Thoughts on Principles by Ray Dalio

Sofia Sanchez
10 min readJun 18, 2021

Ray Dalio is a billionaire investor and co-chief investment officer of the world’s largest hedge fund, Bridgewater Associates, which he founded. He is the author of Principles, a book that I’d summarize as learning how to make better decisions and being in a constant growth mode.

Before reading the book, the name sparked curiosity in me. After reading it, it blew my mind. As a start, I would say that a principle can be a rule that you create for yourself to operate more effectively in life.

Ray noticed that life is a series of events which are many times repeated. If we made a list of the many different events that we’ve gone through, we will realize that we can put them into categories, and then we will see that only a few of them are rare and exclusive situations that only we live.

If life can send you “more of the same” a lot of times, it makes total sense to come up with rules to live those situations better every time, whether those would be challenges, problems, happy moments, or decisions to take.

So the book itself is a huge compilation of all the principles that Ray created for himself. He truly lived by those principles and his suggestion is not for us to follow them blindly, but to understand them and create our own too.

#1 Don’t fool yourself

He rather puts it as “understand reality”, but he’s not the only famous person giving this suggestion. In fact, “The first principle is that you must not fool yourself — and you are the easiest person to fool” was said by Richard Feynman too. To me, these are essentially the same ideas.

My biggest takeaway from this principle is to be objective and see reality as it is, instead of seeing only what we want to see. Sounds obvious at the beginning, but the idea goes deeper. Dalio talks about 3 important concepts: observing machines from the top, being extremely open minded, and evolution.

“Successful people have their feet on the floor and choose their dreams right to then bring them to life”


I love dataism: seeing existence as numbers, time, measures, bits, DNA… We could say that existence is a gigantic system that comprises other systems, which, at the same time, are made up of tinier systems. As humans, for example, we comprise different organs, which are made up of different cells.

A lot of these things are like computers (or machines). Humans take inputs from the environment, process them, and produce an output. A company is another type of computer which (among other things) takes inputs like money, processes ideas, and delivers a product or a service.

More importantly, Ray tells us that these computers can be programmed or designed. This is easier to understand for companies, where managers and chiefs are constantly taking decisions that will impact themselves and others. Humans though, are so special. Through consciousness, we have the ability to operate as both the programmers and the computers.

Are humans computers?

If internalized well enough, I think that this concept is truly impactful. We have the capacity to choose who we want to be AND tune the variables that aren’t working as we want. Here’s the catch: to be a good computer, we need to be a good programmer, and to do that we need to avoid fooling ourselves.

Most make the mistake of not seeing themselves objectively. First of all, this will mean acknowledging your weaknesses and strengths. Ray’s suggestion for weaknesses is to not worry because there are many things you can do about them:

  1. Not ignoring them or denying them: that would be fooling yourself
  2. Accept them and improve them until they become a strength: not feasible every time
  3. Accept them and go about them: the easiest, most feasible, but the least taken path. An example is partnering with someone whose strengths are your weaknesses
  4. Change objectives: after seeing your weakness, perhaps you’ll realize that it doesn’t make sense for you to pursue a certain goal, so there are others that may align better to your reality and your desires

My take on “seeing machines from the top” is learning how to see ourselves objectively and seeking perspective from others too, in order to improve in whichever aspect of our lives.


They say that comparing yourself to others is never a good idea. So how do you determine if the machine is working well? Well, if we considered our goals as one of the inputs we take as machines, and the results of our work being the outputs, we can compare these two to determine if there’s something that we need to fix.

Of course that there’s more to life than just success or failure. There’s learning, and that is a very powerful tool. In Ray’s words, “learning is the result of a feedback loop of decisions, results, and an increase of understanding of reality. Being extremely open-minded increases the efficiency of this feedback loop”.

We constantly use the word feedback referring to constructive criticism, advice, or comments that somebody may give us about something we do. Still, have we really internalized the power of this? Despite knowing what the author means, I haven’t given myself the chance to experience it a lot, so I don’t think I fully understand it.

2 more reasons to be extremely open-minded: we all have blind points and ego. The last one is simple: prioritizing being right over knowing the truth; not acknowledging our weaknesses and errors. I would describe blind points as “you don’t know what you don’t know”. Our ignorance can constrain us a lot, which makes perspective so important.

The way I see it, perspective is the antidote to these two weaknesses. One way to seek perspective is to converse with people from around the world, to visit other places, to read other people’s thoughts.

I’ve been doing more of this recently. Comparing myself to my past self, I now know that there were a ton of things that I didn’t know, but wasn’t even aware of. Now I’m scared of that kind of ignorance.

Thinking that what you have or do “just is”, thinking that it’s the best or the worst it can be. But how can you be sure if you don’t have perspective on something else? That’s why I sometimes question what many say about comparing yourself to others. If competition drives people or countries to be the better, why would it be bad?

My counter-argument to that would be that we can instead commit to the best way of doing things. Subscribe to the idea that no matter how tough something is, there will always be something worse, and no matter how good something may seem, that can always improve.


My favorite part of the book, without a doubt. Once we see and accept reality by ourselves and by seeking perspective, we could come to the conclusion that there’s a lot we can improve in our machines.

