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Ray Dalio: The 5 Criteria for Success

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ray dalio on success

Ray Dalio is the founder of Bridgewater, the world’s largest hedge fund. He has been ranked as one of the 50 most influential people in the world. He grew up in a middle class home as the only child of two Italian-American parents and started investing at age 12.

In short, he is a badass man who went from very humble background and made it to the world elite.

The best advice I can give you is to ask yourself what you want, then ask ‘what is true’, and then ask yourself ‘what should be done about it’. If you honestly ask and answer these questions you will move much faster towards what you want to get out of life than if you don’t!

– RAY DALIO –

In the book Bridgewater Principles (included in the bottom) Dalio describes his own five main criteria for success in life; regardless of how one defines “success”.

Theoretically speaking all these five criteria are pretty easy to understand. But there’s a huge difference between theory and practice: it takes a long time to not only understand, but to fully embody all the five criteria.

The first of the five criteria for success is…

1. Letting Pain Stand in the Way vs Accepting and Managing Pain

Once you accept that playing the game will be uncomfortable, and you do it for a while, it will become much easier… When you think that it’s too hard, remember that in the long run, doing the things that will make you successful is a lot easier than being unsuccessful.

– RAY DALIO –

People who fail to overcome the initial pain, effort, or boredom that is required to execute on a long-term goal tend to not make it that far.

On the other hand, those who accept that they will have to go through some tedious work at first in order to accomplish epic things will look upon the pain as temporary and see it as a necessary evil while focusing on the light in the end of the tunnel.

To illustrate this Dalio uses the example of how there is good pain and there is bad pain. Good pain comes from pushing through towards one’s goals, bad pain is what we will end up with if we don’t go after that which we desire.

When we accept the temporary pain that comes from overcoming challenges we are in what Dalio refers to as the stretch-zone.  It’s similar to conducting strenuous physical exercise; positive pain is the pain that comes from growing.

2. Avoid Facing Harsh Realities vs Facing Harsh Realities

Remember that identifying problems is like finding gems embedded in puzzles; if you solve the puzzles you will get the gems that will make your life much better. For every mistake that you learn from you will save thousands of similar mistakes in the future, so if you treat mistakes as learning opportunities that yield rapid improvements you should be excited by them.

– RAY DALIO –

Surely you have some friend who is pretty mediocre in all aspects of his life, but still sees himself as an übermensch despite having NOTHING to back that belief up.

It’s like this friend of yours is blind to reality – and not in a positive Steve-Jobs-kind-of-way of distorting reality to his advantage.

It’s a lot better to face harsh realities RIGHT NOW rather than avoiding them. Ray Dalio meditates every day in order to better face reality and prescribes the same to others. (I concur.)

People who don’t face harsh realities overstay their visit in the comfort zone while gradually becoming more and more passive until the comfort zone eventually turns into anxiety mixed with pain and eventually swallows them whole.

People who face harsh realities understand that they are not perfect, nor will they ever be, but yet they consistently try to adjust to the feedback given to them and they strive to become better by acting in alignment with reality.

The sooner you can face a harsh reality, the sooner you can start to change it.

In the case of your friend it would be better to face the harsh reality that he currently sucks at life and needs to correct to the feedback that reality is giving him. Only then can he work on his weaknesses in a sincere effort to improve.

The bottom line is this: you cannot wipe reality out, but reality can wipe you out.

3. Worrying about Looking Good vs Accomplishing the Goal

People who worry about looking good typically hide what they don’t know and hide their weaknesses, so they never learn how to properly deal with them and these weaknesses remain impediments in the future. To test if you are worrying too much about looking good, observe how you feel when you find out you’ve made a mistake or don’t know something.

– RAY DALIO –

Are you playing not to lose or are you playing to win?

If you are playing not to lose you are valuing your social image above the accomplishment of the goal.

If you are playing to win you accept that you’re going to fall face down and make a fool of out yourself every once in a while and it’s going to be embarrassing or painful in the short-term, but in the long-term it is going to be A LOT more satisfying.

If you are playing to win temporary setbacks will not deter you because you know and accept the fact that it’s impossible to win big without failing first.

