Ray Dalio’s 5-Step Formula for Success (3)

This is article is part of a series. See all of them here.

Success is simple and complex at the same time. If you look at the broad picture and the big steps, everything seems clear and quite simple. But if you zoom in and look at the specifics, success seems more complex and more complicated.

Ray Dalio made the quest for success look simple and clear in his book Principles. You can get the book by clicking on this affiliate link.

He explained success in a 5-step process that I would like to summarize here. I think that looking at your situation from above and only looking at the essential can be incredibly powerful and helpful at the same time. So let’s see how Dalio brilliantly presents the process of setting goals and working towards them.

The 5 steps are:

  1. Have clear goals
  2. Identify and don’t tolerate problems
  3. Diagnose problems to get at their root causes
  4. Design a plan
  5. Push through to completion

I think that these 5 steps are generic enough to describe all the situations we encounter on our path to success. In fact, this formula seems so simple that we might underestimate the time or effort we need to achieve our goals. Or, on the contrary, we might think that our situation is much more complex or unique to be understood through this simple formula only.

Whatever your situation is, please take the time to really think about this formula and try to use it to understand your situation more objectively and find a better way to solve your problems and achieve your goals. Let’s look at each step!

1. Have clear goals

I know that this sounds simple and easy, but setting clear goals is not always easy – especially if you have little experience with setting goals for yourself. And this first step is so important that it’s worth mentioning it here even if you already do this.

Some of the advice Dalio gives about this is:

  • know what your priorities are since you cannot have everything at the same time
  • remember that your desires may come in conflict with your goals
  • you need flexibility and self-accountability to reach your goals

Setting clear goals that are right for you is the first step you need to take. Take time to reflect on your goals until you are certain you know what you want and you know you’ll be able to work on them.

2. Identify and don’t tolerate problems

Whatever your goals is, I’m 100% sure you will encounter problems at one point or another. While your problems may be specific to your situation, whatever they are, you need to have the right mindset to be able to deal with them properly.

Ignoring problems and hoping they go away won’t help you become successful. Blaming your circumstances or other people and doing nothing also won’t get you very far. While it is true that you may not always be 100% responsible for your problems, it is your responsibility to do something about them.

What Dalio says about problems:

  • think about your problems as chances to improve
  • don’t ignore problems just because they cause discomfort
  • try to identify the real problem and its cause
  • do not tolerate your problems

While setting a clear goal is relatively simple and very enjoyable, thinking about problems is definitely less appealing. You need a lot of self-awareness to see when you are the cause of your problems. This can be the case when you lack of skills or experience or you made some mistakes in the past. Focusing on this is bound to make most people feel uncomfortable.

But if you want to succeed, you need to face your problems, realize what is actually causing them and work on them until you find a solution.

3. Diagnose problems to get at their root causes

Correctly identifying your current problem is necessary, but so is identifying the cause of the problem. Who or what caused that problem? What really happened and why? You may want to skip this step and try to use a quick fix, but I would advise against it.

Until you address the main underlying cause of a problem, it ill continue to create suffering or inconveniences in different forms. So it is better to try to find the root cause and work on that. Just like taking a painkiller is useless when you need to pull out your tooth, finding a temporary solution without fixing the underlying cause will be inconvenient and maybe even harmful in the long term.

What Dalio says about problems and their causes:

  • make sure you understand the real cause of the problem before you starts thinking of a solution
  • try to identify the factors that lead to the current situation, not just the circumstances or effects
  • know what you can expect from others based on what they are like (this applies to you too)

While it is tempting to avoid dealing with problems because they cause discomfort, it is better to try to understand them and find adequate solutions. Remember that problems are opportunities to improve so don’t miss out on them!

4. Design a plan

After you have correctly identified your current problem and the main cause of that problem, it is time to reflect on what you can do about it. You should try to think of a plan or a system for how you will successfully do that.

Here are some of Dalio’s great tips:

  • reflect back on what happened before this point in time and what needs to happen in the future
  • there are usually many ways of dealing with a problem – choose one
  • think about who needs to do what and when
  • make sure you plan before you get to act

Having a clear plan increases your chances of success. It will help you – and others if this is the case – know what needs to be done and when. After the plan is clear, moving to action should be simple. But without a plan, you may continue to stay stuck in the problem for a long time, so don’t skip this step!

5. Push through to completion

Now that you know what needs to be done, you need to start doing your part. For some of you this will be easiest step of all 5. But there’s a chance that this will be a harder task for some. If you already moved through the steps 1-4, now focus on this step to ensure that you will reach your goal!

What Dalio says about this step:

  • a great plan won’t help you much if you do not act on it
  • make sure you always know what you need to do and which tasks are more important
  • measure your work to see if your plan is working or not

If you did all these steps, you should be able to reach your goal. How hard it is and how long it takes will depend on many factors, but what matters is moving through these 5 steps as well and as quickly as possible (without sacrificing quality or skipping any steps).

As I said before, I know that each case may be different just like each person is different. However, they are often similarities once you look at things from above and only focus on the essentials. If you look at the big picture, I think you will realize that all goals can be achieved by moving through this simple 5-step process.

I think that the importance of these 5 steps lies mainly in their simplicity. Because they are so obvious, they force us to only focus on the big picture and the essential aspects. So don’t spend too much time trying to prove to yourself that your case is unique and therefore much more complicated or hard to achieve. If you do this, you’re probably just making this process harder for yourself.

If you want to achieve your goal, take your time and move through these 5 steps as well as you can. Don’t skip any step and do your best to follow through. And if you even think it is getting too hard, zoom out until you see the big picture again. Success seems more simple once you remember where you are on your trajectory to success!

If you want to get “Principles” from Amazon, click on the affiliate link below to order it. Read more about affiliate links here.

Buy Principles

This article is part of a 30-day series where I’ll share an article every day. I will mainly focus on goals, success and habits and I hope this series will help you have a higher chance of achieving your meaningful goals in 2020!

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