How to Live and Work Based on 'Principles'

(Bloomberg View) -- Investors need to create a set of principles to guide their work and personal decision-making. So says this week's Masters in Business guest Ray Dalio, head of hedge fund Bridgewater Associates LP, which manages more than $160 billion. Dalio details the specifics in his book, "Principles: Life and Work," a New York Times bestseller.

Dalio developed these principles by tracking his trading results: before any new position was taken, he wrote down exactly what criteria guided his decision; later, a thorough postmortem was performed. That process eventually became a rule that could be validated across different eras and regions. A full decision-making system which “operated like a GPS” to assist the investment of Bridgewater’s capital was the result.

The system’s success led Dalio to develop similar processes for managing Bridgewater, its procedures and employees. The firm’s culture became an idea meritocracy. The goal: raising the probability of being right, regardless of any ideas’ authorship. 

Some of Dalio’s favorite books are here.

You can stream/download the full conversation, including the podcast extras, on BloombergiTunesOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week, we speak with Jeffrey Sherman, deputy chief investment officer of Doubleline Capital LP.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg View columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He blogs at the Big Picture and is the author of “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.”

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