People who cling to the idea of thinking that they know everything are scared to ask questions because they are afraid it might make them seem ignorant. People who think that they are perfect are afraid to do anything that is socially questionable and might make them lose face.

The result in both of the cases above is that these people will end up spending their time and focus on maintaining current appearances rather than to actually make forward progress.

To prevent this from happening to you, constantly ask yourself this one question:

Am I currently trying to keep up my appearance so that I look good, cool, or socially correct, or am I disregarding that in priority of accomplishing my goals?

Play. To. Win.

4. Short-Term Thinking vs Long-Term Thinking.

It is important not to confuse ‘goals’ and ‘desires’. Goals are the things that you really want to achieve, while desires are things you want that can prevent you from reaching your goals.

RAY DALIO

One of the major differences between people who are successful at accomplishing their goals vs those who are not is whether they are able to defer immediate gratification, develop their long-term thinking, and keep track of their goals.

People with good work habits have to-do lists that are reasonably prioritized, and they make themselves do what needs to be done. By contrast, people with poor work habits almost randomly react to the stuff that comes at them, or they can’t bring themselves to do the

things they need to do but don’t like to do (or are unable to do).

RAY DALIO

People who regularly give into their desires for instant gratification haven’t really learned to think in terms of second-, third, or fourth-order consequences. They don’t see how the actions they’re about to take might induce a downward spiral. They don’t realize how small things accumulate into big things – or as I call it, the cumulative effect.

5.  Blaming others vs Taking Responsibility

By and large, life will give you what you deserve and it doesn’t give a damn what you ‘like’. So it is up to you to take full responsibility to connect what you want with what you need to do to get it, and then to do those things — which often are difficult but produce good results — so that you’ll then deserve to get what you want.

RAY DALIO

To avoid taking personal responsibility is an indicator that you’re being run by your brain’s inherent mechanism to conserve energy. I refer to this state as being deeply in homeostasis. This is how the brain keeps you from changing.

Why would the brain do such a thing, you wonder?

Because change requires the expenditure of lots and lots of energy and the brain is a lazy bastard that wants to stay the same.

People who are stuck playing the blame game will avoid taking personal responsibility at all costs. That is the safe thing to do, and that way they don’t have to change because if something goes wrong it’s not their fault because they never assumed responsibility to begin with so they cannot be blamed, and if they aren’t blamed then they don’t have to change!

Sounds like a really shrewd strategy for long-term success, wouldn’t you say?

Or not.

The fact is that success – including wealth – stems from elevating your mindset and building your character over a long period of time. That was why Henry Ford said that even if they took away everything he owned he would still be able to replicate his entire organization in a matter of years.

Ultimately you will never build character unless you take personal responsibility. It’s really that simple.

I really recommend reading the book Atlas Shrugged by Ayn Rand. The book is a 1200 page long leviathan that really hammers into you the importance of taking personal responsibility for achieving the things you want out of life. I suspect Ray Dalio has read it a couple of times.

Conclusion and Study Resources:

In summary, I believe that you can probably get what you want out of life if you can suspend your ego and take a no-excuses approach to achieving your goals with open-mindedness, determination, and courage, especially if you rely on the help of people who are strong in areas that you are weak.

RAY DALIO

The five criteria for success are:

  1.       Letting Pain Stand in the Way vs Accepting and Managing Pain
  2.       Avoid Facing Harsh Realities vs Facing Harsh Realities
  3.       Worrying about Looking Good vs Accomplishing the Goal
  4.       Short-Term Thinking vs Long-Term Thinking.
  5.       Blaming others vs Taking Responsibility:

Also, some advice to people my age:

The main difference between school and business is that not only can you break the rules, but in many cases you should.

In school you are usually not allowed to enlist the help of others to work in a symbiotic way that makes up for each other’s weaknesses, in the real world you have to do that in order to achieve maximum leverage of your time.

It is often better to work smarter – I.E in a way and in a business area that gives rise to less competition than it is to work harder in a way and in a business area where competition is plentisome.

This is something that the average Joe or the corporate guy sitting in his cubical does not understand. They think that if they just work harder they will eventually get rich or be successful.

