Principles - Ray Dalio

principles-ray-dalio-book-cover.jpg

Rated: 9/10

Available at: Amazon

ISBN: 1501124021

Related: 12 Rules for Life, Tribe of Mentors

Summary

A fascinating book with an extraordinary amount of information.  It’s difficult to get through because of the sheer quantity of information, but worth reading for Part 1 and 2 alone (focused on Life Principles).

Part 3 is the complete list of principles based around running Bridgewater, and is mostly relevant for running a large (or at least, not small) organization, so may be of limited use to some.  

Would certainly recommend reading the first two parts in detail, and then investigating only the rules you find interesting in Part 3.  Overall, a practical guide to both life and running an organization, and a brief look into the mind of one of the world’s top performers.

Notes

Introduction

  • Principles are concepts that can be applied over and over again in similar circumstances as distinct from narrow answers to specific questions.

  • So, when digesting each principle, please...ask yourself: Is it true?

 

Part 1: The Importance of Principles

  • Values: what you consider important.

  • Principles: what allow you to live a life consistent with those values.

  • Adopting pre-packaged principles without much thought exposes you to the risk of inconsistency with your true values.

  • Your principles will determine your standards of behavior. When you enter into relationships with other people, your and their principles will determine how you interact.

  • People who have shared values and principles get along. People who don’t will suffer through constant misunderstandings and conflict with one another.

  • To be successful, you must make correct, tough choices. You must be able to "cut off a leg to save a life," both on an individual level and, if you lead people, on a group level.

 

Part 2: My Most Fundamental Life Principles

  • I want you to work for yourself, to come up with independent opinions, to stress-test them, to be wary about being overconfident, and to reflect on the consequences of your decisions and constantly improve.

  • I learned that failure is by and large due to not accepting and successfully dealing with the realities of life, and that achieving success is simply a matter of accepting and successfully dealing with all my realities.

  • I learned that one of the greatest sources of problems in our society arises from people having loads of wrong theories in their heads—often theories that are critical of others—that they won’t test by speaking to the relevant people about them.

  • I learned that everyone makes mistakes and has weaknesses and that one of the most important things that differentiates people is their approach to handling them.

  • I met a number of great people and learned that none of them were born great—they all made lots of mistakes and had lots weaknesses—and that great people become great by looking at their mistakes and weaknesses and figuring out how to get around them.

  • In short, I learned that being totally truthful, especially about mistakes and weaknesses, led to a rapid rate of improvement and movement toward what I wanted.

  • While most others seem to believe that having answers is better than having questions, I believe that having questions is better than having answers because it leads to more learning.

  • While most others seem to believe that finding out about one’s weaknesses is a bad thing, I believe that it is a good thing because it is the first step toward finding out what to do about them and not letting them stand in your way.

  • What I wanted was to have an interesting, diverse life filled with lots of learning—and especially meaningful work and meaningful relationships. I feel that I have gotten these in abundance and I am happy.

  • The people who really change the world are the ones who see what’s possible and figure out how to make that happen.

My Most Fundamental Principles

  • My most fundamental principle:

    • Truth —more precisely, an accurate understanding of reality— is the essential foundation for producing good outcomes.

    • Good = operating consistently with reality (the natural laws that govern our universe); bad = operating inconsistently with reality.

  • I believe that evolution, which is the natural movement toward better adaptation, is the greatest single force in the universe, and that it is good.

  • I believe that the desire to evolve, i.e., to get better, is probably humanity’s most pervasive driving force. Enjoying your job, a craft, or your favorite sport comes from the innate satisfaction of getting better.

  • In other words, the sequence of 1) seeking new things (goals); 2) working and learning in the process of pursuing these goals; 3) obtaining these goals; and 4) then doing this over and over again is the personal evolutionary process that fulfills most of us and moves society forward.

  • I believe that pursuing self-interest in harmony with the laws of the universe and contributing to evolution is universally rewarded, and what I call “good."

