Derek Sivers

Principles - by Ray Dalio

ISBN: 1501124021
Date read: 2017-10-07
How strongly I recommend it: 8/10
(See my list of 200+ books, for more.)

Go to the Amazon page for details and reviews.

Wow. So dense with wisdom that I wanted to highlight almost every

paragraph. Instead, I skipped Part 1, about his background, because in
the intro he recommends you skip it. I also skipped Part 3, about work
principles, since they were all collaborative group-stuff, and I’m not
working with anyone now. So here are my notes just from Part 2, “Life
Principles”, which were so good I’ll probably re-read this book again
next year. Caveat: it’s mostly so high-level — (“Decide what is true,
then decide what to do about it.”) — that they’re more like koans to
spark your own thoughts, instead of specific “do this” type advice.

my notes
An approach to life based on principles helps me find out what’s true
and what to do about it.

Principles are fundamental truths that serve as the foundations for

behavior that gets you what you want out of life.
They can be applied again and again in similar situations to help you
achieve your goals.

Operate by principles that are so clearly laid out that their logic can
easily be assessed and you and others can see if you walk the talk.

Without principles we would be forced to react to all the things life

throws at us individually.
Instead, classify these situations into types.

Embrace the fact that you don’t know everything you need to know.

My success has more to do with knowing how to deal with *not*

knowing.

Consistently operate with principles that can be clearly explained.

Decide:
1) what you want
2) what is true
3) what you should do to achieve #1 in light of #2

In relationships with others, your principles and their principles will

determine how you interact.
People who have shared values and principles get along. People who
don’t will suffer.

Know how to both strive for a lot and fail well.

To make money in the markets, one needs to be an independent

thinker who bets against the consensus and is right.
That’s because the consensus view is baked into the price.
To be a successful entrepreneur, the same is true, which means being
painfully wrong a fair amount.

“How do I know I’m right?”

Man’s most distinctive quality is our singular ability to look down on

reality from a higher perspective and synthesize an understanding of
it.
While other species operate by following their instincts, man alone can
go above himself and look at himself within his circumstances and
within time.

People to confuse what they want to be true with what actually is true.

Seeing things from the top down is the best way to understand. Find
the one code/law that drives them all.
To understand the world accurately it’s worth having a bottom-up
perspective.
You need both.
By taking a bottom-up perspective that looks at each individual case,
we can see how it lines up with our theories about the laws that we
expect to govern it.

Don’t get hung up on your views of how things “should” be because

you will miss out on learning how they really are.

Whenever I observe something in nature that I (or mankind) think is

wrong, I assume that I’m wrong and try to figure out why what nature
is doing makes sense.

Nature optimizes for the whole, not for the individual, but most people
judge good and bad based only on how it affects them.
Don’t call something good or bad in an absolute sense based only on
how it affects individuals.
To do so would presume that what the individual wants is more
important than the good of the whole.

Memory-based, conscious learning produces less rapid progress than

experimentation and adaptation.

Things (toys, bigger houses, money, status, etc.) don’t supply

anywhere near the long-term satisfaction that getting better at
something does.
It is the evolution, not the rewards, that matter.
The need to have meaningful work is connected to man’s innate desire
to improve.

To gain strength one has to push one’s limits, which is painful.

Develop a reflexive reaction to psychic pain that causes you to reflect
on it rather than avoid it,
Go to the pain rather than avoid it.
If you choose the healthy route, the pain will soon turn into pleasure.

Life doesn’t give a damn about what you like. It’s up to you to connect
what you want with what you need to do to get it and then find the
courage to carry it through.

First-order consequences often have opposite desirabilities from

second-order consequences.
First-order consequences of exercise are the pain and time spent.
Second-order consequences are better health and more attractive
appearance
Food that tastes good is often bad for you and vice versa.

The first-order consequences are the temptations that cost us what we

really want.

Nature throws us trick choices that have both types of consequences

and penalizes those who make their decisions on the basis of the first-
order consequences alone.

