Key takeaways from Ray Dalio’s AMA

Alex Cowie

Often known as “The Steve Jobs” of investing, Ray Dalio is the owner of the world’s biggest hedge fund, Bridgewater Associates. Since inception, he has made over $50 billion for his clients, making Bridgewater the highest moneymaking hedge fund manager in the world. Last week, he held an open AMA (ask me anything) on Reddit, answering questions across how he invests, career advice to his 20-year old self, his view on markets today and much more. Below, we have provided a summary of the key takeaways:

On buying his first share:

“Northeast, it is a true story; I did buy a little bit of its stock when I was 12 because I caddied at the time and people talked about the stock market. I bought the shares because my dad, who was a jazz musician, introduced me to a kind broker he knew who helped me do that. I bought it for the stupid reason that it was the only company I’d heard of that was selling for less than 5/share, so I thought that if it went up, I would make more money. I got lucky because it was about to go bankrupt and then was acquired by another company, and then I was hooked on playing the market.”

On the most important principles for investors:

“First, know how to balance your portfolio so that you don’t have any systematic bias toward bull or bear markets in anything. I described how to do this to Tony Robbins which he described in Money: Mastering the Game. Second, don’t make the mistake of thinking that investments that have been good over the past few years rather than more expensive investments. Think about how to rotate your portfolio to buy that which is cheap and sell that which is expensive.”

On advice to his 20-year old self:

“I’d just dive in and place bets and know how to learn from my experiences. I wrote about how to do that in my book, which is largely about how to convert mistakes into learned principles that work, and how to save these principles and use them in computers so that your thinking is not constrained by your brain’s capacity to juggle a lot of things at the same time.”

“There is no better learning than that which comes from experiences and quality reflections on those experiences. It doesn’t matter whether you do it at a hedge fund, or any other place, but I would recommend that you do it around other smart people who help you brainstorm on the best answer.”

“To know how to simultaneously think for yourself and know that you know virtually nothing so that you have to take in the best thinking that’s available to you and critically analyze it.”

On the books that have had the biggest impact in his life:

“1. Lessons from History by Will and Ariel Durant, which is a 104-page distillation of the themes of history by great historians who covered 500 years of history in all countries.

2. A River From Eden by Richard Dawkins, which in a little over 100 pages covers all evolution of all life through time.

3. Joseph Campbell’s Hero of a Thousand Faces, which looks at the archetypical life evolutions of all heroes through different civilizations through time.”

On learning:

“Have as many painful experiences as rapidly as possible. Pain avoidance is a great motivator for learning.”

“I don’t think you learn the most from an MBA anyway. And I do think you learn a lot from the most basic experiences. You can work yourself up from running a little store or other simple experiences, and you can go online and get wonderful courses on any skill that you want to acquire. Also, look around you and find your role models and ask them what principles led them to be successful.”

“I believe it extends to everything in life. You got to get the basic fundaments crystal clear. Someone said that any damn fool can make it complicated, it takes a genius to make it simple.”

On beginning your investing journey:

“Dive into the markets, have the shit kicked out of you, and learn how to do things differently. One of my most basic formulas for life is Pain + Reflection = Progress. And by the way, when you create reflections that give you principles for how to do things better in the future, be sure to write them down.”

On productivity:

“Whenever I’m in a position in which too many choices are coming at me at once to handle them all well (which is most of the time like it is for most people), it forces me up to the higher level to reflect on my priorities and organize myself to reject good alternatives. If you have my book Principles, there’s one about this idea, Prioritize: While you can have virtually anything you want, you can’t have everything you want.”

“I can assure you that it has been critical in improving my equanimity and creativity , which has been essential to whatever success I’ve had. Almost every person who I’ve introduced it to who has given it a fair chance finds it invaluable. My family and colleagues practice it because they like it (and not because I tell them to). There is only so much convincing I can give you in words (my friend Bob Roth also summarized the research well in his book Strength in Stillness), so the only way to really find out is to do it and see how it feels.”

On organisational culture:

“The key to whatever success I’ve had has to do more with my dealing how to do with my not knowing than anything I know.”

“While the power of a visionary “shaper” is great, it is nowhere near as powerful as the collection of independent-minded shapers who know how to disagree well and then get beyond their disagreements to make the best decisions. In addition, if you don’t have people who can think for themselves, you won’t have great leverage and you won’t build a great organization. You also won’t have them devoted to the mission. So I believe an idea meritocracy is so much more powerful than organizations that resemble feudal monarchies.”

“What’s most key for me is having meaningful work and meaningful relationships, so I like to visualize incredible things that I can make happen and eliminate the gap with what exists to make them happen, and I like to do that with people who are on that mission with me. It doesn’t matter in what area or what profession, as long as I have those things.”

On what he looks for when he hires:

“I call them five Cs—character, curiosity, creativity, common-sense, and consideration.”

On Intuition:

“Instincts and intuition are very important. They come from the subliminal mind and are brought to the surface and have to be reconciled with the logical, conscious mind. When the two are aligned, I’m ready to go.”

On algorithmic trading:

“About 30 years ago I learned that I could take the written principles I’d been recording and put them into equations in the computer that allowed them to think in parallel with me. I believe that you can learn to do this without knowing how to write the algorithms yourself by working with people who know how to convert thoughts into algorithms and I urge you to do this.”

“I believe that the future will be significantly enhanced by having knowledgeable, experienced people who don’t know the language of algorithms working with the next generation who knows the language but doesn’t have the knowledge and wisdom that they need. These partnerships are invaluable.”

On China’s total debt:

“Though the amount of debt is important, even more important is whether or not that debt is denominated in your own currency. That is because if it is denominated in one’s own currency, policy makers have numerous ways of spreading it out so that it doesn’t sink the economy. The most important question for those who do have debt denominated in their own currency is whether they have the skill, wisdom, and political system that allows them to manage that well. Concerning your question about China, from my contact, I believe that they have all the right ingredients to manage their debts well.”

On making the most of college:

“Party like crazy and don’t make the grades your highest priority. Make the friendships and your experiences most important.”

If you wish to view the full forum, it can be found here:

Alex Cowie

Alex has a decade in the production and distribution of research for financial institutions and investment publications. He supported Livewire at its launch before then joining the team as Editorial Director.




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Mike Tan

Thanks for posting this summary, Alex.

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