Book Review: “Principles” by Ray Dalio

According to Wikipedia: “Raymond Dalio is an American investor, hedge fund manager, and philanthropist. Dalio is the founder of investment firm Bridgewater Associates, one of the world’s largest hedge funds.

Ray Dalio’s Net Worth: US$17 billion (as of July 2017)

Although his net worth of $17 billion is 1/5 of Warren Buffett’s net worth, one can definitely say the two men are in the same league; at least mathematically speaking, their worth is on the same order of magnitude. For me, both Dalio and Buffett are “Gods of investing.” They have proven, time and again, to beat the market and built great companies.

I am not going to discuss how Dalio invests. How-to-invest-like-Buffett types of books are mostly scams in my opinion, simply because there is only one Warren Buffett in the world, and only a few people “in the same league” with him, who have the resource to actively invest like Buffett. As an analogy, no matter how many “Playing Basketball Like Michael Jordan” books you read, you cannot win an NBA championship. (The probability of an NBA champion reading this blog is 0.) Nor can you jump from the free throw line and dunk the basketball.

On the other hand, however, if there is a book called “Kobe Bryant’s 4am: how to develop and sustain your insane work ethic” then I would certainly read it. Especially if such book is written by Bryant himself. “Principles” is that kind of book. Dalio shared from his life experience (success and failure), his approach to solving challenging problems, to his mindset, his philosophy (principles) to live by.

The book details the history of his education (bad grades in high school, straight-A in community college, enjoying his time in Harvard Business School), how he founded Bridgewater, the crises he faced. Bridgewater started humbly just like Steve Job’s Apple in his garage, grew to a few hundred employees, and then got struck down by plummeting market, to one employee  (hint: first name Ray) only. How he built an extraordinary company is intriguing; how he manages people is inspiring. For instance, one time his employee who was a fund manager made the mistake of parking a client’s money as cash instead of investing it. Since cash is the worth investment and given the size of Bridgewater’s average asset under management per client, the loss was in tens of thousands if not millions of dollars. How would this end up 99% of the time for the person at fault? More often than not you get fired. Not if, however, you worked for Dalio and that was an honest mistake.

He did not fire that guy. Instead, he kept him and used that incident as an example, “we learn from our mistakes; we are on the same team so we help each other.” His mindset was, if people saw that person got fired as a result of making a mistake, then people would be prone to hide mistakes instead of facing the actual problem. It was by this kind of principles Ray has that he is able to achieve the success he has today.

“Principles” by Ray Dalio is worth reading and it helps you write down the philosophy to live by. Here is an example: “know what you want, know what is true, and think about how to get there given where you are and what is true.” Principles are essentially simple rules that can guide you in life.

Read on,

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