    • In other words, there is an excellent correlation between giving society what it wants and making money, and almost no correlation between the desire to make money and how much money one makes.

  • It is extremely important to one’s happiness and success to know oneself—most importantly to understand one’s own values and abilities—and then to find the right fits. We all have things that we value that we want and we all have strengths and weaknesses that affect our paths for getting them. The most important quality that differentiates successful people from unsuccessful people is our capacity to learn and adapt to these things.

The Personal Evolutionary Process

  • In short:

    • Reality + Dreams + Determination = A Successful Life

  • Also, for most people happiness is much more determined by how things turn out relative to their expectations rather than the absolute level of their conditions.

  • This basic principle suggests that you can follow one of two paths to happiness: 1) have high expectations and strive to exceed them, or 2) lower your expectations so that they are at or below your conditions. Most of us choose the first path, which means that to be happy we have to keep evolving.

  • Another principle to keep in mind is that people need meaningful work and meaningful relationships in order to be fulfilled. I have observed this to be true for virtually everyone, and I know that it’s true for me.

Your Most Important Choices

  • First:

    • Allow pain to stand in the way of progress, or understand how to manage pain to produce progress.

      • Pain + Reflection = Progress

  • Second: 

    • Face, or don’t face, “harsh realities”.

    • Ask yourself, is it true?

  • Third: 

    • Worry about appearing good or worry about achieving the goal.

    • Worrying about appearing good typically results in hiding weaknesses instead of learning about them.

    • What are your biggest weaknesses?  Think honestly and write them down, and look at them frequently.

  • Fourth:

    • Make decisions based on first-order consequences, or on first-, second-, and third-order consequences.

    • Example: exercise.  First-order consequences: pain and time-sink vs. Second-order: better health and appearance.

  • Fifth:

    • Hold, or don’t hold, themselves accountable.

    • How much do you let yourself off the hook vs. hold yourself accountable for your success?

  • 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.

  • If I had to pick just one quality that those who make the right choices have, it is character. Character is the ability to get one’s self to do the difficult things that produce the desired results

  • In summary, I don’t believe that limited abilities are an insurmountable barrier to achieving your goals, if you do the other things right.

My 5-Step Process to Getting What You Want Out of Life

  • In other words, “The Process” consists of five distinct steps:

    • Have clear goals.

    • Identify and don’t tolerate the problems that stand in the way of achieving your goals.

    • Accurately diagnose these problems.

    • Design plans that explicitly lay out tasks that will get you around your problems and on to your goals.

    • Implement these plans—i.e., do these tasks.

  • You need to do all these steps well in order to be successful.

  • Note:

    • 1)  You must approach these as distinct steps rather than blur them together.

    • 2)  Each of these five steps requires different talents and disciplines. Most probably, you have lots of some of these and inadequate amounts of others. If you are missing any of the required talents and disciplines, that is not an insurmountable problem because you can acquire them, supplement them, or compensate for not having them, if you recognize your weaknesses and design around them. So you must be honestly self-reflective.

    • 3)  It is essential to approach this process in a very clear-headed, rational way rather than emotionally. Figure out what techniques work best for you;

  • To help you do these things well—and stay centered and effective rather than stressed and thrown off by your emotions—try this technique for reducing the pressure: treat your life like a game or a martial art.

The 5 Steps Close-Up

  • 1. Setting Goals

    • You can have virtually anything you want, but you can’t have everything you want.

    • Some people fail at this point, afraid to reject a good alternative for fear that the loss will deprive them of some essential ingredient to their personal happiness. As a result, they pursue too many goals at the same time, achieving few or none of them.

    • Put another way, to achieve your goals you have to prioritize, and that includes rejecting good alternatives (so that you have the time and resources to pursue even better ones—time being probably your greatest limiting factor, though, through leverage, you can substantially reduce time’s constraints).

    • 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—as I previously explained, desires are typically first-order consequences.