More from Ray Dalio:

  • Bridgewater Principles: Here you can read the entire book. It is 123 pages in total, the first 38 pages are about Ray Dalio’s personal opinions about life, success, and self-development. The rest of the book is dedicated to management and organizational strategies. I warmly recommend it. It is on my list of books to re-read.
  • Short video of Ray Dalio giving tips on various things.
  • A comprehensive interview you should read if you’re interested in Dalio’s thinking.

Resources:

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Comments

  1. Hey i just wanted to say nice stuff. I just read the book and was googling on ray dalio and found your post.

    Great book. Glad to see others have read it as well.

    Cool vid also.

  2. Wan Muhammad Zulfikri says:

    Hi Ludvig,

    I can relate somehow with the third point. When I was taking a medical school interview, I worried about how I would look in front of the interview.

    But still, I’m kind of a spontaneous guy who dislikes script and telling interviewers what they wanted to hear so I said to myself “Screw this! I am not going to research the interview questions in Google or make a list of questions. I’m going to think about who I am because that’s what matters.”

    And I was interviewed and I rambled saying that I don’t prefer those who pretended that they are some kind of great person when being interviewed.

    I still remember this one question the interviewer asked, “What do you think is your greatest failure?” Instead of promoting myself as someone who had risen up from failure thus showing how great of a person I am, I just admit to her that I had never had a great failures and most of time when I thought I was going to fail, I had actually succeed.

    I realized by not being worried of looking good, I accomplished my goal of getting into the medical school and also looked good to the interview at the same time.

    Anyway, Ludvig, in your Conclusion and Study Resources, there’s the Ray Dalio quote but there’s a bit of typo:-

    “In summhttp://www.startgainingmomentum.com/wp-admin/post-new.phpary, I believe”

    Thanks for the nice post :D

    • Great comment!

      I’ve been through the same thing in interviewing. I really dislike corny-ass questions like:

      “What do you think is your greatest failure?”

      or in my case after high school I got the question:
      “What is your greatest weakness?”

      To which I answered that I’d scored very poorly in physics, but that I had no interest in it and that it shouldn’t matter much for the job I was applying for (in finance/stocks). I passed the interview. Heh.

      Honesty prevails.

      Thanks for your feedback, I don’t know what went wrong in the quote there, but i fixed it.

  3. Ludwig – we can think of pain as roadblocks which prevent us from going further or simply stumbling blocks – we fall over a bit but we get up and keep going. I think successful people like Dalio have learned, like people who sail sailboats, to use the winds of pain to help them sail to their desired destination. Sometimes the wind blows your way and sometimes against you. I imagine the better sailboaters try to figure out the wind strength, direction and force, and sail accordingly.

    Like you say, the difference in success is theory v. practice. Do’ers get to the final destination. Theorists never get on the boat:)

  4. Checked out the book last night. Really great reading, thanks for the tip.

  5. What Dalio is saying is so basic and fubdamental, yet profound.

    Its funny how this stuff would get interpreted as corny and loser-like if most guys said it. But when a guy like this says it everyone (me included) cares.

    I guess these are some of the things we would all like to believe in but dont dare to.

    • I agree with you.

      I think what you’re describing is something a lot of intelligent (yet-to-be-successful) people are struggling with.

      It comes down to credibility, and that realllly has to be earned!

  6. I resonate so much with this article. These principles should be taught to people everywhere. They are the fundamental building blocks of accomplishing big things.

    Right now I’m most focused on short-term thinking vs. long-term thinking. Delayed gratification is so important. When accomplishing anything big it’s all about continuous effort over time.

    Really great post man.

    • Cool. Last year I did that too with the dieting, sleeping, and working out etc – health.

      I feel like this year has been mostly about caring more about achieving the goal than about looking good. I’ve done massively embarrasing and uncomfortable stuff, but learnt a ton in the process.

      Thanks for the comment Kevin!

      PS: I’ll be reading The Slight Edge over Christmas.

  7. This article is gold. Point 3 in particular really spoke to me. Found myself rifling through Nelson Mandela quotes today after hearing of the great man passing and came across this one.

    “The greatest glory in living lies not in never falling, but in rising every time we fall.”

    Daring to fail, accepting, no, embracing failure as a necessary byproduct of growth and progress is what it’s about. I’ve found learning to accomodate this reality is a huge part of kickstarting progress toward any goal. In the end, if you want something bad enough you’ve gotta play to win. No compromise.

