Ray Dalio is a billionaire, a genius, a hedge-fund manager, and a “piece of work.” He is not your average guy in any sense. He is a super smart, opinionated “macro” investor who started Bridgewater Associates, one of the largest hedge funds at the age of 26. (Great background story in the New Yorker here).
Tony Robbins talks about Dalio a lot in his most recent book on investing MONEY Master the Game (affiliate link). Dalio signed the giving pledge where he will give away half of his wealth (currently $15 billion+) to charity while he is alive. You can really learn from him – for many reasons including:
Master at explaining things simply. His 30 minute video, How the Economy Works, which is immensely watchable, and a good primer for any one on economics, finance, and the business cycle. Makes a strong argument that de-leveraging will be the main trend in the developed world for the next decade; similar point as Ruchir Sharma from Morgan Stanley.
Macro-economics guru. Hedge funds come in many different shapes and sizes. Bridgewater – and Ray Dalio – is a marco fund. Look at this 2 x 2 matrix (yes, consultants love them) showing the 4 different environments which affect asset prices as show below. He has an all-weather portfolio where he recommends that you put 25% of the your risk (not assets, but risk) in each of these quadrants; as you might guess – the top 2 boxes have more risk, and therefore, the amount of assets in those boxes are less than in the bottom 2 boxes. See a the post of Tony Robbin’s website here, not subtly titled, “The End of The Bull Market”.
Radical Transparency. He runs his company on “radical transparency” encouraging straight-talk, constructive criticism, and productive disagreement. Employees of any rank and encouraged to challenge each other’s thinking in a form of idea fight club. In this New Yorker article from 2011 here there are numerous examples of this “it’s good for you” honesty given to people directly, publicly, and (some would argue) shamefully. Oh, yes, all meetings are recorded (either audio or video), for others to see. Yes, this place is intense.
Alternative Point of View. Dalio believes that you have a high probability of being wrong – so you should reach out to find people can constructively disagree with you. With the investment business, you have to be an independent thinker – because the consensus is built in the price. You need to know what people are thinking. His speech here (start min 2).
Libertarian attitude. Dalio believes that everyone needs to clearly set goals, understand the market reality, objectively “see yourself”, and continually get feedback from people better equipped than you are. All very useful advice – to a new college graduate, employee, or just friend. He says, “Pain + Reflection = Progress”. Dude that is self-imposed tough love.
Bridgewater is different. They have 2 primary funds: an “all-weather fund” which is lower-fee and aims to match the market returns with lower risk (beta) and the “Alpha fund” which looks to beat the market and has the traditional 2%+20% fee structure. Bridgewater is high-touch – focusing primarily on pension funds (not high net-worth individuals) and B2B clients.
Principles. Ray Dalio wrote a 100+ page manifesto called Principles, where he outlines his point-of-view and advice on how to live a successful, and truthful life. Here is a taste of his LIFE PRINCIPLES (pg 9 – 38); his management principles deserve its own treatment.
Principles connect your values to action. The thought goes – if values are what are important to you – principles help you to make decisions and put your values into action. Simple enough.
To be successful, you need to make tough correct choices. He argues there are 5 types of decisions we make. This is what good looks like:
- Understand how to manage pain to produce progress
- Face harsh realities
- Worry about achieving the goal
- Make decisions on 1st, 2nd, 3rd order consequences
- Hold themselves accountable
It’s tough love libertarian thinking – and I agree with most of it. It’s about understanding what reality looks like, providing the value that society wants, and looking out for blind spots that you might intrinsically have.
To beat the market, you need to be an independent thinker. You cannot just “go with the flow” because you will be average. “To make money, you have to right when they are wrong.”
The way I learn is to immerse myself in something, which prompts questions, which I answer, prompting more questions, until I reach a conclusion. – Ray Dalio
Stress-test your opinions. Dalio believes you should have firm opinions and a point of view. Then stress-test them by getting the smartest people you know to pick your arguments apart. It’s like having a internal “red team” to find weaknesses in your approach. It’s rigorous.
Being totally truthful, especially about mistakes and weaknesses, lead to a rapid rate of improvement. – Ray Dalio
See yourself objectively. Dalio argues that you have to see yourself clearly. Be willing to “fire yourself” if you encounter something you cannot / should not do. Think about thinking. This is his recipe for progress. It’s good advice for most anyone. Rationale, Spock-like advice, but useful:
Not for everyone. Yes, Ray Dalio’s personality is strong. Yes, people cry in the bathrooms. Yes, they record all meetings. Yes, 20% of people leave within the first year. It’s intense.
Look at the employee reviews on glassdoor.com here, and you get a flavor for the raw, intense, and almost confrontational approach to learning. The following are some of the direct quotes from past/current Bridgewater Associates:
“Can be tough. Hard to be confronted with your problems daily, but it will make you better.”
“The promise of speaking your mind, holding people accountable, asking questions. – can become way too much sometimes as it can hinder getting things done.”
Principles will be published (book #1 and 2). Simon and Schuster will be publishing Dalio’s ideas in September 2017. Thankfully, this is still available for free download from Bridgewater here. It’s worth the read.
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