It is much more important that you are a good designer/manager of

your life than a good worker in it.

Most people operate emotionally and in the moment; their lives are a
series of undirected emotional experiences, going from one thing to
the next.

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.
Imagine all the areas in which Einstein was incompetent.

When encountering your weaknesses you have four choices:

1. You can deny them (which is what most people do).
2. You can accept them and work at them in order to try to convert
them into strengths (which might or might not work depending on
your ability to change).
3. You can accept your weaknesses and find ways around them.
4. Or, you can change what you are going after.
Which solution you choose will be critically important to the direction
of your life.
The worst path you can take is the first.

Believable parties are those who have repeatedly and successfully

accomplished something - and have great explanations for how they
did it.

I recommend Richard Dawkins’s and E. O. Wilson’s books on

evolution. If I had to pick just one, it would be Dawkins’s River Out of
Eden.

1. Have clear goals.

2. Identify and don’t tolerate the problems that stand in the way of
your achieving those goals.
3. Accurately diagnose the problems to get at their root causes.
4. Design plans that will get you around them.
5. Do what’s necessary to push these designs through to results.

You will need to do all five steps well to be successful and you must do
them one at a time and in order.
For example, when setting goals, just set goals. Don’t think about how
you will achieve them or what you will do if something goes wrong.
When you are diagnosing problems, don’t think about how you will
solve them - just diagnose them.
Blurring the steps interferes with uncovering the true problems.
The process is iterative: Doing each step thoroughly will provide you
with the information you need to move on to the next step and do it
well.

Prioritize: While you can have virtually anything you want, you can’t
have everything you want.

Don’t let yourself be paralyzed by all the choices. You can have much
more than what you need to be happy. Make your choice and get on
with it.

Don’t confuse goals with desires.

A goal is something that you really need to achieve.
Desires are things that you want that can prevent you from reaching
your goals.
Typically, desires are first-order consequences.

Great expectations create great capabilities.

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

View painful problems as potential improvements that are screaming

at you.

Once you identify a problem, don’t tolerate it.

Design a plan.
a. Go back before you go forward.
Replay the story of where you have been (or what you have done) that
led up to where you are now, and then visualize what you and others
must do in the future so you will reach your goals.
b. Think about your problem as a set of outcomes produced by a
machine.
Practice higher-level thinking by looking down on your machine and
thinking about how it can be changed to produce better outcomes.

Someone other than you should be objectively measuring and

reporting on your progress.

* Goal setting (such as determining what you want your life to be)
requires you to be good at higher-level thinking like visualization and
prioritization.
* Identifying and not tolerating problems requires you to be perceptive
and good at synthesis and maintaining high standards
* Diagnosis requires you to be logical, able to see multiple possibilities,
and willing to have hard conversations with others
* Designing requires visualization and practicality
* Doing what you set out to do requires self-discipline, good work
habits, and a results orientation.

No one has all those qualities.

Have humility so you can get what you need from others!

Look at the patterns of your mistakes and identify at which step in the
5-Step Process you typically fail.

Everyone has at least one big thing that stands in the way of their
success; find yours and deal with it.

Aristotle defined tragedy as a terrible outcome arising from a person’s

fatal flaw - a flaw that, had it been fixed, instead would have led to a
wonderful outcome.

Ego and blind spots are the fatal flaws that keep intelligent,
hardworking people from living up to their potential.

You can’t put out without taking in.

Most people seem much more eager to put out (convey their thinking
and be productive) than to take in (learn).
That’s a mistake even if one’s primary goal is to put out, because what
one puts out won’t be good unless one takes in.

When two people believe opposite things, chances are that one of them
is wrong.
It pays to find out if that someone is you.

Closed-minded people don’t want their ideas challenged. They are

typically frustrated that they can’t get the other person to agree with
them instead of curious as to why the other person disagrees.
Open-minded people are more curious about why there is
disagreement.
Closed-minded people are more likely to make statements than ask
questions.
Open-minded people genuinely believe they could be wrong.
Open-minded people are always more interested in listening than in
speaking.

