Friday, April 22, 2016


So I've been reading Ray Dalio's Principles. I haven't completed it yet but it's a very interesting book.

For the uninitiated, Ray Dalio founded the world's biggest hedge fund Bridgewater Associates, with more than $100 billion in assets and one of the most crazy-successful investment firms in the world. His fund has also been accused of being something of a cult. And one of the main reasons for this is his life and management principles, that he's put into a book (aptly called 'Principles') and is required reading for anyone trying to work at the firm.

Google it. It's wacko. But also strangely fascinating, and almost inspirational. This dude must've been smoking some high-quality shit.

Anyway, there's a ton of principles in there, and his rationale behind them all. But the central premise is this: pursue the truth unrelentingly, suspend your ego, be exceptionally direct and critical of yourself and others, strive for constant and relentless self-improvement through knowing your weaknesses and improving upon them. Yeah, sounds like a fun place to work.

But anyway, once you get over the initial WTF... then it gets interesting.

These aren't just management principles. They aren't just investment principles. They're fundamental life principles - at least for Ray. There's a lot of other stuff in there too, and I don't know I agree with all of them, and they've been vehemently disputed by many others, but anyway... let's cast that aside for now. I'm more interested in the 'Suspend your ego' principle.

So I got thinking... what if I applied it to a different scenario? A life situation.

Imagine this: two people meet up for a drink. They've been friends and colleagues. They respect each other, have crossed paths with each other at work, never worked so closely together to be considered buddies, but that's probably more from luck and circumstance that any lack of interest or inclination. So generally they have a pretty warm opinion of the other person, based on their limited time working together. Most of our colleagues at work probably fall into this camp.

Now let's say they meet up after many months (or years) when they've both moved on to other jobs. It starts out innocently enough... a catch up over drinks, they shoot the shit, chit-chat about old, forgotten office gossip... Meanwhile it's a dimly-lit bar, thumping music, lots of drunk, crazy kids.

And then they're thinking.. hey you know what, this one, he/she's not so bad... she's actually pretty cool. So they loosen up a little bit more, grab a few more beers, laugh a little louder, sit a little closer.. their emboldenment in direct proportion to blood-alcohol levels. The chemistry is palpable. He leans in closer, she lets him. He puts his arm around her waist, she moves in. All the signs are positive... and then he kisses her. Major mistake.

Did I mention they're both married to other people? Ok, that's critical to the story.

Alright, so... that's where our story ends (or begins). Say this happened. What do you think happens next?

Ok so here's what I think most people would do (and I almost wish I could draw a little flowchart... oh wait, I think blogger's gotten less shit in the years I've been away. I think I will draw a little FC!)

Anyway, these are the options.

So you panic a little bit. And then you either shut it down and never-speak-of-it-again (It's beer, we were drunk, shit happens... move on dude) , or get all cut up about it and agonize over it. Now when you agonize, the best way to reach closure is to find something to blame. That someone is either you, if you're the type who internalizes (I'm a total shit, I don't deserve to be married to my wonderful wife / husband) or the other person (He was totally out of line / She was asking for it, egging me on).

In both these scenarios (deny or agonize), you never actually think about what really happened. Not objectively at any rate. Trying to discover why something happened is probably not something you'd want to do... and you don't want to do it, because it's painful to think about.

Yet, it happened, and as humans we want to move on from unpleasant things. So you either
1) Deny it (it wasn't me, it's the beer, it could've happened to anyone, I don't need to change)
2) Try to protect your ego (she came onto me / he's a real dog)
3) Totally give in to your emotions and wallow in self-pity (I'm a bad husband wife, I knew this would happen, I don't deserve happiness).

#3 sounds strange. Why do we beat ourselves up? Aren't we pre-disposed toward self-preservation? Well, my theory is that we rip into ourselves because often it makes us feel like we're achieving something... even if all we're doing in beating ourselves up, it makes us feel in control of the situation.

Now let's say we cast aside ego and emotions for a while. If we were a detached, third-party.... or some alien being observing this purely out of anthropological reasons, how would he see it?

Probably something like this.

(I must say I'm a little pleased with myself with all this flowchart business)

Guy meets up with girl in bar. They have a little too much to drink. They're having a good time, all the signs are positive, he pulls her in for the kiss. Major mistake.

So far those are the facts. Now let's come to the judgements -- all the should, musts and oughts.

Here's the tricky part: what is this invisible line that he just crossed? Where do you draw it? At kissing? At knee or waist touching? At leaning in over-close? At witty banter? At fucking?

The truth is there isn't a line. We just kind of make it up as we go along.

A lot of what happened in this situation arose from primal, subconscious emotion-based motives. We're programmed to want to impress other people. We're programmed to walk to please other people. We're programmed to seek validation.... it makes us feel desired, and that's a heady feeling.

Take the girl. There's fundamentally two sides of her in conflict here. There's the side that's practical and grounded and sorted in her life priorities. There's the side that's impulsive, a little bit devil-may-care, and rebelling against the safe, even-keeled temperament of her boring other-self.

(Sidenote: Everyone's probably got different sides of themselves that surface at different times or with different people. So what's the side that gets stronger? Easy. The one you feed.)

Anyway. Back to the story: so here's a woman in conflict with herself, her impulsive side fighting against her boring self and getting stronger under the influence of alcohol... till the situation escalates to a point where it jolts her sensible side out of its exiled corner, and brings it full-fledged to the fore.

Great, so we've analysed the situation. What does this have to do with Principles?

Glad you asked :P

First, if we suspend our ego, it's a good way for us to confront coldly and objectively, situations that have happened in the past and see them for what they are. It also prevents us from running away from them (because we're afraid of what we might find), or trying to make sense of it in a way that preserves our ego (it's all his fault!), or giving us the illusion of control (I'm a shitty wife, I will berate and punish myself, if I feel sufficiently shitty about this whole thing, then I feel like I've done penance for my crime, and I can move on). All these usual tactics (deny or agonize) is our ego and emotions hijacking the thinking part of our selves.

Second, and probably more importantly, as far as life principles go 'Suspend your ego' is probably as good, or much better in fact, than a value like 'Be faithful to your partner' or 'Always be good'.

Why? Because whereas core values like 'always be...' and 'never do...' impose rules upon us and tells us what we should do or must do or ought to do,  'suspend your ego' merely asks you to look at yourself without anger, without defensiveness, without judgement... and then learn from the situation, fix what needs to be fixed, and move on. It is almost, ironically, close to self-compassion.

So there you go. My take on a hedge fund's management principles applied to life.

When the time comes would I actually be able to apply this tho? Or will I be reduced to a ball of raw emotion? I don't know... I'll have to go through it and see if I'm able to suspend my ego at the very moment when I want to cling to it the most. It would mean that I make myself the opposite of vulnerable... that I make myself almost ego-free.

And that would be a brave, new world indeed.

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