    • Avoid setting goals based on what you think you can achieve.

      • As I said before, do each step separately and distinctly without regard to the others. In this case, that means don’t rule out a goal due to a superficial assessment of its attainability.

    • Achieving your goals isn’t just about moving forward.

      • So goals aren’t just those things that you want and don’t have. They might also be keeping what you do have, minimizing your rate of loss, or dealing with irrevocable loss.

      • Generally speaking, goal-setting is best done by those who are good at big-picture conceptual thinking, synthesizing, visualizing, and prioritizing.

  • 2. Identifying and Not Tolerating Problems

    • Most problems are potential improvements screaming at you.

      • Whenever a problem surfaces, you have in front of you an opportunity to improve. The more painful the problem, the louder it is screaming. In order to be successful, you have to 1) perceive problems and 2) not tolerate them.

      • If you don’t identify your problems, you won’t solve them, so you won’t move forward toward achieving your goals. As a result, it is essential to bring problems to the surface.

    • The most common reasons people don’t successfully identify their problems are generally rooted either in a lack of will or in a lack of talent or skill:

      • They can be "harsh realities" that are unpleasant to look at, so people often subconsciously put them out of sight so they will be "out of mind."

      • People often worry more about appearing to not have problems than about achieving their desired results, and therefore avoid recognizing that their own mistakes and/or weaknesses are causing the problems.

      • Try to look at your problems as a detached observer would. 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. Doing this continuously will lead to your rapid evolution. So, if you’re logical, you really should get excited about finding problems because identifying them will bring you closer to your goals.

    • Be very precise in specifying your problems.

      • Don’t confuse problems with causes.

      • I can’t get enough sleep is not a problem; it is a cause of some problem. What exactly is that problem? To avoid confusing the problem with its causes, try to identify the suboptimal outcome, e.g., I am performing badly in my job because I am tired.

    • Once you identify your problems, you must not tolerate them.

      • Tolerating problems has the same result as not identifying them (i.e., both stand in the way of getting past the problem), but the root causes are different. Tolerating problems might be due to not thinking that they can be solved, or not caring enough about solving them. People who tolerate problems are the worse off because, without the motivation to move on, they cannot succeed.

  • 3. Diagnosing the Problems

  • You will be much more effective if you focus on diagnosis and design rather than jumping to solutions.
    • It is a very common mistake for people to move directly from identifying a tough problem to a proposed solution in a nanosecond without spending the hours required to properly diagnose and design a solution. This typically yields bad decisions that don’t alleviate the problem. Diagnosing and designing are what spark strategic thinking.

    • You must be calm and logical.

    • You must get at the root causes.

      • Root causes, like principles, are things that manifest themselves over and over again as the deep-seated reasons behind the actions that cause problems. So you will get many everlasting dividends if you can find them and properly deal with them.

    • Recognizing and learning from one’s mistakes and the mistakes of others who affect outcomes is critical to eliminating problems.

      • More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.

      • The most important qualities for successfully diagnosing problems are logic, the ability to see multiple possibilities, and the willingness to touch people’s nerves to overcome the ego barriers that stand in the way of truth.

  • 4. Designing the Plan (Determining the Solutions)

    • Creating a design is like writing a movie script in that you visualize who will do what through time in order to achieve the goal.

      • Visualize the goal or problem standing in your way, and then visualize practical solutions. When designing solutions, the objective is to change how you do things so that problems don’t recur—or recur so often.

      • Think about each problem individually, and as the product of root causes—like the outcomes produced by a machine. Then think about how the machine should be changed to produce good outcomes rather than bad ones.

      • Then write down the plan so you don’t lose sight of it, and include who needs to do what and when. The list of tasks falls out from this story (i.e., the plan), but they are not the same. The story, or plan, is what connects your goals to the tasks. For you to succeed, you must not lose sight of the goals or the story while focusing on the tasks; you must constantly refer back and forth.

