Ray Dalio

Ray Dalio: Have Power, Respect Power, And Use Power Wisely

I believe that the following principle about power is important in helping us reflect on the dynamics behind the conflicts that we are seeing today, including the geopolitical conflicts between countries, the political conflicts within countries, the conflicts between and within organizations, and the conflicts between people. I also believe that this principle is relevant to the relationships that you have.

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Ray Dalio

Having power is good because power will win out over agreements, rules, and laws all the time. That’s because, when push comes to shove, those who have the power to either enforce their interpretation of the rules and laws or to overturn the rules and laws will get what they want.

The sequence of using power is as follows. When there are disagreements, the parties disagreeing will first try to resolve them without going to rules/laws by trying to agree on what to do by themselves. If that doesn’t work, they will try using the agreements/rules/laws that they agreed to abide by. If that doesn’t work, those who want to get what they want more than they respect the rules will resort to using their powers. When one party resorts to using its power and the other side in the dispute isn’t sufficiently intimidated to knuckle under, there will be a war. A war is the testing of relative powers. Wars can be all out or they can be confined; in either case they will be whatever is required to determine who gets what. A war will typically establish one side’s supremacy so that it will be followed by a peace because nobody wants to fight the clearly more powerful entity until that entity is no longer clearly the most powerful. At that time, this dynamic will begin again. This dynamic is timeless and universal.

It is important to respect power because it’s not smart to fight a war that one is going to lose; it is preferable to negotiate the best settlement possible (that is unless one wants to be a martyr, which is usually for stupid ego reasons rather than for sensible strategic reasons).

It is also important to use power wisely. Using power wisely doesn’t necessarily mean forcing others to give you what you want—i.e., bullying them. It includes recognizing that generosity, love, and trust are powerful forces for producing win-win relationships which are fabulously more rewarding than lose-lose relationships. In other words, it is often the case that using one’s “hard powers” is not the best path and that using these “soft powers” is preferable. For example, though I always had and retained the ownership power to make decisions at Bridgewater autocratically, I chose to not use those powers. Instead I created and operated an idea-meritocratic system (that I described in Principles). I also chose to be far more generous with the people I worked with than I had to be while maintaining extremely high standards because I knew that operating that way would produce the amazing relationships and outcomes that we experienced – far better than if I used my “hard powers” more forcefully. So, it’s important to remember that great relationships gives one great powers, and that they are wonderful rewards in and of themselves. There is nothing more powerful and rewarding for the individual and the collective than a community of capable people who care for each other and will give each other all they can.

If one is in a lose-lose relationship, one has to get out of it one way or another, preferably through separation though possibly though war.

To handle one’s power wisely, it’s usually best not to show it because it will usually lead others to feel threatened and build their counter-threatening powers which will lead to a mutually threatening relationship. Power is usually best handled like a hidden knife that can be brought out in the event of a fight. But there are some times when push comes to shove that showing one’s power and threatening to use it is most effective in improving one’s negotiating position and preventing a fight.

Of course it is valuable to know what matters to the other party most and least, especially what they will and won’t fight for and how they will fight. That’s best discovered by looking at the types of relationships they have had and the ways they used power in the past, by imagining what they are going after, and by testing them through trial and error.

Sometimes mutual testing leads to tit-for-tat escalations and eventually dangerous brinksmanship. These tests can be dangerous because they put the other party in the difficult position of having to choose between fighting and being caught bluffing. Escalating tit-for-tat wars often takes conflicts beyond where either side would logically want them to go.

Knowing where the balance of power lies – i.e., knowing who would gain and lose what in the event of a fight – should always be kept in mind because it is essentially the equilibrium level that parties keep in the back of their minds when considering what a “fair” resolution of a dispute is – like thinking about what results a court fight would lead to when considering what the terms of a negotiated agreement should be.

Though it is generally desirable to have power, it is also desirable to not have the powers that one doesn’t need. That is because maintaining power consumes resources, most importantly your time and your money. With having power comes having the burden of responsibility. While most people think that having lots of power is best, I have often been struck by how happy less powerful people can be relative to more powerful people.

When thinking about how to use power wisely, it’s important to also think about when to reach an agreement or when to fight. To do that, it is important to imagine how one’s power will change over time. It is desirable to use one’s power to negotiate an agreement, enforce an agreement, or fight a war when one’s power is greatest. That means that it pays to fight early if one’s relative power is declining and fight later if it’s rising.

Of course there are also times that wars are logical and necessary to keep or get what one needs. In such cases, having enough power to win the fight while preparing for the painful consequences that will follow is most appropriate.

Besides being the best advice I can give for you for whatever difficult relationships you might have, this principle helps me to figure out what others in conflicts are likely to do.

Article by Ray Dalio, LinkedIn


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