Use feelings of anger/frustration as cues to calm down, slow down,

and approach the subject at hand thoughtfully.

Record the circumstances in which you’ve consistently made bad

decisions because you failed to see what others saw.
Write a list, tack it up on the wall, and stare at it. If ever you find
yourself about to make a big decision in one of these areas, consult
others.

Be evidence-based:
Most people do not look thoughtfully at the facts and draw their
conclusions by objectively weighing the evidence.
Instead, they make their decisions based on what their deep-seated
subconscious mind wants and then they filter the evidence to make it
consistent with those desires.

Can you point to clear facts (i.e., facts believable people wouldn’t
dispute) leading to your view? If not, chances are you’re not being
evidence-based.

Use evidence-based decision-making tools.

A decision-making computer that gives you logically derived
instructions.

There are no greater battles than those between feeling and thinking.

It is so important to reconcile what you get from your subconscious

with what you get from your conscious.
If you stick with a behavior for approximately eighteen months, you
will build a strong tendency to stick to it nearly forever.

Your greatest challenge will be having your thoughtful higher-level you

manage your emotional lower-level you.
The best way to do that is to consciously develop habits that will make
doing the things that are good for you habitual.

Failing to consider second- and third-order consequences is the cause

of a lot of painfully bad decisions, and it is especially deadly when the
first inferior option confirms your own biases.
Never seize on the first available option, no matter how good it seems,
before you’ve asked questions and explored.

Getting an accurate picture of reality ultimately comes down to two

things:
1. being able to synthesize accurately
2. knowing how to navigate levels.

Synthesis is the process of converting a lot of data into an accurate

picture.

To synthesize well, you must

1) synthesize the situation at hand
2) synthesize the situation through time
3) navigate levels effectively.

No sensible person should reject a believable person’s views without

great fear of being wrong.

One of the most important decisions you can make is who you ask
questions of.

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

Be an imperfectionist.
The marginal gains of studying even the important things past a
certain point are limited.
Until you make the unconscious conscious, it will direct your life and
you will call it fate.

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

Make your decisions as expected value calculations.

Think of every decision as a bet with a probability and a reward for

being right and a probability and a penalty for being wrong.

Suppose something that has only a one-in-five chance (20%) of

succeeding will return ten times (e.g., $1,000) the amount that it will
cost you if it fails ($100).
Its expected value is positive ($120), so it’s probably a smart decision,
even though the odds are against you, as long as you can also cover the
loss.
Play these probabilities over and over again and they will surely give
you winning results over time.

You can almost always improve your odds of being right by doing
things that will give you more information.

Knowing when not to bet is as important as knowing what bets are

probably worth making.
You can significantly improve your track record if you only make the
bets that you are most confident will pay off.

The best choices are the ones that have more pros than cons, not those
that don’t have any cons at all.
Watch out for people who argue against something whenever they can
find something - anything - wrong with it, without properly weighing
all the pluses and minuses.
Such people tend to be poor decision makers.

Don’t mistake possibilities for probabilities.

People who can accurately sort probabilities from possibilities are
generally strong at “practical thinking”; they’re the opposite of the
“philosopher” types who tend to get lost in clouds of possibilities.

1. Slow down your thinking so you can note the criteria you are using
to make your decision.
2. Write the criteria down as a principle.
3. Think about those criteria when you have an outcome to assess, and
refine them before the next “one of those” comes along.

People who have common sense, imagination, and determination, who

know what they value and what they want, and who also use
computers, math, and game theory, are the best decision makers there
are.

The value of a widely known insight disappears over time.

A lot of people vest their blind faith in machine learning because they
find it much easier than developing deep understanding.

Because the same kinds of things happen over and over again, a
relatively few well-thought-out principles will allow you to deal with
just about anything that reality throws at you.

Don’t fall into the common trap of wishing that reality worked
differently than it does or that your own realities were different.
Instead, embrace your realities and deal with them effectively.

Have principles and use them consistently.

Never stop refining and improving them.