      • When designing your plan, think about the timelines of various interconnected tasks. Sketch them out loosely and then refine them with the specific tasks. This is an iterative process, alternating between sketching out your broad steps (e.g., hire great people) and filling these in with more specific tasks with estimated timelines (e.g., in the next two weeks choose the headhunters to find the great people) that will have implications (e.g., costs, time, etc.). These will lead you to modify your design sketch until the design and tasks work well together. Being as specific as possible (e.g., specifying who will do what and when) allows you to visualize how the design will work at both a big-picture level and in detail. It will also give you and others the to-do lists and target dates that will help direct you.

      • It doesn’t take much time to design a good plan—literally just hours spread out over days or weeks—and whatever amount of time you spend designing it will be only a small fraction of the time you spend executing it. But designing is very important because it determines what you will have to do to be effective. Most people make the very big mistake of spending virtually no time on this step because they are too preoccupied with execution.

  • 5. Doing the Tasks

    • Next, you and the others you need to rely on have to do the tasks that will get you to your goals. Great planners who don’t carry out their plans go nowhere. You need to "push through" to accomplish the goals.

    • I believe the importance of good work habits is vastly underrated. There are lots of books written about good work habits, so I won’t digress into what I believe is effective. However, it is critical to know each day what you need to do and have the discipline to do it. 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).

    • People who are good at this stage can reliably execute a plan. They tend to be self-disciplined and proactive rather than reactive to the blizzard of daily tasks that can divert them from execution. They are results-oriented: they love to push themselves over the finish line to achieve the goal. If they see that daily tasks are taking them away from executing the plan (i.e., they identify this problem), they diagnose it and design how they can deal with both the daily tasks and moving forward with the plan.

    • As with the other steps, if you aren’t good at this step, get help. There are many successful, creative people who are good at the other steps but who would have failed because they aren’t good at execution. But they succeeded nonetheless because of great symbiotic relationships with highly reliable task-doers.

Weaknesses Don’t Matter if You Find Solutions

  • Most importantly, ask yourself what is your biggest weakness that stands in the way of what you want.

  • It is difficult to see one’s own blind spots for two reasons:

    • 1)  Most people don’t go looking for their weaknesses because of "ego barriers"—they find having weaknesses painful because society has taught them that having weaknesses is bad.

    • 2)  Having a weakness is like missing a sense—if you can’t visualize what it is, it’s hard to perceive not having it.

  • Because I believe that you will achieve your goals if you do these five steps well, it follows that if you are not achieving your goals you can use the 5-Step Process as a diagnostic tool. You would do this by 1) identifying the step(s) that you are failing at; 2) noting the qualities required to succeed at that step; and 3) identifying which of these qualities you are missing.

  • In a nutshell, my 5-Step process for achieving what you want is:

    • Values → 1) Goals → 2) Problems → 3) Diagnoses → 4) Designs → 5) Tasks

  • As you design and implement your plan to achieve your goals, you may find it helpful to consider that:

    • Life is like a game where you seek to overcome the obstacles that stand in the way of achieving your goals;

    • You get better at this game through practice;

 

Part 3: My Management Principles

  • While individuals operating individually can choose whatever values and principles they like, when working in a group the people must agree on the group’s values and principles. If the group is not clear about them, confusion and eventually gravitation toward the population’s averages will result. If the group’s values and principles are clear, their way of being (i.e., their culture) will permeate everything they do. It will drive how the people in the group set goals, identify problems, diagnose problems, design solutions and make sure that these designs are implemented.

  • While having a clearly conveyed great culture is important, that’s only half of the magic formula. The other half is having great people—i.e., people who have the values, abilities, skills that fit the organization’s culture.

 

List of Principles

  • [Graham]: There are 210 principles in this section, many focused on the details of running a large (or at least not small) organization, and so I’ve left many out.  I’ve included ones I’ve found most relevant at the time of writing.

