Principles: Life and Work suggests that principles are powerful weapons in one’s fight against flawed thinking. They are the ultimate method of seeing the world as it truly is, not the way one would like it to be.
If one perhaps asked Dalio why he thinks it is vital to have principles, he would say that “Principles are ways of successfully dealing with reality to get what you want out of life” (Four Minute Books). When he was younger, Dalio predicted that Mexico would default its debt and that the world would subsequently fall into an economic crisis. He even talked about this prediction on TV and in front of the US Congress. Even though Mexico did default on its debts, the economic crisis never occurred. Instead, stocks and business soared. Since Ray had placed his financial bets accordingly, all his money got lost, forcing him to fire all his employees. This was his biggest failure, and from it, he learned that it is always vital to be guided by rational thinking and not emotions. The tragedy of most lives of people is that they hold desperately to their opinions, making it difficult for them to see reality. This is the main reason as to why Dalio required principles as the ultimate method of stress testing his opinions, and later those of his employees.
In the book, Dalio repeatedly shows the importance of having principles. He states that without principles, we would be forced to react to the different things that life brings to us as individuals, as if it is the first time we are experiencing them. He also notes that successful people operate by principles that help them become successful. Nonetheless, the principles of these people vary since what they choose to be successful at varies from one individual to another. Later in the book, Dalio argues that utilizing principles is a method of both simplifying and improving one’s decision making. It is important to realize that all “cases at hand” is merely “another one of those,” identify which “one of those” it is and then apply principles that are well-thought-out to deal with it. This is important as it allows one to largely reduce the number of principles that he/she has to make, and will result in making better decisions (Powers para. 2). Overall, therefore, principles are a powerful tool in making better decisions.