49 pages • 1 hour read
Ray DalioPrinciples
Nonfiction | Book | Adult | Published in 2011A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Summary
Chapter Summaries & Analyses
Key Figures
Themes
Index of Terms
Important Quotes
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BetaPart 1, Chapters 5-8Chapter Summaries & Analyses
Part 1: “Where I’m Coming From”
Part 1, Chapter 5 Summary: “My Ultimate Boon: 1995-2010”
Bridgewater grew to 42 employees by 1995, with $4.1 billion under management. The company continued to invest in technology and in skilled programmers. Bridgewater also developed additional products, such as global inflation-indexed bonds and an “All Weather Portfolio” that combined a mix of assets to increase risk parity (70).
Dalio notes that during this period he also increased his focus on management, including developing a list of his principles and distributing it to managers, insisting on policies like “Radical Transparency,” relying on psychometric testing like the Myers-Briggs Type Indicator, and creating “baseball cards” with “stats” for employees. He attributes his increased understanding of individual differences to the knowledge he gained from dealing with his son Paul’s bipolar disorder.
Despite Bridgewater’s growth, Dalio began making plans to step back from his role in 2008, just as a major financial crisis was emerging. Dalio had predicted the debt crisis, and he describes discussing the problem with White House staff and Tim Geithner, the president of the New York Federal Reserve. According to Dalio, Bridgewater made money in 2008 despite the crisis, and policymakers began to seek his advice. Dalio credits Federal Reserve chairman Ben Bernanke with making good decisions to stop the worst of the crisis’s effects. Dalio continued to promote his principles within his network and to prepare Bridgewater to go on without him.
Part 1, Chapter 6 Summary: “Returning the Boon: 2011-2015”
At the start of the second decade of the 21st century, Dalio felt ready to transition to a third phase of life, in which he is ready to savor things but also to focus on helping others be successful. He worried that Bridgewater would have difficulties without him and ultimately decided to stay on within the company, but only as a mentor. He crafted a transition plan and thought carefully about how to be a “shaper” of ideas like Steve Jobs and other leaders he admires.
The investing portions of Bridgewater are highly systematized, according to Dalio. At the time of his transition, he was more concerned with the non-investment portions of the company. He describes encountering scholar Joseph Campbell’s book on mythology The Hero with a Thousand Faces, which discusses a path of adventure and testing a hero’s skill to improve, ultimately “returning the boon” of the gift of their talents by sharing with others (111). Dalio does not describe himself as a hero, but he appreciated the idea of learning to improve at the time he was preparing to give back to his company and ensure its success.
The same line of thinking led him to get involved with philanthropy. He thought carefully about what causes to contribute to, given the fact that there is never enough money to accomplish everything. He notes that his philanthropic efforts focus on his family’s passions, including education, nature, and orphanages.
Part 1, Chapters 7-8 Summary: “My Last Year and My Greatest Challenge: 2016-2017” and “Looking Back from a Highest Level”
Bridgewater was challenged when Dalio left his CEO role. As he predicted, the non-investment portions suffered. Dalio’s replacement, Greg Jensen, eventually stepped aside as CEO to become an investment officer. Dalio temporarily became co-CEO with Eileen Murray. He notes feeling pain about the struggles but also hopeful about the opportunity to grow. A more formal governance system was set up at Bridgewater to ensure success through future CEO changes and to provide checks and balances against decision making.
Dalio closes Part 1 of Principles by reflecting on the process of learning from pain and failure. He praises the virtues of seeing strengths in successful people and how they handle mistakes. He also reiterates the importance of setting principles and sticking to them for guidance.
Part 1, Chapters 5-8 Analysis
The second half of Dalio’s personal narrative emphasizes his increased interest in management and higher-order thinking about organizations, on a mission to “deepen [his] understanding of our different ways of thinking” in order to strengthen Bridgewater (74). He turned from spending most of his time at Bridgewater involved in the particularities of financial management and client relationships to a late-career position of thinking more about the structure, goals, culture, and legacy of his company. This evolution partially explains Dalio’s motivations for writing Principles and his desire to share insights with the wider world.
There are two primary aspects to the evolution Dalio describes in these chapters. First, he narrates how his reach as a leader broadened. Within Bridgewater, Dalio began to increase the attention he gave to management as the company grew exponentially in size, from Dalio alone in the early 1980s to 42 employees in 1995 to over a thousand employees and billions of dollars under management by the time he stepped down as CEO. When it became clear in 2007-2008 that the United States was headed for a major financial crisis, Dalio also found his reach expanding beyond business colleagues to include White House staff and other major policymakers.
Second, Dalio explains how this professional evolution coincided with a period of philosophical self-reflection. He felt as though he was entering a stage in life in which “I was no longer as excited about being successful as I was excited about having the people I cared about be successful without me” (91). Exemplifying his allegiance to alternative patterns of thought and to life questions that extend beyond business, Dalio notes developing an interest in the scholar Joseph Campbell at the same time. Campbell is known for his exploration of myth, archetypes, and psychology in works such as The Hero with a Thousand Faces. Campbell’s work has influenced groups and individuals as diverse as the band the Grateful Dead and Star Wars creator George Lucas. Dalio’s references to Campbell echo the countercultural interests he alluded to earlier in his life story.
Dalio places his reflections at that stage in his life in terms of seeking to become a “shaper” who does not just lead in business, but also helps define and guide how others choose to pursue their own personal and professional ventures. Ending his personal narrative on this high level emphasizes that Dalio sees an intertwined connection between life and work and that his ideas are broad and ambitious.
