Making wise decisions is essential for the success of a startup, as is obvious. Even if working hard is crucial, it won’t get you where you want to go by itself because making wise decisions will decide the course of your journey and, consequently, the trajectory of your project’s growth.

Since every unique problem has a different optimal solution, you should take into account all of your own circumstances, values, and goals before making a choice.

Unfortunately, the complexity of reality prevents us from having omniscient awareness of both our situation and how the world functions. Additionally, acquiring knowledge is expensive; you simply cannot afford to spend an endless amount of time doing so for each decision you make.

Making judgments without acquiring any data or conducting any research is a serious mistake, but becoming overwhelmed by data is also hazardous.

As a result, for the majority of our life, we are compelled to base our decisions on heuristics developed via trial and error, which allows you to develop your own set of guidelines or principles for handling various scenarios.

“Principles are ways of successfully dealing with reality to get what you want out of life.”Ray Dalio

Fortunately, you don’t have to create the wheel from scratch and you may save yourself a lot of heartache and unforeseen consequences by using what others have learned.

The guidelines we go over here were derived from the book “Principles” by Ray Dalio, who is regarded as one of the world’s most successful hedge fund managers and a self-described professional mistake maker. Based on our professional expertise, we translate his ideas into a startup framework to make sure entrepreneurs can put them into practice.

1. Accept Reality and Deal With It

If there is one thing that you as a company founder should internalize, it is that your map of reality (your ideas, vision, and understanding) does not and cannot fully match reality.

You’ll frequently be in error. If you find it difficult to accept it and don’t take the lessons from it, it will be very tough for you to develop an concept into a successful business.

“Smart people are the ones who ask the most thoughtful questions, as opposed to thinking they have all the answers. Great questions are a much better indicator of future success than great answers.”Ray Dalio

When you are incorrect (or had incorrect expectations), you should seize the opportunity to improve your mental model of reality and change the course of your project rather than worrying about how other people will perceive you. Even though making mistakes hurts, they are the best way to develop as a person and get better.

You should feel at ease donning the hat of a scientist as the founder of a startup. Don’t spend a lot of time, money, or emotions on hypotheses you haven’t checked. Instead, try to learn as much as you can about your area of expertise in the world while remaining humble and curious.

In real life, this means you should make an effort to test your unproven theories and hypotheses against reality. Talk to people who, from their particular perspectives, can provide you with useful information (Ray Dalio refers to these people as credible), and conduct empirical studies to observe not only what people say but also how they behave when faced with your ideas.

When the results are in, you shouldn’t try to defensively defend your own opinions, despite the fact that this is a natural instinct, especially if you’ve expressed them to others. Instead, you should be radically open-minded, which is another of Ray Dalio’s principles.

It’s your responsibility to be mentally flexible and to adjust your behavior to the situation.

2. Recognizing and Utilizing Individual Differences in Decision-Making

It’s your responsibility to develop effective people skills after dealing with reality as a whole. It’s no accident that one of our Forbes articles referred to it as the most crucial skill for startup founders.

To comprehend and effectively interact with the various stakeholders in your project, it is essential to try to put yourself in their shoes.

“If there is any one secret of success, it lies in the ability to get the other person’s point of view and see things from that person’s angle as well as from your own.”Dale Carnegie.

Assuming that everyone will think and act in a certain way as you would in a given situation is incorrect because people are wired very differently.

Gaining knowledge of incentives, fundamental psychology, and management experience will all greatly aid you in becoming a much better communicator and manager.

3. Embracing Radical Honesty and Openness

Ray Dalio vigorously advocates radical truth and transparency as the cornerstones of successful, fruitful business relationships.

Even though it is socially awkward, the principle of radical truth enables you to place truth (or reality) at the top of the hierarchy of values. It should be your mission to create a society that values radical honesty. At the end of the day, not just you, but the entire team, needs to be able to recognize and accept reality.