What does this all mean? Most of us had only heard of evolution in a biological context. “Yeah, yeah. That guy Darwin who came up with this law…” But it’s present in everything.

To the best of my understanding, the core ideas behind evolution are:

  • Survival of the ‘best’
  • ‘Best’ for the whole system
  • Iteration
  • Increment

I believe that our universe is an evolution machine. Broadly said, atoms evolved into molecules, those into cells, then we have humans with consciousness, and we are creating other intelligent machines.

Let’s stop in the “living things” level. Previous entities to us (like monkeys or other living things) couldn’t improve themselves. They carried information that would be passed with slight and random changes on to the next generation so eventually the whole system would experience incremental improvements.

Consciousness makes us so special. It means 2 things: having the ability to change, and choosing how and when to do that. We are not totally subject to what the universe wants to do with us. We can set objectives for ourselves, learn, and improve.

We can grow

#2 Grow

From my perspective, the second principle is the application of an evolution or growth mindset. If we understand that evolution is one of the most powerful, if not the most powerful force of the universe, we know the importance of trying new things, learning, taking risks, and growing from those experiences.

My interpretation of this principle is that evolution can be a loop with 5 main steps (which are all fascinating by the way):

  1. Have clear objectives
  2. Identify and don’t tolerate problems that interfere with your goals
  3. Diagnose precisely the problems to get to their root causes
  4. Draft a plan to go about those problems
  5. Do what’s necessary so those strategies convert into results
The 5-step evolution process

Goals and courage

“Life is like a buffet full of delicious plates, but you can only try so many”

That thought spoke directly to myself at this moment. I previously thought I could do everything. Through experience, I’ve realized that I can do anything that I put our mind to, provided that I don’t put my mind to more than 3 things.

In other words, the first sub-principle is to prioritize. This will involve a wonderful art that we should all practice more often called “say no”. What I’m realizing these days is that prioritizing requires a certain level of courage, at least if you don’t have much practice with it.

I think about this like in investing. Most don’t recommend putting “all your eggs in one basket” but rather to diversify. That reasoning would actually lead us to do as many things so that if one fails, we aren’t as affected. That in turn, should give the investor a sense of safety.

I think that courage is getting rid of that sense of safety. In this case, it’s committing to something for which you have a burning desire, and working hard and efficiently to achieve it.

“Don’t take away a goal from your list because it seems impossible. Be brave. Find that path and gather courage to follow it. Once you start the journey, you’ll learn a lot, especially in collaboration with others. Doors that you didn’t even know about will open to you” — Paraphrasing the most beautiful thoughts I found in the book

Incorporating this into my personal mission

One more BIG idea is that evolution involves pain. Growth comes after pain; no pain no gain. That’s why it’s okay if our goals seem impossible. They should be challenging. We don’t grow by what we can already do, but by challenging ourselves to do what is not yet possible.

Finally, you should differentiate goals and desires to then align them. Desires can come into your way of achieving your goals. For example, a goal may be losing weight, while a desire could be eating junk food.

Next steps

These are way more straightforward. They are based on the idea of working backwards from the kind of life you want to have, that success is setting a goal, identifying the obstacles or gaps to get there, and tackling those. These steps are about tackling the obstacles between you and your goal.

  • Identify the problem: what’s the problem?
  • Diagnose the problem: asking why many times until getting to the root cause of it
  • Create a plan: visualize specific tasks and changes to you as a machine and others. Think of the cause-consequence reactions
  • Execute the plan: you’ll need discipline. Remember the link between these tasks and your goal and establish clear parameters to measure success

Remember that every time you complete a step, you have new information to modify the next ones. When you’ve done the 5, you’ll start with another objective.


With practice, we can start seeing life as a game. We have an objective and have to go through a jungle of obstacles to get there. We may win some battles, but when we don’t, we can learn. That’s when we create principles. It’s reflection on failure and pain that allows us to gain the gems that principles are.

Of course, the real value in the book is finding a way to apply these principles into our daily lives. I like to call them Systems for Living, and I keep track of them on Notion. This is only one example of how I apply the 5 steps:

I try to do this daily, weekly, and starting monthly now as part of my personal updates

After reading

Photo by Olivier Guillard on Unsplash

I’m sure that I’ll continue to find ways to apply and execute these principles, coming to different realizations as I go through the jungle of life, and create my own principles as well. As of now, I have some questions to figure out about Ray’s principles:

  1. We grow from pain, but if something makes sense is enjoying what we do. How do we find the balance between doing the hard things and struggling and doing what we enjoy?
  2. Does growth mode involve the constant identification of problems? Is that good since we understand that there will always be a better way to do things or bad because we will never “be happy with what we have”?

Just before finishing, you may have noticed that I used the word understand or realize a lot of times throughout the article. Seeking understanding is a mindset that I’ve incorporated more into my life recently. My hypothesis as of now is that you can only gain understanding empirically (from experience).

This article may mean nothing to you until you realize stuff too, and it will certainly mean something different for me as I continue to evolve.

Hey! I’m S🧠FIA, an ambitious teenager building innovative projects with 🧬Synthetic Biology and Artificial Intelligence.
Just for growth, I also innovate at TKS🦄, create content, play the piano, read a lot, and 🌎 connect with new people on a weekly basis (hit me up!).