“Principles” (Commentary)

A set of predetermined mental models used for life

This book help reinforce a lot of protocols that I already implement in my daily and personal life. While reading through this book I was taken back by the parallels of my way of thinking, interests, and methods of operations in business between myself and Dalio. I do not claim to be a prolific savant genius, just merely recognizing similarities. I just assimilated with his thought process and perspective on life and on business, in general. I genuinely enjoyed reading this book. Probably top 10 for sure.

If you do not know Ray Dalio here is a quick video on him.

Principle

/ˈprinsəpəl/ — noun

a fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of reasoning.

This is his antidote to problems and the unexpected. Simply using previous experience (data) coupled with reflection (synthesizing the data) to create models and systems that automate decision making (principles).

I hope that you enjoy the book as much as I did. The chapters that I found most relevant have the “*” at the end of the chapter title.

Analysis

Book I — Life Principles

Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life. — Ray Dalio

Principles are models constructed from previous experience, mainly mistakes. Dalio builds principles to know how to operate in the future with the same problem arises. This autonomizes the decision making and critical thinking process, turning a solution into an automatic habit.

1 EMBRACE REALITY

The chapter begins with a formula, “dreams + reality + determination = successful life.” This formula is nothing novel, however, the model is typically incomplete. The “reality component is integral for the successful life, otherwise, you are living a life of grandiose delusion. Do not misconstrue this statement to not “dream big” but Dalio advocates for people to become hyperrealists.

Having read “Maps of Meaning” before this book was so coincidently appropriate that it almost feels divine lol. He promotes the idea of being radically truthful, specifically in your weaknesses. Expanding on that concept, he produces the idea to be radically open-minded and transparent. This allows the knower, the individual, to become aware of short-comings and rapidly accelerate the learning process and means for effective change. Do not let fears, sepciallicaly fear from others opinions of you, incapacitate you form producing change. Lastly, both radical truth and transparency bring meaningful work and especially relationships, with fewer disputes.

Looking towards nature, we can build great models for our reality, our experiences. Natures complexities make its “intelligence” superior to ours, especially in evolution. The driving force for our existence is evolution. GOing back to Peterson, we shouldn’t focus on how things “should” be otherwise we will overlook how things “really” are. This observation will assist us in life, we must evolve, continually, or die (or suffer eternally until then).

Group selection is considerably more significant than individual selection. Evolution regardless is dependant on perseverance through adversity. No pain = no gain. Dalio proposes an app called the “Pain Button”. If you have pain, it’s inherently not a bad thing. With some reflection you can make substantial progress, you can evolve. During this process, consider 2nd and even 3rd “order consequences”. Example: Goal = Losing weight. 1st order consequence = food is tasty, 2nd order consequence = it’s fat and counterproductive towards your goal. Regardless of your decision, you must OWN your consequences.

Lastly, look at the “machine” form a “higher level” perspective. Ray challenges us to shift our paradigm of thought and proposes that we each are machines in a machine, with the ability to alter the machines to obtain our desired outcomes. You can reflect goals with outcomes and modify the “plan of action”. Distinguish between being the worker (functioning part in action) and the designer (architect, engineer). Sometimes you can be both but rarely, therefore, be radically transparent with yourself and notice when you are insufficient for the particular job, and delegate or eliminate. Be objective on your own capacity and abilities. If you can not — which most of us cannot because of ego — then I employ you to use a 3rd party intermediary to act as an objective determinator on your abilities. The goal is to find someone strong in areas of your weakness. We are a machine in machines. We are as strong (as effective and efficient) as our weakest link (trait, characteristic, ability).

Take Aways:

1. Become a Hyperrealist
2. Be radically truthful (with others and most importantly, yourself)
3. Be radically open-minded and radically transparent
4. Learn from nature, continue evolving, and be a good person
5. Pain + Reflection = Progress
6. Own your outcomes
7. Confront weaknesses
8. We are machines

2 Use the 5 Step Process to Get What You Want Out of Life*

When planning your life you can have virtually anything you want (see hyperrealism above), but you cannot have everything you want. We must prioritize and execute. Do not conflate desires with goals. Desires are usually 2nd or 3rd order outcomes. However, we can come into reconciliation with our desires and goals. We can align them to get what we truly want. Although we are hyper-realists, we must never rule out a goal simply because we think its “unattainable”. Anything is possible with flexibility, a desire, a plan, and self-accountability (discipline mainly). Once you have laser-like focus just act, figure out the rest later. With great aspirations comes great capabilities.

