Ray Dalio's Five Decisions to Making the Right Choices - Summary

Apr 21, 2014 -

Dalio's Five Decisions to Making the Right Choices

First : Understand how to manage pain to produce progress vs. allow pain to stand in the way of their progress.

Pushing yourself out of your comfort zone is how you grow as a person. As with lifting heavier weights, the more difficult and uncomfortable situations you put yourself in, the more opportunities you give yourself to succeed. But it isn't enough to just put yourself in these situations, you have to manage the pain that comes about whether it be facing the problem head-on or some other another way. Adapting to the new situation leads to more strength.

"If they have "fight or flight" reactions to it then they either strike out at whatever brought them pain or they try and run away from it." - Ray Dalio

You will never make any significant progress if you do this. Develop a reaction of reflection to a problem rather than a flight or flee response.

Pain + Reflection = Progress

Second: Face "harsh realities" vs. avoiding facing "harsh realities"

"People who know that understanding what is real is the first step toward optimally dealing with it make better decisions." - Ray Dalio

Learn to see the reality of the situation without creating distorted pictures of what you want the situation to be. Your judgment can be negatively affected by false pictures.

Third: Worry about achieving the goal vs. Worrying about appearing good. 

This one is about getting to the heart of the matter. What good does it do to appear to be smart or know the answer to something when you truthfully do not? Not only does this hinder progress, it also means you avoid acknowledging your weaknesses. The difficulty in doing this is that it can be very painful. However, once you are able to recognize these weaknesses, you will be able to work towards dealing with them or turning them into strengths.

Fourth: Make their decisions on the basis of first-,second-and third-order consequences. vs. Make their decisions on the basis of first-order consequences. 

For example, the first-order consequences of exercise (pain and time-sink) are commonly considered undesirable, while the second-order consequences (better health and more attractive appearance) are desirable... If your goal is to get physically fit and you don’t ignore the first-order consequences of exercise [...] and connect your decisions with their second- and third-order consequences, you will not reach your goal. - Ray Dalio

Take a look at the bigger picture. Nature will throw trick choices at you and penalize those who base their decisions off of first-order consequences alone.

Fifth: Hold themselves accountable vs. Don't hold themselves accountable

It is your responsibility to deal with the consequences of your actions. There is no one else to blame other than yourself for the outcome. The difference between those who are successful and those who are not is successfully dealing with the challenges that come about. 

In ultimate and final summary,

1) Suspend your ego
2) Apply and no-excuses approach
3) Be open minded, determined, and courageous 
4) Rely on help from people who are strong in areas you are weak
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