  • Be extremely open and truthful, and create an environment in which all your people speak up.

  • 5) Have integrity and demand it from others.

    • 5a) Never say anything about a person you wouldn’t say to them directly , and don’t try people without accusing them to their face.

  • 6) Be radically transparent.

  • 8) Create a culture in which it is ok to make mistakes by unacceptable not to identify, analyze, and learn from them.

  • 10) Do not feel bad about your mistakes or those of others. Love them! Remember that 1) they are to be expected, 2) they’re the first and most essential part of the learning process, and 3) feeling bad about them will prevent you from getting better. People typically feel bad about mistakes because they think in a short-sighted way that mistakes reflect their badness or because they’re worried about being punished (or not being rewarded).

    • Good school learners are often bad mistake-based learners because they are bothered by their mistakes. I particularly see this problem in recent graduates from the best colleges, who frequently shy away from exploring their own weaknesses. Remember that intelligent people who are open to recognizing and learning from their weaknesses substantially outperform people with the same abilities who aren’t similarly open.

  • 18) Be self-reflective and make sure your people are self-reflective. This quality differentiates those who evolve fast from those who don’t.

  • 24) Be assertive and open-minded at the same time. Just try to find out what is true. Don’t try to ‘win’ the argument.

  • 26) Recognize that conflicts are essential for great relationships because they are the means by which people determine whether their principles are aligned and resolve their differences. I believe that in all relationships, including the most treasured ones, 1) there are principles and values each person has that must be in synch for the relationship to be successful and 2) there must be give and take. I believe there is always a kind of negotiation or debate between people based on principles and mutual consideration. What you learn about each other via that “negotiation" either draws you together or drives you apart.

    • If your principles are aligned and you can work out your differences via a process of give and take, you will draw closer together. If not, you will move apart.

  • 30) Don’t treat all opinions as equally valuable. Almost everyone has an opinion, but many are worthless or harmful. The views of people without track records are not equal to the views of people with strong track records. Treating all people equally is more likely to lead away from truth than toward it.

  • 31a) Ask yourself whether you have earned the right to have an opinion. As a general rule, if you have a demonstrated track record, then you can have an opinion of how to do it—if you don’t, you can’t, though you can have theories and questions.

  • 31b) People who have repeatedly and successfully accomplished the thing in question and have great explanations when probed are most believable. Those with one of those two qualities are somewhat believable; people with neither are least believable.

    • Someone new who doesn’t know much, has little believability, or isn’t confident in his views should ask questions. On the other hand, a highly believable person with experience and a good track record who is highly confident in his views should be assertive.

  • 33d) A small group (3 to 5) of smart, conceptual people seeking the right answers in an open-minded way will generally lead to the best answer. Next best is to have decisions made by a single smart, conceptual decision-maker, but this is a much worse choice than the former. The worst way to make decisions is via large groups without a smart, conceptual leader.

  • 33e) 1+1=3. Two people who collaborate well will be about three times as effective as the two of them operating independently because they will see what the other might miss, they can leverage each other, and they can hold each other to higher standards.

  • 44) Recognize that people are built very differently.

  • 45) Think about their very different values, abilities, and skills. Values are the deep- seated beliefs that motivate behaviors; people will fight for their values, and values determine people’s compatibility with others. Abilities are ways of thinking and behaving. Some people are great learners and fast processors; others possess common sense; still others think creatively or logically or with supreme organization, etc. Skills are learned tools, such as being able to speak a foreign language or write computer code.

    • While values and abilities are unlikely to change much, most skills can be acquired in a limited amount of time (e.g., most master’s degrees can be acquired in two years) and often change in worth (e.g., today’s best programming language can be obsolete in a few years).

  • 54) Weigh values and abilities more heavily than skills in deciding whom to hire.

  • 96) Don’t “pick your battles.” Fight them all.  If you see something wrong, even something small, deal with it.