Take a different approach to problems. If the problems are excruciatingly painful then imagine them basically screaming at you. Don’t, by any means, avoid the problem altogether. It will foster and grow into something exponentially more terrifying or painful. When identifying a problem we must be diligently thorough in the identification process. It’s easy to misconstrue the problem with the cause, and even more challenging to differentiate the big problem form a small one. However, once the problem is identified we must address it immediately heads on, without hesitation. We have ZERO tolerance for problems. He makes a greater emphasis on distinguishing the differences from root causes and proximal symptoms. The distinction will allow us to know “what to do about it” once we discover “what it is.”

We must “first go backward before we can go forward.” Remember, we are small “machines” in larger “machines”. All problems are merely outcomes from the machines. There are multiple paths to take to achieve the desired outcome, so design your plan of action accordingly. Track progress, as this will help you and others evaluate your plan of action and success (and failure). Going back to the 80/20 rule. Planning may take time (nominal usually) but it will help you produce and execute non-proportionally.

You can be the most prolific architect in history, but if you cannot get the blueprints built then it is only an idea. Your life is no different. A plan without proper execution is simply wishful thinking. Build successful work habits, track and monitor progress, consistently reflect and evaluation, employ others to evaluate you, objectively, and modify plans when needed.

We will go into the next chapter in greater detail, as he highlighted it towards the end. Remember, everyone has 1–2 main problems standing between them and success, find yours and eliminate it asap. Practice this with humility and you will be surprised on your ability for growth and development.

Take Aways:

1. Have Clear Goals
2. Identify & Don’t tolerate problems
3. Diagnose problems at the root cause (not the symptoms)
4. Design a plan
5. Push through completion
6. Weakness doesn’t matter when solutions are found.

3 Be Radically Open-Minded*

Dalio starts this chapter diving into our ego. He developed this concept of the “two yous.” If we remember the 1st book I read on sociology we had the Rider (prefrontal cortex) & the Elephant (amygdala) analogy. That is exactly what Dalio is describing with the two yous. Our mind is constantly fighting with logic and emotion or the unconsciousness (gut feeling, intuition, emotions, etc). The second barrier is the blind spot. This is our ego also substantiating our ignorance, as we believe to know everything when it is just impossible.

You must relieve the ego with this antidote, become radically open-minded. Recognize that you might not have the best path or solutions. Acknowledging your limitations is significantly more important than your ability to comprehend that which is already “known”. We often act with post-hoc fabrication but the reality is that effective decisionmaking is two steps: Intake relevant info, make a decision. He suggests looking at the problem with a different perspective. Recognition of the two barriers is a start, but try implementing a “higher level” view of the machine. We are after the best answer, not our answer. Let your ego rest and don’t worry about looking good or being right. We are concerned with achieving the goal effectively and efficiently.

We must change the paradigm of thought if we wish to obtain radical open-mindedness. Continually use pain as a motivator toward quality reflection. Stimuli, a component in the reward-learning systems of our mind is motivated by positive or negative input, both of which are neurotransmitters. We overemphasize positive reinforcement when Dalio argues that pain is much more potent. We may prolonge a second or third order consequence (goal) for a 1st order consequence (desire) if the immediate satisfaction of the 1st order consequence is superior to the goal(sequential consequences). If you cannot prolonge the instant gratification problem then you are either oblivious (possibly) or simply immature similar to a child. I’m not being facetious, it’s serious — check out this study from the 60s by Dr. W. Mischel.

Now, if you simply cannot prevent yourself from compulsively reaching towards desires (typically 1st order consequences, bad habits) use pain as a motivator. Embrace your failures, the pain is an indispensable learning tool and pain is an amazing motivator. Don’t believe me, try placing your hand on a stove for $1,000,000. I guarantee the rewards is tantalizing but the pain will certainly add resistance towards achieving that goal.

Use believable individuals (people with 3 or more success in their field of expertise, years of experience, mentors, teachers) to give critical feedback to your biased assessment of your egocentric self. Discover blind-spots. Practice and exercise the elephant and rider exploration. Develop or utilize existing evidence-based-decision-making-tools. Promote open-minded thinking. Meditate once a day, for 20 minutes or more. Recognize signs of closed-minded mentality and conduct communication accordingly with those individuals, accordingly.

Take Aways:

1. Recognize the two barriers
2. Practice Radical Open-Mindedness
3. Triangulate your view with believable people
4. How you can become radically open-minded

3. Understand That People Are Wired Differently*

There is a natural benefit to being wired differently. Understanding how you and others are wired can help in almost every component of your life that involves interacting with other humans working. The positive relationships that we have are not as independently self-determined as we had thought. The models of our mind are genetically (therefore, neurologically) wired to attract relationships with people who “get us”, who are similar to us, who display predictable behaviors and therefore we can easily assimilate with them.

Taking this into consideration we can train our brain if we so desire to. The process is not without its inherent challenges. We must start by training our “lower-level you” as Dalio suggests, this is the subconscious, the emotional “you”. There are uni-hemisphere dominate brains. Therefore, you must acknowledge the potential limitations of the mind. You can improve but hit genetic thresholds, basically.

