Life Principles Recommended by The Worlds Biggest Hedge Fund Manager – Mr. Ray Dalio.

Saturday, 17 February 2018

Life Principles Recommended by The Worlds Biggest Hedge Fund Manager – Mr. Ray Dalio.

Greetings from Hitesh! Today I am sharing my learning form the guy who manages USD 160 Billion HEDGE FUND. He is the biggest and most respected guy in the industry. Most Central Bankers take his views before making important policy decisions.

He has written his learning in two books. Principles – for life and work and he is writing another book now – Principles – for Investments. The idea is very clear – build life around sound principles, develop a healthy work habits and then only approach investments. You can do all simultaneously. The beauty of this book is that he has written each of the word very thoughtfully and that way it pays to read and re-read his book. I have just completed the same and I feel like sharing with you all. This is more of a CHARACTER BUILDING STEP.

When I look back on his life and his achievements I see he is following what LORD KRISHNA said in GITA. This is the beauty of TRUTH – one can reach from any which way.

He calls his learning Embrace Reality and Deal with It. He has divided the same into 10 areas. Let us deal with them.  

He says “There is nothing more important than understanding how reality works and how to deal with it. The state of mind you bring to this process makes all the difference”.

We all know how life and market works. There is a BIRTH also and there is a Death also. Same way market has cycles of TEJI and MANDI. However, look at the normal behaviour - we celebrate BIRTHDAY and Cry in DEATH. We invest in TEJI and run away in MANDI.

In GITA chapter 2, slok 27, Lord Krishna says following – “jatasya hi dhruvo mrtyur dhruvam janma mrtasya ca tasmad apariharye 'rthe na tvam socitum arhasi.” He says those who born will die and those who die will reborn and this is the TRUTH. How many of us have embraced this TRUTH?

 

Mr.Dalio says “All sorts of emotions come to me while I am playing in the market and those emotions can either help me or hurt me. If I can reconcile my emotions with my logic and only act when they are aligned, I make better decisions.”

 

The important message is to align your emotions with your logic. Most guys do the reverse – they find out the logic to support their emotions and that is the root cause of their failure to grow. Mr. Dalio suggested following steps to EMBRACE the reality.

 

1.1 Be Hyperrealist: -  he says “Understanding, Accepting and working with reality is both practical and beautiful. I have become so much of a hyperrealist that I have learned to appreciate that beauty of all realities, even harsh ones and have come to despise impractical idealism.”

      

In GITA the word used is STHITPRAGYA – whose intelligence is BALANCED. 

                   

He says a Successful life is only and only possible when you have DREAMS + REALITIES (not idealism) + DETERMINATION.

1.2 TRUTH or Accurate understanding of REALITY is the essential foundation for GOOD OUTCOME: - “Most people fight seeing what’s TRUE when it’s not what they want it to be. That’s bad, because it is more important to understand and deal with the BAD stuff since the good stuff will take care of itself.”

I have always mentioned word GROUND REALITIES in all my past posts to indicate the point Mr.DALIO is making. My superlative calls in the market is the results of my understanding of the REALITIES.

1.3 Be radically open minded and radically transparent: - “None of us is born knowing what is true, we either have to discover what’s true for ourselves or believe and follow others. The key is to know which path will yield better results.”

Most guys would like to have a READY MADE TRUTH. They search in their RELIGIOUS SCRIPTURES or ask their PANDITS and they run their SHOW.

They fail to see the truth that all whom the WORLD appreciates, or worships have found their own truth themselves. They did not COPY PASTE.

Mr.Dalio says “Radical open mindedness and radical transparency are invaluable for rapid learning and effective change”. 

Just see what he says “Learning is the product of a continuous real time feedback loop in which we make decisions, see their outcome, and improve our understanding of reality as a result. Being radically open minded enhances the efficiency of those feedback loops, because it makes what you are doing, and why, so clear to yourself and others that there can’t be any misunderstandings.  The more open minded you are, the less likely you are to deceive yourself and the more likely it is that others will give you honest feedback.”

Don’t Let fears of what others think of you stand in your way. You must be willing to do things in the unique ways you think are best – and to open mindedly reflect on the feedback that comes inevitably as a result of being that way.

Embracing radical truth and radical transparency will bring more meaningful work and more meaningful relationship.

1.4 Look to nature to learn how reality works. In nature there is nothing like MORAL and IMMORAL. It is AMORAL. There is nothing BAD and GOOD. All is REALITY.

