There is nothing more important than understanding how reality works and how to deal with it. The state of mind you bring to this process makes all the difference. I have found it helpful to think of my life as if it were a game in which each problem I face is a puzzle I need to solve. By solving the puzzle, I get a gem in the form of a principle that helps me avoid the same sort of problem in the future. Collecting these gems continually improves my decision making, so I am able to ascend to higher and higher levels of play in which the game gets harder and the stakes become ever greater. #principlesoftheday

This simple animated video series answers the question, "How does the #economy really work?" Based on my practical template for understanding the economy. This series breaks down economic concepts like #credit, #deficits and #interest rates, allowing viewers to learn the basic driving forces behind the economy, how economic policies work and why economic cycles occur. This is Part 5, I hope you find these helpful.

It's easy to tell an open-minded person from a closed-minded person because they act very differently. #principleoftheday

Recently, a lot of people asked me a lot of questions about gold, so I invited anyone who cared to ask me questions about gold to do so, and I answered most of them.   But I also wanted to share the most important things I think about gold in a nutshell, which is the purpose of this article.  As always, I’d love to hear any questions you have or you can ask my AI Twin questions directly. x.com/RayDalio/status/198395…

As always, I’d love to hear any questions you have or you can ask my AI Twin questions directly. The Digital Ray beta sign up here: principles.com/AIBeta-signup…

#Trust your gut.

Remember this: The pain is all in your head. If you want to evolve, you need to go where the problems and the pain are. By confronting the pain, you will see more clearly the paradoxes and problems you face. Reflecting on them and resolving them will give you wisdom. The harder the pain and the challenge, the better. Because these moments of pain are so important, you shouldn't rush through them. Stay in them and explore them so you can build a foundation for improvement. Embracing your failures--and confronting the pain they cause you and others--is the first step toward genuine improvement; it is why confession precedes forgiveness in many societies. Psychologists call this "hitting bottom." #principleoftheday

The U.S. 's debts are on the edge of becoming unmanageable to the point where it could default if conditions are not changed. This isn't a new problem; it's a recurring historical cycle. I believe the path to solving our current debt issues lies in rigorously studying the past. I recently joined Bloomberg Markets ahead of the UN Ocean Conference to discuss this cycle, the possibility of a global crisis, and why investing in our oceans is a vital piece of the global solution. Watch the full interview here: lnkd.in/eAJDpnrh

For those interested in understanding our collective debt burden—and the tangible steps we can take to solve these issues—I explain my thinking in detail in my new book, How Countries Go Broke: The Big Cycle. I hope you will read it and share your thoughts.  You can find it at the link here: amazon.com/Principles-Invest…

Make sure they're fully informed and believable. Find out who is responsible for whatever you are seeking to understand and then ask them. Listening to uninformed people is worse than having no answers at all. #principleoftheday

This year, the US will spend 40% more than it’s taking in. This number is increasing each year — and our debt plays a major role. This is a big problem, especially because cutting our spending is a difficult political issue. And as we continue to add to the debt, the supply-demand picture worsens. I fear that we are approaching the point where we won’t be able to rectify it.

While we should all strive to see ourselves objectively, we shouldn't expect everyone to be able to do that well. We all have blind spots; people are by definition subjective. For this reason, it is everyone's responsibility to help others learn what is true about themselves by giving them honest feedback, holding them accountable, and working through disagreements in an open-minded way. #principleoftheday

Understand the concept of "by-and-large" and use approximations. Because our educational system is hung up on precision, the art of being good at approximations is insufficiently valued. This impedes conceptual thinking. For example, when asked to multiply 38 by 12, most people do it the slow and hard way rather than simply rounding 38 up to 40, rounding 12 down to 10, and quickly determining that the answer is about 400. Look at the ice cream shop example and imagine the value of quickly seeing the approximate relationships between the dots versus taking the time to see all the edges precisely. It would be silly to spend time doing that, yet that's exactly what most people do. "By-and-large" is the level at which you need to understand most things in order to make effective decisions. Whenever a big-picture "by-and-large" statement is made and someone replies "Not always," my instinctual reaction is that we are probably about to dive into the weeds--i.e., into a discussion of the exceptions rather than the rule, and in the process we will lose sight of the rule. #principleoftheday

When considering the kinds of mistakes you are willing to allow in order to promote learning through trial and error, weigh the potential damage of a mistake against the benefit of incremental learning. In defining what latitude I'm willing to give people, I say, "I'm willing to let you scratch or dent the car, but I won't put you in a position where there's a significant risk of your totaling it." #principleoftheday

I often observe people making decisions if their odds of being right are greater than 50 percent. What they fail to see is how much better off they'd be if they raised their chances even more (you can almost always improve your odds of being right by doing things that will give you more information). The expected value gain from raising the probability of being right from 51 percent to 85 percent (i.e., by 34 percentage points) is seventeen times more than raising the odds of being right from 49 percent (which is probably wrong) to 51 percent (which is only a little more likely to be right). Think of the probability as a measure of how often you're likely to be wrong. Raising the probability of being right by 34 percentage points means that a third of your bets will switch from losses to wins. That's why it pays to stress-test your thinking, even when you're pretty sure you're right. #principleoftheday

The way I see it, any serious effort to solve the debt crisis will likely come too late. It’s a timing issue. 2026 is a midterm election year — politicians won’t want to take the painful steps needed to improve our economic picture: cutting spending, raising taxes, and the like. Any sort of bipartisan effort that comes after will both take time and be unlikely to be effective, because those commissions generally don’t work very well in practice. That’s what it looks like to me. I’m curious to hear if you see things similarly. @ProfGPod

. . . because they are how people determine whether their principles are aligned and resolve their differences. Everyone has his or her own principles and values, so all relationships entail a certain amount of negotiation or debate over how people should be with each other. What you learn about each other will either draw you together or drive you apart. If your principles are aligned and you can work out your differences via a process of give-and-take, you will draw closer together. If not, you will move apart. Open discussion of differences ensures that there are no misunderstandings. If that doesn't happen on an ongoing basis, gaps in perspective will widen until inevitably there is a major clash. #principleoftheday

1) It gave me humility — the fear of being wrong was so strong that I had to always ask, “How do I know I’m right?” 2) It taught me the power of diversification — and how 15 good, uncorrelated return streams could lower risk by 80% without impacting returns 3) I realized I wanted an idea meritocracy