He goes onto to list various types of “personalities”

• Introversion vs. extroversion,
• Intuiting vs. sensing,
• Thinking vs. feeling,
• Planning vs. perceiving,
• Creators vs. refiners vs. advancers vs. executors vs. flexors,
• Focusing on tasks vs. focusing on goals,
• Workplace Personality Inventory, and
• Shapers are people who can go from visualization to actualization.

The goal as the designer of your life, of the machine is to assign personalities appropriately with their roles (and their members of the team). Objectively manage yourselves and other workers in the machine. You are the conductor and this is your orchestra.

Take Aways:

1. Recognize the two barriers
2. Practice Radical Open-Mindedness
3. Triangulate your view with believable people
4. How you can become radically open-minded
5. Discover the type of people in the world

4 Learn How to Make Effective Decisions*

Our post-hoc fabrications are the biggest threat to appropriate decision-making ability. Understanding this and that decision making is a two-step process (learning then deciding) then we can begin. To make an effective decision we need all relevant information available. We must synthesize with the appropriate data points. We should shift our perspective from close in proximity and take a higher-level perspective. Keep track of the level of change things have and their correlation. We must consider the 80/20 rule, and focus on the most important 20%.

Consider building a hierarchy of levels for the machine. Define the solutions to problems, and implement on the appropriate level. The decision must be uniform and consistent across the hierarchy (decision cannot conflict from level 1 … level n ). Dalio suggests we look at situations, problems, the machine objectively and empirically.

We must not conflate possibilities with probabilities. Therefore, we must try to increase the odds of being right, even if the odds are already favorable. Inversely, we should know when not to “bet” on a solution. We must go with the possibility with the greatest odds and obtains more pros than cons. Next is to conduct 80/20 evaluation with task prioritization. We likely won’t have time to finish everything so we must prioritize the most effective and the most important, — the “must dos”. If we complete those tasks then we can conduct “like-to-dos” activities.

We must create principles (models, habits, automatization) to problems for anything that continually presents itself, especially if the situation is problematic. Try to convert the principles into algorithms as a tool to use alongside your decision-making capacity. However, do not trust the AI blindly. It is merely a tool for you to use in your decision-making process. Machine learning is only as effective as the data it receives.

Take Aways:

1. Synthesize the situation at hand & through time,
2. Navigate levels of the machine,
3. Make decisions based on expected value calculations,
4. Prioritize & execute,
5. Simplify, and
6. Build principles and algorithms.

Book II — Work Principles

In Work Principles, Ray Dalio believes that the power of an organization is so much higher than that of the individual. “Work Principles” are essentially the “Life Principles” applied to organizations.

1 Trust in Radical Truth & Transparency*

Peterson argues that the lie is the main component of corruption. Denial and lying of our personal weakness are problematic. Lying is a form of cheating and cheating is a result of stunted maturity. The lie fosters and developed into something sinister. You cannot hide what will not be exposed. For all things are in plain site as it is in heaven. Therefore, if the truth will become illuminated regardless why attempt to suppress it yourself?! Own ti and embrace the truth, there is no fear in facing the truth only courage.

Adding onto this we must cultivate an environment of integrity. Dalio offers various prescriptions to nurture integrity. Simply do not say to others about someone that you would not say to their face. Do not let the loyalty of friends or loved ones blind you from the truth and objective evaluation. Never be naive to dishonesty.

A potential remedy to dishonesty, further nurturing an environment of integrity, is to be radically transparent and have a radically transparent company culture. Transparency is used to enforce justice. We cannot be radically transparent with everyone, Dunbars law, so we must prioritize who we share what is difficult to share. Discover who can handle transparency, and those who cannot. Deny transparency to those who cannot handle it well or remove them from the organization, if possible. This is perfect for evaluation.

The combination of the two, truth and transparency, can become the culmination of any meaningful relationship.

Dalio uses various tactics to help with this culture:

1. Recording and trimming meetings with public access,
2. Base-Ball Card Ideas,
3. Encouraging its implementation between members of the team.

Take Aways:

1. No fear in the truth,
2. Have integrity,
3. Practice transparency to obtain truth (integrity),
4. Use tools to enforce and assist transparency, and
5. The two are perfect for meaningful relationships.

2 Cultivate Meaningful Work and Meaningful Relationships

Be loyal to both the mission and those who align with the overall mission. Deviating from those two components of the machine (the company, the organization) can result in failure to complete an objective and ultimately failure of the overall mission.

This part of the chapter resembled Jocko’s book on leadership. We must simplify orders and objectives. When disseminating the tasks, and the why for those tasks become crystal clear. Next, we must differentiate between generosity and fairness. Error on the side of fairness. You reap what you sow, so you’re paid for the work that you produce. Practice agape with your members in the team and of the machine (the organization, the company). This will allow you to be more considerate of others than yourself.