Mr. Dalio makes very important point – Don’t get hung up on your views of how things SHOULD be because you will miss out on learning how they really are.

Most issues in relationships occurs due to the above point.

He says “To be good something must operate consistently with the laws of reality and contribute to the evolution of the whole; that is what is most rewarded.

If you are not with the NATURE – you will not GROW. Let me share a beautiful example of GROWTH in COMPUTER. Today COMPUTER has become the life of normal guys. The basic reason is that it operates on the LAW of NATURE.

Have you observed that computer operates on multiple of 8 bits / 16 bits / 32 bits / 64 bits / 128 bits / 256 bits / 512 bits / 1024 bits and it goes like that only. As per our RISHIS UNIVERSE is created by PURUSH + PRAKRITI, RAJO GUN (male and female)+ TAMO GUN (male and female) + SATTVA GUN (male and female). Sattva (light, bliss, goodness), Rajas (passion, motion) and Tamas (inertia, darkness).

This way universe has 8 elements. Computer basically follows the NATURAL LAW and that’s why it is growing like anything.

In short, Mr.DALIO says observe the NATURE. 

He says in NATURE “EVOLUTION is the single greatest force in the universe. It is the only thing that is permanent, and it drives everything”

This is most important for people who are waiting to get perfect before doing anything. Where NATURE is evolving every day, there can’t be PERFECTION in anything. Had apple not launched it’s first mobile, we would not have got iphone X today.

So, evolving is the only key to progress.

1.5 Evolving is the life’s greatest accomplishment and it’s greatest reward.

It is instinctively that way. That’s why we instinctively want to get better at things and have created and evolved technology to help us. History has shown that all species will either go extinct or evolve into other species.

In current time, those who are getting used to Digital payments, GST rules and BANK PAYMENT methods are seeing their business is growing while those who are not adapting to change are getting out of the business.

In evolving – your individual goal must be aligned with the GROUP GOAL or GROUP BENEFIT. JIO is benefiting MUKESH AMBANI the most but it is helping common man to communicate at throw away prices. That’s why it has become profitable while other companies are bleeding.

1.6 UNDERSTANDING NATURE’s PRACTICA LESSONS

Nature always gives pain before gain. So, if you don’t evolve when pain comes, you will not gain.

1.7 PAIN + REFLECTION = PROGRESS

There is no avoiding pain, especially if you are going after ambitious goals. Believe it or not, you are lucky to feel that kind of pain if you approach it correctly, because it is a signal that you need to find solutions so you progress.

If you are not failing you are not pushing your limits, and if you are not pushing your limits, you are not maximising your potential.

Go for the pain rather than avoiding it.

1.8 Weigh 2^nd and 3^rd order consequences.

Say you want to start exercise programme. Now it will pain your body in the first place. Most will stop there. But if you continue to do that over a period of time you will find good health (2^nd order consequences of exercise) and good energy to work for full day (3^rd order consequences). So, always thing beyond obvious.

Most guys stop at the first pain and they forget that after pain there will be a pleasure.

1.9 Own your Outcome: -

You are responsible for your results and not somebody else. Whatever circumstances life brings you, you will be more likely to succeed and find happiness if you take responsibilities for making your decisions well instead of complaining about things beyond your control.

Psychologist call this having an “internal locus of control” and studies have consistently shown that people who have it outperform those who don’t.

1.10 Look at the MACHINE from the higher level.

This is the most beautiful point he is making. He says you are the BOSS and you are the employee of yourself. If BOSS YOU is not getting what he wants – it means EMPLOYEE YOU is not working properly and as a BOSS – you need to discipline your EMPLOYEE so that BOSS can get what he wants.

You need to fire your EMPLOYEE YOU and find out somebody who can do it better than EMPOLYEE YOU in order to get success.

When you come across WEAKNESSES of EMPLOYEE YOU, you have 4 options.

1.  You can deny them. Most of the guys do this.

2.  You can accept them and work at them in order to try to convert them into strength (which might or might not work depending your ability to change).

3.  You can accept your weaknesses and find way around them.

4.  You can change what you are going after.

Out of all the 4, 3^rd step is the most ideal thing to follow which most guys do not think about.

What NEXT?

All the above 10 steps if followed will shape your character and attitude. They all put together will take your success to the new levels.

I wish you all a great success. Have a HAPPY WEEKEND.

Follow me on Twitter @hiteshmparikh /  WhatsApp - +91-9869425399.

Live With Passion…Invest With Passion.

Hitesh Parikh.