    • I just heard about Nelson Mandela today (I never watch the news). He was the definition of a bad ass. I’ve yet to read his biography, it’s on my list for this year’s reading.

      “if you want something bad enough you’ve gotta play to win. No compromise.”

      —> Definitely.

  8. Number 3 was really clever.

    This leads to so many people spending way too much to dress really well and nice really nice cars and live above their means. Few people are willing to live poor in order to invest all their money on their dreams.

    This is a huge obstacle for people man.

  9. Hi Ludwig,

    Excellent post indeed and Ray Dalio sounds like one extremely inspiring person.

    What you wrote about looking good vs accomplishing the goal was really interesting. I see so many people do this where they spend so much time and energy trying to look good. Instead, they could spend this time and energy on activities where they actually would make a worthwhile difference.

    Thank you.

    • Hiten, thanks for the comment.

      I’ve actually been really focused on this lately – being pragmatic. And I see so many people around me that are the opposite; people that are just trying to please others or look cool at the expense of actually getting stuff done.

  10. Ludvig,

    Great Post and i can tell you that i was suffering from a few of those statements back then before i realized what i was doing wrong. The first statement about Pain hit a nerve. As i did not make myself be noticed by others instead i hid behind the curtains because i was afraid the pain was going to be too much whenever i tried to get out of my “Comfort Zone”

    I missed out on a lot of opportunities back then which i realize now. The truth is in order to be successful you have to get out of your “Comfort Zone” and be out there and do you thing.

    The other statement where he spoke about Facing Realities i think we all tend to hide from reality and live in a make believe world. A world were you are never wrong and everyone else is type of world. I have seen many people crash and burn because they refuse to see the 800 pound gorilla in the room. For example i knew this guy who bought a luxury car for no reason but because every one else had it. Mind you this guy had no job to make payments on it. He rode as if he was the King and refuse to see the late notices on the car note. Then one day he woke up one morning and the car was gone!
    Did you know that he was actually so mad about it that he called the bank screaming and yelling. The bank told him that the care was repo’ed for nonpayment. Instead of letting it go he continued arguing about it. This man really was living in his make believe world!
    Playing to win is always been my mantra! Looking good does not pay the bills! I work in the IT field and have come across a few people like that who think they know everything but in reality very little but always worried about how others percieve them. I used to know another guy in the IT field who thought he knew everything about computers until they called on him to solve some big issue.
    He delayed and delayed until the person who needed the help gave up and asked me. I could not tell them then and there what the problem was but i went to see if i could at least solve it for them. After a few minutes i was able to figure the problem out and person back to work again. Guess who they are coming to next time!
    This Blaming others instead of taking responsibility is something that runs rampant in the corporate world! Being an IT guy you get to see people just throw IT people under the bus for the smallest thing. I know for me if i know i messed up why lie about it? Just fess up that you messed up and get to cleaning up! Because blaming others will not solve the problem at hand but it will delay it.
    I believe in teamwork being that i served in the armed services where team work is continously drilled into your head until it becomes natural. In the work environment everyone talks about team work but few actually participate in it. Teamwork for me helps me to accomplish what goals we have in order to further make money. There is so much rivalry in the corporate world that teamwork sometimes is thrown by the way side.

    I apologize for the long comment and keep teaching us!
    Your friend
    Jose

    • Jose,
      No need to apologize for the long post, I see you put a lot of thought into it. I appreciate it.

      Good work on solving the IT project, you showed a lot more initiative than the other guy. He was getting complacent and thought he had their business forever.

      When it comes to facing harsh realities, I think a lot of people (in particular from my generation) drown themselves in a cycle of endless stimulation (movies,TV, video games, and recreational drugs) to try to feel good about their situations instead actually facing it and solving the root problem that’s causing the dissatisfaction.

  11. Michal Stawicki says:

    Great stuff Ludvig. Did you read The Slight Edge by Jeff Olson? I see many points inerlocking in both books and it was SlightEdge which broke me out of my homoestasis.

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  1. […] many people will not want to believe this–because it is a very disconcerting idea; a harsh reality. Those people will want to dispel their discomfort by, for example, pointing to the success stories […]

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