The size of the organization can become potentially threatening. Using Dunbars law we realize that we are restricted to a number of meaningful relationships that we can have, and as the range continues to become wider, transparency and thus truth begin to dissipate. We must not be naive that some may operate with self-interest in mind and display a mask of the general interest of the group. Therefore, we must honor and treasure those who are capable of.

Take Aways:

1. The loyalty of the mission is quintessential,
2. Simplify, and
3. The size of the Organization matters.

3 Create a Culture in Which it is Okay to Make Mistakes and Unacceptable to NOT Learn From Them*

Dalio is truly interesting. His arousing curiosity for things is interest. This books truly helped me with my ability to express my interests more. I guess I was intimidated and paralyzed by fear — mainly afraid to receive persecution from others’ opinions. Failure is part of the evolutionary process. Therefore, if I decide to utilize the failure constructively then I can fail forward — I can evolve. Embrace failures and don’t feel bad for making them or having public failures.

Forget about “looking good” to others. Instead, focus your energy on being accurate and effective. Do not concern your self with others’ opinions of you. Shift your value in receiving credit for achieving and don’t coward from taking the blame (ownership). Observe the failures. Collect multiple data points and build correlations. Discover if the failures are products of weaknesses or problem. If they are, address it immediately.

Pain without reflection is bad. The use or lack of use of the failures determines the valence outcome. Once again, Dalio stresses the importance of acknowledging the fact that it is near impossible to observe ourselves objectively. We should recruit 3rd party unbiased intermediaries to ask for reflective feedback. Recognizing your failures (mistakes) quickly is beneficial, you can determine which mistakes are acceptable and which mistakes are NOT acceptable early into your exploratory process.

Take Aways:

1. Fail well,
2. Don’t concern yourself with others’ opinions, and
3. Reflect your pain.

4 Get and Stay in Sync*

Conflict contains a negative connotation and infamous reputation. The truth is that the perspective and result of conflict determines if it was positive or negative — constructive or destructive. With relationships, Dalio argues, that conflict is an essential element for a healthy and sustainable relationship. He continues by stating that traversing through each others’ principles we can become aware of where they align or don’t align. We can create principles for situations where they do not align. This is getting in-sync (compromise, “plan of action” disagreements, principles). Get in-synch quickly to mitigate wasted arguments and remedy problems with more efficiency.

He prescribes often to stay away from closed minded people. He also suggests to watch out for people who are afraid to admit their inherent expanding domain of unknown. Make sure that leaders and managers are openminded, open to suggestions and correction (also described by Jocko). Understand the distinction between questioning (highly suggested if you are not an expert), suggestions (only prescribed by experts, typically), and criticism.

Dalio suggests solutions for getting insync in a meeting setting. Immediately make clear the purpose of the meeting (its agenda), who is to lead, and who is meant to be served (similar to the purpose of the meeting). Be assertive in your presentation of information but consider being open-minded to ideas, suggestions, and questions. Be careful of “topic slips” as he notes. If there is much disagreement in a particular meeting implement a “two-minute rule”. This allows a person to talk for 2 minutes without interruptions or interjections. More importantly, it allows others to listen to what the person is saying. Prioritize “completion” of the conversation. Make sure objectives were accomplished and that the person has completed conveying their feedback.

“Great collaboration feels like playing jazz.”

Take Aways:

1. Align principles and develop new ones,
2. Stay away from closed minded people.

5 Believability Weight Your Decision Making*

This chapter is one of the distinguished as a more significant principle in Dalio’s decision-making process for life and especially in the workplace. We must understand that everyone has opinions, and most of those opinions are bad. Therefore, the antidote is to only receive opinions on matters from those who have successfully accomplished what it is in questions (he suggests 2–3 success or 10+ years of experience).

We must first deconstruct a believable person before we can assess if their opinions are good or bad. A believable person has accomplished the thing in questions at least 3 times, and/or has a great explanation for the cause-and-effect relationships that lead them to their conclusion for the thing in question. Here we must focus on peoples reasoning that leads them to the conclusion, NOT the conclusion itself. If the reasoning (theory process for the conclusion) is reasonable and can be “stress tested”, then stress test it. Adding onto intense transparency, he recommends that members of the team be up-front in the confidence level of their thoughts. We must remain aware that even inexperienced people possess great ideas, sometimes better than those who are experienced (My guess is because they are not constrained by the formal thought process of the thing, using myself as an example with engineering solutions. I have the ability for more creativity).

This particular section of the chapter adds onto the previous chapters, proceeding. Dalio has us continually ask ourselves of our “role” in the world in any instance. Are we the teacher, the student, or the peer? Depending on your role you will be teaching, asking questions, or debating, respectively.

