Month: December 2014

Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund. Bridgewater Associates grew to its current size thanks to its far-above-normal rate of returns. We did a case on Bridgewater Associates at school as an extreme example of employee culture. I use the word “extreme” because Ray Dalio has built a firm on a cultural “hyper-transparency.” At Bridgewater, employees seek out conflicts in pursuit of the “truth.” Given the rather cult-ish nature of the firm, it attracts a certain kind of person.

I was intrigued by Ray Dalio as some of his interviews revealed a disciplined and obsessive (is there any other kind of billionaire?) person who had an interesting take on markets and life that has evolved over time. For example, he has taken note of every investment decision he’s taken since the 1960s with the rationale behind them. And, over time, he’s studied the data to understand how the economic machine really works.

His approach to both the markets and life seemed very aligned around a principle-based approach he shared via a 109 page document with called ‘Principles‘ that is shared on Bridgewater’s website. So, I took some time over the past week to read the document. I was more interested in the part around fundamental principles as the management principles were derivative of that. These are a collection of quotes (similar ones grouped together) that resonated/made me think –

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“Principles are concepts that can be applied over and over again in similar circumstances as distinct from narrow answers to specific questions. Principles connect your values to your actions.”

“Truth, more precisely, an accurate understanding of reality, is the essential foundation of producing good outcomes. Dreamers who achieve great things are not divorced from reality. Instead, they understand nature’s principles and make their invention to harness them. E.g. Flying.”

“The desire to evolve is probably humanity’s most pervasive driving force. And pursuing self interest in harmony with the laws of the universe and contributing to evolution is universally rewarded. Self-interest motivates people to do the difficult things that benefit them and that contribute to society. That, in turn, means they get rewarded financially.”

“Adaptation is simply adjusting appropriately to changes in one’s circumstance.”

“The quality of our lives depend on the quality of the decisions we make. Good decision makers learn to think about the second and subsequent-order consequences of their decision.”

“Happiness is often determined by how things turn out relative to expectations. You can choose to either have high expectations and strive to exceed them or lower expectations. Most choose first oath and hence have to keep evolve to be happy.” (My critique here is that Ray is talking about the feeling of happiness in the first bit. The state of happiness isn’t linked with outcomes. It is a way of being – in my opinion.)

“Pain + reflection = progress”

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Ray Dalio’s approach to life and the markets has been to understand the principles that drive them. For example, he shares his mental model of the financial markets on a website called EconomicPrinciples.org. While I’m not sure I would have come to the same conclusions outlined in his approach to management, the document demonstrates incredible clarity of thought and alignment of values, principles and actions.

There is one footnote in the document where Ray asks every person to develop a “Principles” document. He also wishes he could read the principles of folks like Albert Einstein.

I wish that, too. Thanks for sharing this, Ray.

Learn-rate is simply the speed at which you learn. And, I have a simple tactic for maximizing your learn-rate. Just look for what’s counter intuitive.

Every skill you attempt to pick up has a few elements that are counter intuitive. I’d argue that the more counter intuitive elements there are, the harder it is to learn the skill. Here are a couple of examples –

– If you are trying to learn the guitar, you have to learn to gravitate towards pain. Our natural reaction is to stop doing something if it is painful. When learning the guitar, it works the other way around. If you feel your fingers hurting when you try playing the F-chord, that’s a sign that you need to do a lot more of it.

– If you are learning to serve in tennis, you should look at where you want the ball to go. This is completely against our instinct to look at the racket and the ball. Also, we have to toss the ball higher than our normal zone of comfort.

– If you are learning to ski, there are a collection of counter intuitive ideas. First, you should always lean forward to keep control. This goes against our instinct to pull back when we move fast. Second, to turn right, you must put your tilt your left ankle and put your weight on it. Thirdly, like in tennis, you must keep your eyes on the trail in front of you. Finally, you have to go slow to go fast. This means you spend a lot of time making S-shapes so you don’t just speed down the hill, lose control and fall.

So, when you’re picking up your next skill, keep an eye for what’s counter intuitive and spend all your energy learning it. It works like magic.

We are all exposed to industrial systems sooner or later in our lives. An outcome of having 7 billion people on the planet is that we’ve had to build industrial systems – school, college, the factory, etc. One consequence of these systems is that we’re conditioned to think of life like an assembly line – go to school, then get into a great college, then get a prestigious first job, then an elite masters program, then work in an exploding start-up and then build our own company. Or, the other way to think about it would be – study hard till you’re in college, then work hard while finding a partner, marry the partner, have kids, send kids to school, and let the cycle go on. Not much seems customizable. If anything, it feels like a never-ending list of things that just “have to be done.”

We crave connection as human beings. And, a result of this craving combined with technological advances is a slew of services like Facebook, Twitter, and the like. However, if we’re not careful, these can soon lead us to believe that there is a certain socially acceptable way to have fun, to go on vacation, or to even relax. After all, can it be a great vacation if it doesn’t make for a great profile picture?

But, here’s where it all breaks down –
1. Every bit of life is customizable. While large groups of us exhibit similar kinds of behavior (=> industrial systems work on average), we all have unique quirks. And, our happiness is entirely dependent on our quirks.
2. As a result, happiness exists in the customization. The less we feel like we’re going through life working through a pre-designed checklist,  the more we’re likely to be happy. The less we care about what others think, the more likely we’ll find our custom approach.
3. The less stuff we “have to do,” the happier we will be.

Our life is entirely what we make of it. And, the first step to making it what works for us is to realize that everything we take for granted was invented by people like and you and me.. and, that it is all customizable.

..until I make progress on my number 1 priority.

To this day, I haven’t found a single app or hack that accomplishes important work better than when I make this commitment. I’m just learning to be disciplined at breaking lists down into groups, prioritizing them and then getting to work.

Like all good things, the commitment just sets the stage for great follow up. There’s no way of escaping that.