially don't like to look at our mistakes and weaknesses.

19:30 We are instinctively prone to react

19:33 to explorations of them as though they're attacks.

19:36 We get angry, even though it would be more

19:39 logical for us to be open to feedback from others.

19:42 This leads to our making inferior decisions,

19:45 learning less, and falling short of our potentials.

19:49 The second is the blind spot barrier.

19:52 Everyone has blind spots.

19:54 The blind spot barrier is when a person believes he or she can see everything.

19:58 But it's a simple fact that no one alone can see a complete picture of reality.

20:04 Naturally, people can't appreciate what they can't see,

20:08 just as we all have different ranges for singing,

20:11 hearing pitch, and seeing colors,

20:13 we have different ranges for seeing and understanding things.

20:17 For example, while some people are better at seeing the big picture,

20:22 others excel at seeing details.

20:26 Some are linear thinkers, and others are more lateral.

20:29 While some are creative but not reliable,

20:33 others are reliable but not creative, and so on.

20:37 Because of how are brains are wired differently,

20:39 everyone perceives the world around them differently.

20:43 By doing what comes naturally to us,

20:46 we fail to account for our weaknesses and we crash.

20:50 Either we keep doing that, or we change.

20:53 Aristotle defined tragedy as a terrible

20:56 outcome arising from a person's fatal flaw.

20:59 A flaw, that had it been fixed, would have instead led to a wonderful outcome.

21:06 In my opinion, these two barriers are the main

21:09 impediments that get in the way of good decision-making.

21:13 (noble orchestral music) Taking risks

21:17 and occasionally being ruined wasn't acceptable

21:21 and neither was not taking risks and not having exceptional results.

21:26 I needed an approach that would give me

21:27 the exceptional upside without also giving me the exceptional downside.

21:33 When I discovered it, it turned out to be my holy grail.

21:37 To get it, I needed to replace the joy

21:40 of being proven right with the joy of learning what's true.

21:46 This need prompted me to seek out the most

21:48 thoughtful people I could find who disagreed with me.

21:52 I didn't care about their conclusions,

21:54 I just wanted to see things through their eyes,

21:57 and to have them see things through my eyes,

22:00 so that together we could hash things out to discover what's true.

22:05 In other words, what I wanted most from them was thoughtful disagreement.

22:11 Going from seeing things through just my eyes,

22:14 to seeing things through the eyes of these thoughtful people was like

22:18 going from seeing things in black and white to seeing them in color.

22:22 (birds chirping) The world lit up.

22:26 (growling) (wings flapping) That's when I realized

22:30 that the best way to go through

22:32 the jungle of life is with insightful people who see things differently from me.

22:38 Think about the five-step process I described earlier.

22:41 As I said, because we are wired so differently,

22:44 not everyone can do all the five steps well.

22:47 But you don't have to do them all alone.

22:50 You can get help from others who are good at what you're not,

22:54 who are wired to perceive things you can't.

22:58 All you need to do is let go

22:59 of your attachment to having the right answers yourself,

23:03 and use your fear of being wrong to become open-minded to these other views.

23:10 In this way, you could point out

23:12 the risks and opportunities that you would individually miss.

23:16 I found that taking this radically

23:18 open-minded approach and believability-weighting people's

23:21 thinking significantly increased my probabilities

23:25 of making the best decisions possible.

23:27 This enabled me to ascend to greater heights and greater challenges.

23:32 In the past, I would have always wanted to do what I, myself, thought was best.

23:37 But now I sought out the strongest independent thinkers I could find.

23:41 I still do.

23:43 There is nothing better to be on a shared mission with extraordinary

23:47 people who can be radically truthful and radically transparent with each other.

23:53 This approach led me to create a company with the unique idea meritocracy,

23:57 operating in a unique way, that produced unique successes.

24:02 In an idea meritocracy, you get the best of everybody.

24:06 Everyone thinks independently,

24:09 then we work through our disagreements to get at what's best.

24:13 However, not every opinion is equally valuable.

24:16 And we had to learn to distinguish between good

24:18 ideas and bad ones to get the best decisions.

24:22 In other words, we needed to believability-weight people's thinking.

24:27 But that's another story I will explain in my work principles.

24:31 Right now, there are many wonderful opportunities

24:34 and dangerous risks surrounding you that you don't see.

24:39 If you saw them free of the distortions

24:42 produced by your ego or your blind spots,

24:45 you would be able to deal with them more effectively.

24:48 If you could acquire this ability,

24:50 and with practice you can, you will radically improve your life.

24:57 So far I described how I learned to confront my own realities,

25:01 my problems, my mistakes, and weaknesses.

25:04 And how I surrounded myself with others who could do things better than I could.

25:09 This was the most effective way I discovered for making great decisions.

25:15 This is not the normal way of being,

25:17 but through this approach, I became very successful.

25:20 And being successful enabled me to meet

25:23 extraordinarily successful people and see how they think.

25:28 I've discovered that their journeys were similar to mine.

25:31 You might not know it, but they all struggled,

25:35 and they all have weaknesses that they all get around by working

25:39 with people who see risks and opportunities that they would miss.

25:43 Over time, I leaned that by nature, most people's greatest strengths are also

25:48 connected to their most significant weaknesses.

25:51 And striving hard for big things is bound to lead you to painful falls.

25:56 It's just part of the process.

25:59 Such setbacks will test you.

26:01 They sort people.

26:03 Some think hard about what caused their setbacks,

26:07 learn lessons, and continue progressing toward their goals,

26:11 while others decide that this game is not for them, and get off the field.

26:16 I've come to realize that success is not a matter of attaining one's goals.

26:22 I've found that when I reached each new higher level of success,

26:26 I rarely remained satisfied.

26:28 The things we are striving for are just the bait.

26:32 Struggling to get them forces us to evolve,

26:35 and it is this struggle toward personal

26:38 evolution with others that is the reward.

26:41 I no longer wanted to get across the jungle,

26:44 but instead wanted to find greater and greater challenges to go after,

26:49 surrounded by great people working together on a shared journey.

26:54 Eventually the success of the mission and the well-being

26:58 of the people alongside me became more important than my own success.

27:03 I also started to see beyond myself,

27:05 and wanted others to be successful when I'm no longer here.

27:10 I realized that if I fail to do that, I will be a failure.

27:15 I struggle with this now.

27:18 We all struggle with different things at different times,

27:21 until we either choose to give up,

27:23 or until we die and become part of the larger evolutionary story.

27:28 This is how all machines work, and are recycled through time.

27:32 When a machine breaks down, its parts go back into the system to become

27:37 parts of new machines that also evolve through time.

27:41 Sometimes this makes us sad, because we become very attached to our machines.

27:46 But if you look at it from the higher level,

27:48 it's really beautiful to observe how the machine of evolution works.

27:53 Now you must decide for yourself how you will evolve.

27:58 Forget about where these principles came from.

28:01 Just assess whether or not they are useful to you,

28:04 and evolve them to suit your own needs.

28:07 As with all of life's decisions, what you do with them is ultimately up to you.

28:13 My only hope for you is that you have the courage to struggle

28:17 and evolve well to make your life as great as it can be.

28:22 Thank you, and goodbye.

28:24 (warm orchestral music)