Determining how people obtain their opinions is of great significance. We must immediately disregard statements that start with “I think, “I feel,” and/or “in my opinion”. We may not always align our principles, especially with high priority values, so we must learn how to disagree efficiently. Understanding when to debate and when to agree on solutions. Everyone has ideas, but not every idea is good. Our time is finite so we must be aware of that truth as well. So we must be selective on who we choose to evaluate when determining believable people.

The purpose of having believable people in our life is to seek the truth, not opinions (although the two coincide at times). If the focus is to achieve a solution the group should be comprised of the most believable people. If the aim is to spread knowledge or education the group can be comprised of broader (relevant) individuals. Our goal is to create a fair decision-making process, one that seeks truth and effective solutions rather than feeding our ego and being right.

Take Aways:

1. Understand who is believable and why,
2. Understand your role,
3. Disagree well, and
4. Seek solutions rather than focus on being right.

6 Recognize How to Get Beyond Disagreements

Mutual agreements cannot discredit or abandon principles. The standard of upholding principles should be revered by everyone. individuals must also understand the difference between the right to complain, debate, ask questions and give advice versus the right to make decisions. Adding onto that we cannot allow significant conflicts to remain unresolved. The little things should not divide groups. Do not become stuck on disagreements — escalate them or vote them out. Dalio suggests recruiting a mutually agreed on third party individual to mitigate disagreements. Once a decision is made everyone must go behind it fully, even if it is still disagreed on by individuals.

Highlight points to be wary of in your organization is to recognize when the authority or those in “power” along the dominance hierarchy do not desire to operate by principles the principled way will collapse. Declare “martial law” when the idea-meritocracy conflicts with the “well being” of the organization. Temporarily suspend the principles while situations get resolved. Resume principles asap. Use this moment to modify the model of principles.

Take Aways:

1. Recruit 3rd party mitigation,
2. Don’t leave important conflicts unresolved, and
3. Once a decision is made, everyone should get behind it even though individuals may still disagree.

7 Remember That the WHO Is More Important than the WHAT

This particular chapter talks primarily on the importance of properly choosing the leaders and management or as Dalio calls them the “Responsible Parties” (“RP”). Deciding who will reside in the RP is probably one of the most important tasks for the organization’s success rate and sustainability. These individuals are responsible for goals, strategies, outcomes, and machines at a higher level.

Remember, the RP has an embedded hierarchy. Each person including the RP should have someone that they report to — someone who must bear the consequences of the outcomes: good or bad.

Take Aways:

1. Everyone has someone to report to, to hold accountable, and
2. Choosing team leadership is extremely important.

8 Hire Right, Because the Penalties for Hiring Wrong Are Huge

Adding onto the previous chapter Dalio stresses the significance of hiring right. He designed various aptitude tests to measure peoples strengths, weaknesses and personality — the goal is to match the right character with the role. Consider the value, skills, and abilities you are looking for for a role. Quantify the hiring process as much as possible to best align a prospective new member with the vacant role. If you are in leadership positions do not use your “pull” to get someone a job.

Remember one simple truth people are built differently. The different way people view and think can be used strategically when determining a role for them. Understand how to use and use personality assessments. We are biased beings, adhering to what’s comfortable, predictable, similar. So, choose the interviewer carefully as they will likely choose a new hire similar to themselves. Choose people who can be open-minded and willing to see things objectively. People seldom change their personalities much, if at all.

We are a sports manager, a conductor, the designer of our life and specifically our organization — the machine. Every person is important and everyone should excel. Check references for new hires, thoroughly with diligence. Their abilities in school do not reflect their capabilities with your organization. Inversely, if someone did well at other organizations do not assume that they will thrive in yours. Lastly, hire someone with character and is capable.

You are not filling a role in the machine but a person in the organization, the family, your life! Look for people with great questions. Dalio uses a jazz reference once again by stating to, “Play jazz with people with whom you are compatible but who will also challenge you.” You need to be on the same higher-level understanding to improvise jazz successfully with others to have ordered chaos, otherwise its simply chaos.

When considering pay remember that you are paying the PERSON, not the JOB. So choose compensation based on that concept. Regardless, pay north of fair. When determining pay attempt to correlate performance metrics with compensation, loosely. Do not worry about getting a smaller “piece of the pie.” If you are hiring properly than you will be concerned with building a bigger pie anyway. Fiscal compensation is only part of the pay package. Considerations and generosity (exceeding beyond monetary reimbursement for services rendered) will be significantly more impactful than money.

Great people are hard to find, so find ways to keep them.

Take Aways:

1. Match the person to the role,
2. People are wired differently,
3. Look at the history,
4. Don’t hire to fill roles but to adopt in your life, and
5. Consider compensation well (money and more).