  • 110) If someone is doing their job poorly, consider whether this is due to inadequate learning (i.e., training/experience) or inadequate ability. A weakness due to a lack of experience or training or due to inadequate time can be fixed. A lack of inherent ability cannot.

  • 111) Remember that when it comes to assessing people, the two biggest mistakes are being overconfident in your assessment and failing to get in synch on that assessment. Don’t make those mistakes.

  • Management ratios should not be more than 1:10 and ideally more like 1:5.

  • 142) Don’t use the anonymous “we" and “they," because that masks personal responsibility—use specific names.

  • 143) Be very specific about problems; don’t start with generalizations.

  • 144) Tool: Use the following tools to catch problems: issues logs, metrics, surveys, checklists, outside consultants, and internal auditors.

    • 1)  Issues log: A problem or “issue" that should be logged is easy to identify: anything that went wrong.

      • You diagnose root causes for the issues log the same way as for a drilldown (explained below) in that the log must include a frank assessment of individual contributions to the problems alongside their strengths and weaknesses.

      • You have to encourage use by making clear how necessary they are, rewarding active usage, and punishing non-use.

    • 2)  Metrics: Detailed metrics measure individual, group, and system performance. Make sure these metrics aren’t being gamed so that they cease to convey a real picture. If your metrics are good enough, you can gain such a complete and accurate view of what your people are doing and how well they are doing it that you can nearly manage via the metrics.

      • Instead, use the metrics to ask questions and explore. Remember that any single metric can mislead. You need enough evidence to establish patterns. Metrics and 360 reviews reveal patterns that make it easier to achieve agreement on employees’ strengths and weaknesses.

  • 151) Remember that a root cause is not an action but a reason. It is described by using adjectives rather than verbs. Keep asking why to get at root causes, and don’t forget to examine problems with people.

  • 152) Identify at which step failure occurred in the 5-Step Process. If a person is chronically failing it is due to either lack of training or lack of ability. Which was it? At which of the five steps did the person fail? Different steps require different abilities.

    • 1. Setting goals: This requires big-picture thinking, vision, and values that are consistent with those of our community

    • 2. Perceiving problems: This requires perception, the ability to synthesize, and an intolerance of badness

    • 3. Diagnosis: This requires logic, assertiveness, and open-mindedness. You must be willing to have open and/or difficult discussions to get at the truth

    • 4. Design: This requires creativity and practical visualization.

    • 5. Doing the tasks: This requires determination and self-discipline.

    • If you 1) identify at which of these steps the chronic failures are occurring and 2) see which, if any, of these abilities the person is short of, you will go a long way toward diagnosing the problem.

  • 177) Constantly think about how to produce leverage. For example, to make training as easy to leverage as possible, document the most common questions and answers through audio, video, or written guidelines and then assign someone to regularly organize them into a manual.

    • 177a) You should be able to delegate the details away. If you can’t, you either have problems with managing or training or you have the wrong people doing the job. The real sign of a master manager is that he doesn’t have to do practically anything.

    • 177b) It is far better to find a few smart people and give them the best technology than to have a greater number of ordinary and less well-equipped people. First of all, great people and great technology are almost always a great value because their effectiveness in enhancing the organization’s productivity can be enormous. Second, it is desirable to have smart people have the widest possible span of understanding and control because fragmented understanding and control create inefficiencies and undermine organizational cohesion.

  • 183) Tool: Maintain a procedures manual. This is the document in which you describe how all of the pieces of your machine work. There needs to be enough specificity so that operators of the different pieces of the machine can refer to the manual to help them do their job. The manual should be a living document that includes output from the issues log so that mistakes already identified and diagnosed aren’t repeated. It prevents forgetting previous learning and facilitates communication.

  • 184) Tool: Use checklists. When people are assigned tasks, it is generally desirable to have these captured on checklists so they can check off each item as it is done. If not, there is a risk that people will gradually not do the agreed tasks or there will be lack of clarity. Crossing items off a checklist will serve as a task reminder and confirmation of what has been done.

