Ray Dalios Principals: How to think like like a billionaire

Curious or confused about Principles? Good, you're in the right place

What is he doing?

Ray is using a mental model called "reasoning from first principles" it's a powerful tool for problem-solving and can be applied to near-endless complex situations.

Why is using principles so effective?

"Within the problem lies the solution"

As humans, we tend to jump into solution mode as soon as a problem is identified. Think of it like an automatic response to problem-solving. In fact, by default your brain will look for shortcuts in decision-making so it can reduce cognitive load and continues to look for threats in its immediate surroundings.

Here's a fun example: You're in the supermarket trying to decide what instant noodles you're after. You go to the aisle. There are too many options, you may glance up and down but likely your brain is going to make you pick something at eye level and a brand and flavor you're familiar with. Well done, you've made your decision you've picked something that you're familiar with and given little thought to any of the other options. Here in lies the problem, what if there's a better flavour of noodles that you haven't considered? What if

Although solving a problem quickly is great

First principle is a basic principle or truth that cannot be broken down any further. First-principles thinking is about digging deeper until you arrive at the very foundations of a problem.

"Within the problem lies the solution"

By identifying the core principles of a problem it allowed you to cut through the noise of the situation and avoid mental biases and misinterpretations . and will allow you to come up with innovative solutions.

Further reading: "The solution lies in the problem"

How to use it?

Start with your problem and take these two steps:

1. Break it down to the most basic truths (first principles)

2. Re-build a solution from those principles

It sounds simple but requires some focused thinking to really dig deep in the problem and discover those first principles.

There are some techniques to help you:

The Five Whys

This is a popular technique in user research where a researcher digs deeper by repeatedly asking "why" questions. It enables you to discover the root causes of problems. Of course, you don't have to stop at five, but it's generally enough to discover a first principle.

Socratic questioning

A form of disciplined questioning that enables critical thinking. There are six types of questions you can ask to dig deeper for the fundamental truth:

1. Clarification – "What do you mean by...?"

2. Probing assumptions – "What could we assume instead?"

3. Probing reasons/evidence – "Why do you think this is true?"

4. Implications and consequences – "What effect would that have?"

5. Different viewpoints – "What would be an alternative?"

6. Questioning the original question – "What was the point of this question?"

In the words of Simon Sinek "Start with why https://www.youtube.com/watch?v=u4ZoJKF_VuA&vl=en"