9 Constantly Train, Test, Evaluate, and Sort People

Personal evolutions are inevitable. They are results of discovering ones own strengths and weaknesses. The training provided should be a guide for the personal evolutionary process. The goal is to teach members of the team HOW to fish rather than giving them a fish, even if that means allowing them to make mistakes. Lastly, internalized learning cannot be substituted by book theory, alone. Your goal as a leader is to provide constant feedback (usually in performance metrics and tests).

As a leader, you must evaluate accurately. Do not emphasize kindness in fear of hurting others emotions. Think of accuracy versus implications. Make accurate assessments and evaluations as accuracy is the same as kindness, in perspective. Although compliments are more widely desired accurate criticism is much more significant and loving. You are to use a variety of performance surveys (self and others), metrics, and formal reviews to document all aspects of the persons’ performance.

Learning what someone is like should be embraced and open-sourced. The task should be evolutionary and iterative. As a leader navigate the review process with humility and compassion, yet remain objective; and encourage others to stay objective. It is best to get in sync by reviewing evidence together. Exploring weaknesses is daunting, so help people walk through their pain of self-discovery. Remain transparent and open-minded during the whole process, and acknowledge that changing is challenging.

As a leader, we are tasked with the obligation to ascertain the source of problems and to resolve them asap. When a jr leader, subordinate, member of the team is failing you must discover if the root cause is learning or their abilities. Test the poor performers’ abilities while simultaneously discovering if they are capable of acquiring the required skills necessary for the role. Continually place your employees under evaluation, to the same rigor that of a candidate. During tenure, you should take no more than one year to determine if they are suitable for the role.

After evaluating you may be burdened with the task of deciding the fate of an employee within the organization. This ties with Jocko’s Train vs Give up principle. If someone fails to meet the requirements and is not able to learn the necessary skills then it is best to let them go from the company. Similarly, if someone failed at one role, be wary of allowing them to come back to the said role at a later date without an intense evaluation process.

Do not lower the standard.

Take Aways:

1. Everyone goes through personal evaluation,
2. Evaluate accurately, not kindly,
3. Get in sync when evaluating,
4. Make learning someone evolutionary, open, and iterative, and
5. Guardrail and remove when needed.

10 Manage as Someone Operating a Machine to Achieve a Goal*

Dalio continually stresses the importance of operating from a “higher-level”. This novel illustration fits perfectly with my style of operation. I try to have a higher level perspective which allows me to view data differently. This perspective enables you to monitor outcomes with goals. A great manager (and I’d argue CEO of the company or your life) is an organized engineer. You need to quantify as much as you can to build great metrics. However, do not spend too much attention focuses on the details and forget to look at the machine. Don’t become distracted. Like Jocko said, balance the dichotomy of focuses on the details and focuses on the big picture.

When viewing a mission you should consider two primary objectives: 1) get you closer to your goal, and 2) test and train your machine (the people, the design, the cooperation, the principles). The Dali Lama suggests to view everything like a laboratory and objectively. If you can reconcile your emotions it is easier to find joy. Dalio shares similar thoughts and considers everything to be a case study. When a problem occurs there are two levels that should be focused on; Why it was produced (machine-level), and what to do about it (case-at-hand-level). When you create rules you must explain the principles behind them (the how, why, and what it was formed). The principles should produce policies and the two should correspond well, however, there are always case-by-case exceptions.

This chapter is a summary of Jocko’s book in my opinion. This section talks about distinguishing the differences between managing, micromanaging, and not managing at all. He uses skiing as an analogy for this section. I suck at skiing so I will explain it my way haha. A manager should know what should be deligated and to focus on higher level activities (managing effectively). A proper manager should never be entrenched in the details as the manager does not have the time or the deep understanding to be effective (micromanaging). The lack of the two is a lack of management in general. To get greater details on the dichotomy of under vs over managing read my blog covering Jockos book, “The Dichotomies of Leadership”.

During the evaluation process, you will determine your confidence level in the team. Vary your involvement based on your confidence of your team. Get them trained up so you can be hands-off or replace. You also need to assign people according to their talents and capabilities. Be crystal clear with expectations or expect “job slips”. If you disseminate the why properly the accountability will be self-monitored. Regardless, if you think like an owner you must take owner responsibilities. Vacations are not vacations of responsibilities. The more you practice this the more your team will watch and imitate. Be the standard for company work ethic.

As a manager, you must learn about how the machine “ticks”. Your job as a CEO or manager is to get a threshold level understanding of everything, consider the 80/20 rule again. Don’t waste time on pointless meetings, instead create daily updates that can replace meetings and can be fulfilled in minutes rather than hours. Probe to the level below the people who report to you, this will help you see potential problems before they manifest. Allow the subordinates of those who report to you feel comfortable escalating the problem to you; overriding them. Welcome probing as it should be transparent.