Naturally, this does not imply that you should completely disregard the emotional needs and feelings of others (more on that below). They are as much a part of reality as anything else in your surroundings. You should be able to communicate effectively enough to practice radical truth without endangering your business relationships.

Even if you know more about some aspects of the world than other people, you run the risk of demoralizing your team if you lack social skills. By doing this, you run the risk of losing your most crucial business associates and personnel, which is obviously counterproductive.

Radical truth and transparency complement each other as a guiding principle. There are two main effects of transparency.

First, because they have access to more accurate, unadulterated information, it makes it simpler for people to accept reality.

Second, openness (and we might add vulnerability) fosters trust, which is extremely valuable for any team.

4. Encouraging Growth Through Mistake: Building a Culture that Embraces Failure but Expects Learning

“If you’re not failing, you’re not pushing your limits, and if you’re not pushing your limits, you’re not maximizing your potential” Ray Dalio

Since startups are by their very nature new and unproven, it is impossible to get everything perfect on the first try. You’ll make a lot of mistakes, so you should have a solid system in place to handle them.

First of all, this entails developing a sense of personal and group comfort with mistakes. A supportive environment where making errors is acceptable is essential for an innovative startup project. Innovation necessitates taking risks, and risks by their very nature result in some undesirable outcomes.

Having said that, it’s not a good thing to be overly at ease with mistakes on your own. After all, if you can’t apply the lessons you’ve learned from mistakes, the value of making mistakes in the first place will be lost.

In his book, Ray Dalio uses the example of a Bridgewater employee who unintentionally failed to execute a planned trade. The result was a loss to the business of hundreds of thousands of dollars. However, Ray Dalio chose to use the opportunity to demonstrate that making a mistake is OK while at the same time creating a system of error logging that prevents the repetition of said mistakes, as opposed to firing the employee, which would have fostered a culture in which people would hide their mistakes out of a fear of negative consequences.

As a young startup, you are in a race against time to establish your company’s viability before you exhaust your available funding.

In short, the likelihood that your project will succeed depends on how quickly you make mistakes and learn from them in the context of the resources at your disposal. A startup’s motto is “fail fast” for precisely this reason.

5. Proactively Identifying and Addressing Issues

Your startup’s ability to endure and grow depends on both your ability to deal with problems and learn from your mistakes.

If you’re not worried, you need to worry. And if you’re worried, you don’t need to worry.Ray Dalio

Ignorance of issues is not an excuse; as a founder, it is your responsibility to both identify and address issues. Worrying indicates that you are aware of the issues, which is a lot better than being ignorant because it enables you to take action.

An organization is like a machine, according to Ray Dalio. Unattended issues cause your machine to run more slowly and may even result in serious failures. On the other hand, problems that have been solved offer a fantastic chance to increase the machine’s speed and effectiveness.

In essence, the only way to ensure that your machine operates smoothly—which, it goes without saying, is essential for success—is to be intolerant of problems.

6. Building Strong Relationships and Prioritizing Meaningful Work

You should delve a little deeper into the subject of what people actually derive from their work if you want to be able to recruit top startup talent and inspire your startup team.

Making money is only one aspect of a person’s professional life, despite being a very important one. People work for a variety of reasons, so if you want your team members to go above and beyond, you must look beyond straightforward explicit motivation.

You have a fantastic opportunity to profit from your position as a startup founder.

First off, because early-stage startup teams are by definition small, it is much simpler to foster a sense of community, which is a powerful source of meaning and motivation.

Second, startups typically work on something novel, so your work could have a significant global impact – another source of meaning.

Last but not least, the potential financial rewards of the work of your team are higher (albeit riskier) than those in traditional corporate environments due to the high growth potential of startups combined with company equity or employee stock options.

All of this encourages you to live a professional life that is deeply meaningful.

In Summary

The undisputed success of Dalio and his company Bridgewater is evidence that adhering to the aforementioned principles will probably improve your professional life.

Having said that, this is merely the beginning. Your startup journey would actually consist of a never-ending search to compile and update such principles based on your own vast experience.