    • 184a) Don’t confuse checklists with personal responsibility. People should be expected to do their job well, not just what is on their checklists.

  • 189) Push through! You can make great things happen, but you must MAKE great things happen. Times will come when the choice will be to plod along normally or to push through to achieve the goal. The choice should be obvious.

  • 192) Understand that the ability to deal with not knowing is far more powerful than knowing. That is because there’s way more that we don’t know than what we could possibly ever know.

    • 192a) Embrace the power of asking: "What don’t I know, and what should I do about it?" Generally you should find believable people and ask their advice, remembering that you are looking to understand their reasoning rather than get their conclusions.

    • 192b) Finding the path to success is at least as dependent on coming up with the right questions as coming up with answers. Successful people are great at asking the important questions and then finding the answers.

  • 194) While everyone has the right to have questions and theories, only believable people have the right to have opinions. If you can’t successfully ski down a difficult slope, you shouldn’t tell others how to do it, though you can ask questions about it and even express your views about possible ways if you make clear that you are unsure.

  • 196) Make all decisions logically, as expected value calculations.

  • 197) Considering both the probabilities and the payoffs of the consequences, make sure that the probability of the unacceptable (i.e., the risk of ruin) is nil.

    • 197a) The cost of a bad decision is equal to or greater than the reward of a good decision, so knowing what you don’t know is at least as valuable as knowing.

    • 197b) Recognize opportunities where there isn’t much to lose and a lot to gain, even if the probability of the gain happening is low.

    • [Graham] Note that the above is basically a restatement of many of the concepts from Nassim Nicholas Taleb’s work and writing.

    • 197c) Understand how valuable it is to raise the probability that your decision will be right by accurately assessing the probability of your being right.

    • 197d) Don’t bet too much on anything. Make 15 or more good, uncorrelated bets.

  • 199) Distinguish the important things from the unimportant things and deal with the important things first.

    • 199a) Don’t be a perfectionist, because perfectionists often spend too much time on little differences at the margins at the expense of other big, important things. Be an effective imperfectionist. Solutions that broadly work well  are generally better than highly specialized solutions, especially in the early stages of a plan.

    • 199b) Since 80% of the juice can be gotten with the first 20% of the squeezing, there are relatively few (typically less than five) important things to consider in making a decision. For each of them, the marginal gains of studying them past a certain point are limited.

    • 199c) Watch out for "detail anxiety," i.e., worrying inappropriately about unimportant, small things.

    • 199d) Don’t mistake small things for unimportant things, because some small things can be very important (e.g., hugging a loved one).

  • 207) Understand what an acceptable rate of improvement is, and that it is the level and not the rate of change that matters most. I often hear people say, It’s getting better, as though that is good enough when it is both below that bar and improving at an inadequate rate. That isn’t good enough.

    • Everything important you manage has to be on a trajectory to be "above the bar" and headed for “excellent" at an acceptable pace.

  • 208) If your best solution isn’t good enough, think harder or escalate that you can’t produce a solution that is good enough. A common mistake is accepting your own best solution when it isn’t good enough.

 

Footnotes:

  • I believe that our society's “mistakephobia" is crippling, a problem that begins in most elementary schools, where we learn to learn what we are taught rather than to form our own goals and to figure out how to achieve them. We are fed with facts and tested and those who make the fewest mistakes are considered to be the smart ones, so we learn that it is embarrassing to not know and to make mistakes. Our education system spends virtually no time on how to learn from mistakes, yet this is critical to real learning. As a result, school typically doesn’t prepare young people for real life—unless their lives are spent following instructions and pleasing others. In my opinion, that’s why so many students who succeed in school fail in life.

  • “Bright" people have high IQs, are highly analytical thinkers, and can solve complex mental problems.

  • “Smart" people have common sense, are good at synthesizing, and can imagine what is possible.