Being a proficient leader isn’t as prolific as it may appear. You must balance the dichotomy of being strong and confident, someone you members of the team can rely on. Yet, you must also be open and expose weaknesses. Don’t worry if they like you just be an effective good leader and the rest should follow, but certainly, do not “look to them” for answers on “what you should do”. Get in sync with those who directly report to you and create that culture with their subordinates.

Take Aways:

1. Create autonomy accountable culture,
2. Probe your machine,
3. Distinguish between managing, micro-managing, and not managing at all,
4. Remember the two approach system, and
5. Always view from a higher level.

11 Perceive and Don’t Tolerate Problems

As the designer of the machine, you must notice when things are “good enough”, “not good enough”, or needs to be resolved by you personally. Assign jobs to people with a single task to perceive problems. Give them independence so that they can investigate without negative repercussions, and give them a time frame to accomplish the investigation. FEAR THE FROG IN BOILING WATER SYNDROM! Do not boil alive unknowingly. If the group-think consensus says, “nothing is wrong” it does not mean nothing is wrong. Have as many people tasked with searching for problems as possible, especially those closest to certain jobs as they know them best. Therefore, they can detect them sooner.

When a problem is detected be hyper-specific, even with people responsible. If you or they use “we” or “they” it distributes and avoids personal responsibility. It’s okay to be responsible for a problem that is not okay is trying to hide it. A problem simply needs a well-planned solution. Think of these as “machine-like”.

Take Aways:

1. Distinguish between good enough, not good enough, or to do it yourself, and
2. Address problems with specific details.

12 Diagnose Problems and Get to Their Root Causes

To diagnose well ask a few questions; 1) is the outcome good or bad, 2) who is responsible, and 3) if bad, is the RP incapable or is the design simply poor? Ask yourself, “Who should do What differently?”. During the diagnosing process determine at which point the 5-step process failed. Then you must identify which principles were violated, who violated them, and why they were violated. Modify the principle to evolve the situations, create a new sub-principle, or correct the individual who broke the principle. Remember, identifying that someone doesn’t know what they are doing does NOT constitute that you know what to do. We are looking for Root Causes, the reason, NOT the action that leads to the problem. Managers, like their subordinates, are subject to failure as well. They typically fall short or fail for one (or more) of 5 reasons. Stay in a perpetual state of synthesis by continually diagnosing the machine.

As the manager, you should consider using the 80/20 principle to learn about various departments in greater detail when problems are diagnosed. Diagnosis should create action. If there is a problem and the same people are creating the same mistakes, you should expect the same problems. Understanding that diagnosing is foundational for both progress and quality relationships should stimulate the production of perceiving problems.

Take Aways:

1. Diagnose well and diagnose often, and
2. When diagnosed use principles to remedy the problem.

13 Design Improvements to Your Machine to Get Around Problems*

You are the designer of your company (life), so build the machine. You must systemize your principles for implementation. Consider creating “decision-making machines” by thinking through the criteria used for making decisions thoroughly while making the decisions. A great plan (design) should be fluid and seamless. Look at different perspectives and other machines. Examine their outcomes and results, build yours accordingly. Remember to acknowledge 2nd and 3rd order consequences, not just first-order ones. A great machine recognizes that people are different and imperfect. The machine design accounts for such contingencies. The design recognizes a “bad now” and aims for a “good then” and the current process is “working through it” to get from A-to-B.

Building a goal-centered culture is much more impactful than task oriented. Assigning specific expectations and objectives or goals tandem with a capable design allows the workers to develop tasks accordingly, autonomously. Build the organization from top-down. Each person must report to a believable person with high standards. Each manager at the top of their respected hierarchy should have deep understandings of the job and be focused on managing their direct reports. When designing the machine implement the 5-step process. Keep scale in mind and build the machine to fit the people, keep it modular. Make sub-departments as self-sufficient as possible. Think of each department as a separate business, with the need to have all the resources to run, and build that sub-machine effectively and efficiently, so that it can be ran independently.

Literally, build pyramid charts that link the personnel at the pinnacle of each department with direct arrows down, never across, when resolving issues cross-department issues. Be careful of developing “department slip” as you should never do tasks for other departments or grab individuals from others unless agreed upon by both managerial members of each department.

After you have conducted thorough investigation implement “policemen” (auditors). Use “Public hangings” to detour bad behavior. When people are spending your money (company money) they probably will not spend it wisely. This is where I disagree. I would receipt the teachings of Jocko in this instance for managing people.

Assign responsibilities, tasks, objectives, and goals based on the individuals' abilities, capabilities and workflow — never the job title. Constantly think of producing leverage based outcomes (typically 80/20 thinking). It is best to have fewer people of greater abilities than more “ordinary” people less equipped.

