First, a confession: I enjoy writing these Weekly Whiteboards far more than you might enjoy reading them. Matt, you might say, how is that possible as these are the cornerstone of my week and, not to overstate it… the single most important part of my life!? Nevertheless, I would/will respond that writing allows me to think more deeply (generally) about the work I do and those I do it for. For this week’s writing, I am making a comparison and drawing lessons learned from a book I recently finished called Principles. So, writing about another writer’s writings…
Ray Dalio’s Principles (written about a decade ago) is not only a bestseller among leadership books, it is a great book for a variety of topics and perspectives. Is it a page-turning thriller? Well, not exactly, but it is a good read and I believe applicable to many regardless of profession, age, belief-system, etc. Among a number of interesting concepts put forth in the book, I think the focus on radical truth and transparency and the “idea meritocracy” stand out to me as the fundamental core principles that apply to how one should invest, plan and, frankly, live/work. Principles is marketed as a business and leadership book. In reality, Dalio’s book is about decision-making and it is a thoughtful dive into how humans collide with reality — and what happens when we finally decide to listen. Which, if you think about it, is also a pretty good definition of financial planning.
Below are four “scenes” from Dalio’s journey and how they translate into the work we do with clients every day.
1. The Humbling of 1982: When the Market Reminds You Who’s in Charge
Early in his career, Dalio made an enormous economic call. In 1982, Ray Dalio was convinced a depression was imminent. He built his portfolio around it. He was early, loud… and wrong. Bridgewater (his relatively new investment firm) nearly collapsed. Dalio didn’t describe this moment as a failure, rather, he described it as an awakening. I think the book uses something like: Pain + Reflection = Progress
Every serious investor or investment manager eventually has their own version of 1982. In recent times it might be the tech bubble, the financial crisis, COVID or even 2022’s bond market collapse. That moment when you realize the market does not care how smart or prepared you are or even that you are “correct”. It is still a market.
Good financial planning begins with this simple, humbling truth: You are not smarter than reality. Plans are not made and portfolios are not built to prove intelligence. They are built to survive uncertainty, absorb stress, and compound quietly while life unfolds. Dalio might say – pain is inevitable… what matters is what you build after it.
2. Radical Transparency: The Conference Room as a Portfolio Review
At Bridgewater, Dalio created a culture of “radical transparency”. Meetings were recorded. Feedback was direct. No one — including Dalio himself — was protected from the truth. Even to this day (maybe especially given our world today) true transparency is extremely uncommon. Why is that? Why was Dalio so convinced that radical transparency was important? Because truth, while uncomfortable, produces resilience. Our clients’ financial plan should operate the same way. Let’s be radically honest/transparent about: risk tolerance, retirement expectations, spending, career goals, legacy intentions, and the list goes on.
Every assumption deserves honest examination. Not because we enjoy discomfort, but because clarity might be foundational to stability and even success. A plan that avoids hard truths is fragile. A plan that faces reality becomes durable. This is true with finances, health-focused plans and diets, partnerships, friendships, etc. There is something quietly spiritual (to me) about the idea of facing truth and accepting the fundamental importance of that truth.
3. The Machine: Designing Your Financial Life
Like the previous concept of radical transparency, I found Dalio’s views about his company — and his life — as a collection of systems to be very interesting. Problems are not failures; they are signals. Diagnose them, redesign the system, move forward. He would say that design beats discipline – even if both are important. This is exactly how sustainable financial planning works. We do not need to rely on willpower. We can rely on structure: automatic savings, rebalancing schedules, tax planning frameworks, and estate documents that function even when life is chaotic… to name a few.
The goal is not to be a champion planner or heroic investor. The goal is to build a system that works even when you are tired, emotional, distracted, or busy being human. This concept, in my view, is the cornerstone of asset allocation. Markets are inherently tricky to predict. Life can be even more tricky to predict – or understand. That is why, where we can, we should create systems. Systems are how peace of mind is manufactured and the probability of long-term success is increased.
4. The Inner Game: The Two You’s
As I learned in my philosophy class at Carolina (which seemed more like a psychology class, but I digress), humans might be categorized as one person with many competing viewpoints/interests/perceptions. Like Freud’s Ego and Id. I know I am oversimplifying but the ego is like a system of conscious perception where the Id is the unconscious mind. Dalio has a similar dichotomy when he describes the tension between the rational you and the emotional you — the one that panics, chases certainty, and confuses activity with progress. Dalio might argue that nearly every major investing mistake in history lives in that emotional mindset. Whether fear at the bottom or euphoria at the top (or overconfidence in the middle) it is getting away from the emotional investor instincts and sticking with the rational investor discipline that can make all the difference in outcome.
Financial planning, different than investing, is not primarily about returns. In fact, it is barely about returns at all. Financial planning (in a broad sense) is mostly about helping people build enough structure and self-awareness that they stop sabotaging themselves. The portfolio becomes the mirror. And if you are paying attention, the mirror eventually becomes the teacher. How is that for some Eastern philosophy?!
I am going to close with a concept that I write about quite a bit – that wealth is a tool and not an outcome. Ray Dalio did not write Principles to teach people how to invest or how to lead or run an organization. I believe he wrote it to explore something deeper: how a human being learns to cooperate with reality. I think that is also the quiet work of financial planning. After all, we cannot control the markets… and we most certainly do not control the future. In fact, in most regards, we do not even fully control ourselves. What we cando, with patience and honesty, is build a life and a portfolio that reflects and responds to how the world actually works.
So, not only would I encourage you to read Principles, but if you do choose to read it, remember that this is more than a book about leadership and investing and building an organization, it is really about how we think and work and behave – and it is worth taking the time to read… I am glad I did.
