Unlock the Power of Success with Ray Dalio’s ‘Principles’: A Revealing Book Review
What are your thoughts on an idea meritocracy? In Ray Dalio’s book, “Principles“, he explains why he is an evangelist about the idea. As the founder of Bridgewater Associates, one of the largest and most successful hedge funds in the world, Dalio has a lot of experience and knowledge to share about building successful organizations and a successful life. In this book, he lays out the principles that have guided him in his career and life and illustrates why he thinks they are essential for anyone looking to achieve success in anything.
Readers must take his principles in context, however. What he advocates may not work for someone in middle management at a large organization. We’ll dive into other criticisms towards the end, but overall the principles should speak for themselves.
Dalio’s believability scale weighs in his favor: there’s strong empirical data to support his track record, he’s accomplished everything he preaches, and he can convincingly connect cause and effect relationships. All things that many self-help or random business books fail to do.
So while this book may not be perfect – and what book is – it has useful advice for most people. I will highlight three of my favorite “principles” before getting into the criticisms below. Let’s start with one that is overarching; one that permeates all others: the “idea meritocracy.”
Importance of an “idea meritocracy”
One of the central themes of “Principles” is the importance of creating an idea meritocracy, where the best ideas rise to the top regardless of where they come from. Although there’s a strong caveat here in terms of vested interests. Anyone with an interest that conflicts with the good of the whole cannot prevail even if they have the best ideas. So like most things in life, the concept of an idea meritocracy is not absolute for Dalio.
Two considerations here: (i) Dalio’s case for idea meritocracies is even more important today than it was when he published the book in 2017, and (ii) creating an idea meritocracy should not be limited to C-Suite executives, despite how the book can read.
I’ve been pretty vocal about my disdain and disappointment with some of Elon Musk’s actions over the past couples years, but he nailed it in this recent interview with Bill Maher. Meritocracies are under assault in many places across America. The best ideas do not always flourish anymore if they are also not politically correct. Other ideas are silenced because people are scared to share for fear of being “canceled” or attacked virtually (or even in the real world).
Dalio stresses the importance of cultivating an idea meritocracy to combat these very problems. A culture that encourages the free sharing of ideas and the evaluation of those ideas based on merit does not care about who is presenting them (absent vest interests) or how it’s being presented. The best ideas win. Plain and simple. Everyone is empowered, and in turn an organization or society can innovate, progress, and evolve to the best of its ability.
Do not think this guidance is only relevant to C-Suite executives either. Most of the negative comments on this book describe it as intended for a founder or senior executive audience. This principle of an idea meritocracy, however, can be applied anywhere. From the C-Suite to the home, or even amongst your friends, if you create an environment where people are comfortable sharing, the best ideas can flourish.
Many of Dalio’s principles can be applied as broadly or creatively as desired.
My favorite of Dalio’s principles: failing well
Another important theme in “Principles” is the concept of failing well. As Dalio puts it:
“Everyone fails. Anyone you see succeeding is only succeeding at the things you’re paying attention to . . . People who are just succeeding must not be pushing their limits.”
This principle comes from a section of the book that discusses creating a culture where it’s okay to make mistakes, but “unacceptable not to learn from them.” Dalio views failure as an essential part of the learning process. He respects people the most who have failed – who, in fact, have failed big – and then come back to achieve great success. Those people are far more impressive to him than someone who has only succeeded. The latter person isn’t taking big risks.
Failing well really means learning from your mistakes. It should be understandable that someone may make a mistake once. How they learn, adjust, and forge ahead are the determining factors in that person’s character. If they come out stronger, that’s the type of person Dalio seeks.
We often focus on success. Riches. Fame. Power. Rarely do we focus on how to handle the failures.
Dalio does a good job highlighting how failures are actually the most important. They not only reveal character, but they indicate that someone is pushing themselves hard and taking risks. Are you truly living if you’re not?
Using technology as an assistant
I loved Dalio’s discussions on using technology, and specifically algorithms and artificial intelligence, as assistants. He was doing this back in the 1970s and 80s, folks. So don’t think AI has suddenly just appeared on the scene.
Dalio would put many of his trade ideas and market strategies into economic models powered by algorithms. I can only imagine the primitive computing power he was relying on to do this early on. But even some 40 years ago, Dalio was using technology as an assistant to make himself more productive and efficient.
Many of us are scared of groundbreaking technologies like generative AI. And there are some good reasons to be scared. The more we can work with these technologies, however, the more we can supercharge our own productivity and effectiveness.
If Ray Dalio could use algorithms, data analytics, and machine learning decades ago to build what is now the biggest hedge fund in the world, you can add technological elements to your daily life. Insights like these are important for anyone looking to succeed in an evolving digital world.
Criticism of “Principles”
Ode to the patriarchy. Unfortunately, so much of Dalio’s emphasis is narrowly focused. All of his influences, perhaps unsurprisingly, are white men (many of whom are deceased). He talks about them at length throughout the book, highlighting people like Steve Jobs in particular.
That’s understandable to a degree. Steve Jobs is obviously a revolutionary and important business leader. But if you’re the author of a book that is meant to apply to everyone, not just a readership of white men, there could be a perceived oversight should you fail to mention the contributions of women or other marginalized groups. I don’t recall Dalio highlighting the contributions of one woman or non-white male.
It raises the question of how inclusive his principles actually are.
My second major criticism is that I doubt all of these methods and principles could work on a large scale. The big bank I used to work at would be bogged down with even more bureaucracy than it already has if it gave everyone an equal voice in a true idea meritocracy. I’m talking about an organization that is around 300,000 people. Gathering input in an organization of even a few thousand is far easier than attempting to steer a giant freighter in iceberg-infested waters.
Dalio also had the benefit of starting his own company from scratch. He didn’t have to deal with established organizational hierarchies or entrenched power dynamics. Large organizations concentrate their decision-making authority at the top (naturally) and there’s major resistance for change to occur organically from within. The investing public or regulators usually have to force the change, so Dalio’s principles in this context are not very realistic.
My overall takeaway and rating of “Principles”
Despite my criticism, I think most of “Principles” is generally applicable to almost anyone’s life. The book offers a wealth of insights and advice for anyone looking to succeed in their career and in life. In particular, Dalio’s emphasis on creating an idea meritocracy, failing well, and using technology as an assistant are all valuable lessons that can improve the lives of individuals and the effectiveness of organizations.
While the book’s patriarchal and male-dominated tone is a bit cringy at times, it does not negate the value of the principles Dalio outlines. Overall, I would give “Principles” a rating of 8 out of 10. It is a thought-provoking and informative read that is well worth the time and attention of anyone seeking proven principles to live by.
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