Everything will take more time and money then you expect! This is SOOOO TRUE! I experienced this by a magnitude of 10+ with business and specifically our public proposition.

Take Aways:

1. Build a pyramid and flow chart diagrams for communication,
2. Implement auditors and “public executions”,
3. Think 80/20 and passing based on person NOT title,
4. Expect the worse.

14 Do What You Set Out to Do

Develop goals (missions) that excited and motivate the team. Their excitement will provide greater intrinsic motivation for taking action. Do not act before thinking (80/20). Always devise a “game plan”. Recognize that everyone is always overloaded; not just with work but personal and family matters. Do not get frustrated. Be open-minded and practice stoicism, then prioritize and execute. Do not forget to “ring the bell” once an objective is completed. It is beneficial to continually strive towards progress and achievement but does not commit to form resting and recovering. Finally, reflect and renovate as needed before executing again.

Take Aways:

1. Form goals that create excitement, and
2. Rest and Reflect.

15 Use Tools and Protocols to Shape How Work Is Done*

Have systemized tools and principled embedded in the company culture for operation will be tremendously valuable, especially in an idea meritocracy. If there is to be a paradigm shift or true behavior change than place significance on internalized learning and habit formation and tracking. When collecting data from tacking tools use machine learning to develop conclusions and action plans. You must foster an environment (and culture) of fairness and confidence. Using such data-driven tools helps the team form logic based conclusions.

Take Aways:

1. Realize the benefit of data-driven tools and protocols

16 And for Heaven’s Sake, Don’t Overlook Governance

All organizations must have checks and balances in place to prevent tyranny and help keep everyone accountable (even the CEO and Board). In an idea meritocracy merit is not the only determining factor in assigning responsibility and assignments. An individual should be subject to the organization's systems and must certainly not be so valuable that they are replaceable. This is tying back to Dalio leaving Bridge Water. Reporting and decision lines must be clearly defined. When an individual is conducting an assessment on someone else, make sure that these 3 prerequisites are satisfied; 1) have the time to be fully informed about how the person they are checking on is doing, 2) have the ability to make the assessments, and 3) are not in a conflict of interest that stands in the way of carrying out oversight effectively. In an organization with proper checks-and-balances, especially one that’s an idea meritocracy, a single CEO is not better than a collective board of leaders.

Conclusion

There are highlights of principles and concepts that are interdependent of each other and applicable both in the work and personal life.

Here are the important parts:

Radicalism

Embrace radical open-mindedness when receiving criticism and feedback. Practice and foster radical transparency when giving suggestions to others and divulging on mistakes.

Decision Making

The decision-making process should consist of the five-steps mentioned in Chapter 2 of BOOK I. The best solution is to create principles that automate the decision-making process using empirical methods of evaluation. Using believable people when creating automized systems and protocols will increase the process’s effectiveness and possibly efficiency.

Pain & Reflection

The pain and reflection component was an overarching theme throughout both books. Making mistakes is not bad. Making mistakes and not documenting it and reflecting on it is bad. Pain, like positive rewards, is a phenomenal reward catalyst to get people motivated to take action. Using mistakes is a great way to create or correct models for life.

Probe & Solve

Throughout life and as a manager of an organization you should envision the operation as a machine within larger machines. You are the designer and an engineer. Your goal is to make the machine efficient and solve problems that conflict with the machine for operating at maximum capacity. You must continually probe the machine for problems. Discover the root cause of the problems. Build principles for those root causes to remedy them quickly or prevent them altogether.

This book inspired me to reconceptualize my thought process on operating our business. I now want to implement Dalios tools or modify and introduce my own concepts.

Team Assistant

He talked about a coach but I wanted to take that one step further and build a Chatbot that is like a mentor and or our Alfred from Batman. It can teach and learns over time (evolves) with the company.

Baseball Cards

This is such a f*ckin cool concept. I love it and definitely want to integrate with our team ASAP. The baseball card concept gives you a highlight overview of the team member in an instant. It’s a personal profile that can reflect strengths, weaknesses, personality type, etc.

Issue Log & Pain Button

These tools are similar in that they are used to document and log mistakes or pain (anger, frustration, etc). It collects the problem, its varying severity, and implications. The tools are used later to reflect and even solve problems. You may discover that pain or mistakes are similarly correlated and caused by the same root problem. Develop a principle and modify the model as needed.

Not necessarily highlighting his tool (Dispute Resolver) but his suggestion for dispute resolution is pretty novel. Escalate the problem to management, agreed on 3rd party mediators, or mutually agreed on principles for problems. This highlights his get in sync and stay in sync concept. Vote, is straight forward, cast the problem to a vote and majority (through believability) rules. The next step is to stand behind the decision 100% even if you still disagree on the solution.

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Written by: Angel Mondragon.