Billionaire Ray Dalio shares a simple 5-step formula for new graduates (or anyone) to succeed

Ray Dalio, founder of investment firm Bridgewater Associates.
J. Countess | Getty Images

When Ray Dalio was 26 years old, he launched a company called Bridgewater Associates from his two-bedroom apartment in New York City. Over decades, it grew to become the world's largest hedge fund, managing about $160 billion in assets, according to Bridgewater's website.

For today's 20-somethings and college grads, Dalio, now 68, says he's perfected a recipe to succeed as he did.

In an animated series released Tuesday with condensed advice from Dalio's 2017 book, "Principles: Life & Work" (which is nearly 600 pages long) the billionaire reveals a simple, five-step process anyone can use to get ahead.

"A successful life essentially consists of doing these five steps over and over again," Dalio says in the series. "This is your personal evolution."


Here's how it works.

1. Hone in on what you want

"Step one is to know your goals and run after them," Dalio says in the series. "What is best for you depends on your nature, so you need to really understand yourself and know what you want to achieve in life."

How do you do that? To focus on his goals, "Shark Tank" investor Daymond John reads them every night before bed and every morning when he wakes up.

2. Spot the roadblocks that will stop you from getting there

Take stock of the mistakes, failures or challenges that stop you from reaching your goals.

"These problems are typically painful," Dalio explains. "If handled badly, some of them can lead to your ruin. But to evolve, you need to identify those problems and not tolerate them."

Dalio himself had to use this technique in 1982, when he incorrectly bet on bond prices and nearly had to close his firm. "This experience was like a blow to my head with a baseball bat," Dalio says, adding that it led him to investigate why he made the wrong call, which turned out to be a valuable experience.

3. Look deeper into the problem

"Step three is to diagnose these problems to get at their root causes. Don't jump too quickly to solutions," Dalio advises. "Take a step back and reflect in order to really distinguish the symptoms from the disease."

From his mistake in the 80s, Dalio says he learned to question his own conclusions and pursue greater certainty in decision making.

Microsoft co-founder and fellow billionaire Bill Gates agrees that cultivating an analytical mindset about failure is key to success.

"Once you embrace unpleasant news not as a negative, but as evidence of a need for change, you aren't defeated by it," Gates writes in his book "Business @the Speed of Thought: Succeeding in the Digital Economy." "You're learning from it."

4. Find a solution

"Design a plan to eliminate the problems," Dalio says in the series. "This is where you will determine what you need to do to get around [the blocks]."

For Dalio, that meant creating an "idea meritocracy" at Bridgewater, where employees felt comfortable challenging each others' — and Dalio's — ideas to bring the best insights to the forefront.

5. Put that solution in place

"Step five is to execute those designs, pushing yourself to do what is needed to progress toward your goal," Dalio says. Today, Bridgewater is known for its culture of "radical transparency" and "radical truth," where ideas are openly debated.

To follow through on plans, billionaire Richard Branson suggests putting them in writing. "Go through your ideas and turn them into actionable and measurable goals," he writes on his blog.

It isn't always easy, but Dalio says his strategy is built for continual personal development: "As you push through this often painful process, you'll naturally ascend to higher and higher levels of success."

Don't miss: Mark Cuban says billionaire Ray Dalio's book teaches 'the greatest skill' you need to succeed

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Billionaire hedge fund founder Ray Dalio uses 'radical transparency' to deliver feedback—here's how it works
Billionaire hedge fund founder Ray Dalio uses 'radical transparency' to deliver feedback—here's how it works