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Friday, February 20, 2026

Basketball Lessons from Ray Dalio's "Principles" (Examining Our Process)

Preview: Pain, Our record, Stress, Versatility, Self-assessment, Emotion

Sport parallels society. A key investing principle is, "There is no get rich quick approach." Risk and reward travel together and high risk is more likely to create busts than booms. Better process presages better outcomes. 

Former Bridgewater chief Ray Dalio wrote Principles, which shares valuable lessons for coaches. The core idea wasn’t about markets. It was about decision loops under stress. “Pain + reflection = progress.”

Being “underwater” — down 20%, down 40%, portfolio bleeding — is the investor’s version of a losing streak, a 12–2 run against you, a season that isn’t going as scripted.

Washington Post investigative reporter Bob Woodward has a principle that each piece should share at least six key points. Here are six Dalio-style lessons from being underwater that translate for sports and coaching.

1. Pain Is Data, Not Identity

Investing lesson:
Losses aren’t evidence of stupidity. They’re signs your model is incomplete.

Dalio's Bridgewater culture excavated mistakes to be logged, studied, and not repeated. 

Basketball parallel:
A blown assignment isn’t a character statement. It reveals a need for better systems, reads, and communication. Some coaches tell players, "You don't care" when they haven't shown players how to see the game. 

Coaching application:
When a team is underwater, e.g. 2–5, losing late leads, the question is  "What is this teaching us about our assumptions?"

Great programs transform pain through diagnosis and treatment. 

2. Mr. Market (Our Record) Is Not Wrong

Investing lesson:
James Grant discusses "Mr. Market," who is never wrong. When you’re losing, it’s tempting to blame anything and everything. Dalio’s stance: assume the record is right and you’re missing something.

Basketball parallel:
When you lose, officials, schedule, and luck become targets. Don't apply "biases" to make excuses. 

Coaching application:
If your team can’t defend ball screens, stop blaming spacing trends. Kevin Eastman, former Celtics assistant says, "Do it harder, do it better, change personnel, or "&#*@ it ain't working" - do something else."

3. Stress Reveals Reality

Investing lesson:
Bull markets hide leverage risk. Bear markets expose fragility. Risk will find you without management. 

Basketball parallel:
Weak culture hides and survives in blowouts. It breaks in tight games. Communication and execution break down in softness.

Coaching application:
End-of-game failures don’t create cracks; they reveal them. Poor communication, lack of conviction, shaky trust - bubble to the surface.

Being underwater clarifies weak structure...possession by possession - turnovers, shot selection, rebounding, defense. Young players must learn how to win. 

4. Diversification Beats Conviction

Investing lesson:
Dalio emphasizes balancing risks. Concentrated conviction can feel heroic - until it’s catastrophic.

Basketball parallel:
Teams that rely on one scorer or one action look powerful… until that option is neutralized. Watch a player who relies on one skill, e.g. three-point shooting, get nullified when a defense takes her 'good looks' away. 

Coaching application:
Develop secondary playmakers. Teach multiple coverages. Build scoring redundancy.

Depth is antifragile.

5. Reflection Must Be Systematic

Investing lesson:
Dalio didn’t just reflect emotionally; he built algorithms and checklists from mistakes.

Basketball parallel:
Saying “we need more effort” is not analysis.

Coaching application:
After losses, log specifics:

  • Turnovers by type

  • Points per possession allowed in transition

  • Late-clock decisions

Pain without structured reflection becomes frustration. Pain with structure becomes growth.

6. Being Underwater Tests Emotional Governance

Investing lesson:
The worst investing mistakes happen after drawdowns - panic selling or doubling down recklessly.

Basketball parallel:
Teams unravel not from one bad run but from emotional reaction to the run. The difference between being 15-5 and 11-9 is often a few possessions per game creating close losses. 

Coaching application:
The true test of leadership is response to adversity. Does the team:

  • Rush shots?

  • Argue calls?

  • Deviate from identity?

Or does it narrow focus?

Underwater moments expose emotional discipline.

The Big Picture:

Dalio’s deeper point:

You are not your results. You are your decision process.

In investing, you can make a good decision and still lose money.

In sports, you can run the right action and miss the shot.

The goal is not to eliminate losses.
It is to build a process that improves because of them.

“Being Underwater Is a Classroom.”

Because in both markets and locker rooms, the scoreboard is not the lesson. The reaction is.

Lagniappe. "You can't use everything." Find one or two actions that you can. 

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