Ray Dalio is one of the world’s most successful investors and entrepreneurs--but he is also one of those people who transcends the industry in which he has been successful. That's in no small part due to the fact that he's a real thinker, a person whose thoughts inform top people outside the investment world. There's a reason he's been called "the Steve Jobs of investing." There's a reason that Bill Gates and Tony Robbins have blurbs on the front of his book.
And of course there's a reason his book Principles has been such a phenomenal best seller.
It's a rare opportunity to get to talk to someone like Ray Dalio, so I had a lot of questions for him. Here's a partial transcript of our conversation.
Chris Schluep: Why did you write the book?
Ray Dalio: I wrote it to help people make decisions better, to help them be successful.
About 2008/2009 we anticipated the world financial crisis and did well. I wanted to stay under the radar, but then I started to receive a lot of attention. And the attention was about how Bridgewater’s culture works and how we make decisions differently. There was a lot of confusion about that, so I put the principles on our website—and they were downloaded, since then, three and a half million times.
This is my year of transition from what I’m calling the second phase of my life to the third phase of my life. And I wanted to pass it along. What I mean by that is, in the first days of your life you’re dependent on others and you learn. You’re basically a kid, depending on your parents. In the second phase of your life, you’re working and others are dependent on you and you’re trying to be successful. And then when you go to the third phase of your life—or I feel this—it’s no longer as much of a kick to be successful. There’s a natural, instinctual desire to help other people be successful.
CS: Have you been surprised by the book’s success?
RD: (laughing) I know not to know anything, so I’m never surprised one way or another. I’m certainly pleased.
It’s great that people are finding it helpful, because I really do believe in the idea meritocratic concepts in the book.
CS: This seems like the perfect book to give someone who is just entering the work world. Do you agree?
RD: Yes, I think it’s written for them. It’s also written for entrepreneurs. It’s written for people who are reflecting on how to change their lives. There’s somebody who is mid-life—thirty-eight years old—who was just describing how he’s got the second half of his life ahead, and this book is going to have a big impact on how he approaches it.
CS: You write your own story in the book, but you’re clearly a private person. Was the biographical part of the book the hardest for you to write?
RD: It depends what you mean by hard. It was the least desirable thing to write, but it was also an enjoyable experience in that it enhanced my reflections. It was enjoyable to think about, not only the experiences, but about my evolution and the evolution of the people around me. It was not what I wanted to do, because I don’t want this to be about me. It’s like a recipe book, and sometimes you hear a story—like in Steve Jobs’ book—and it’s a semi-soap opera of his life. What was he like as a kid? and all that. What I wish Steve Jobs did, or Jeff Bezos, or anybody like that, is to actually write down their principles or their recipes. In other words, I faced this thing. How did I approach that thing? And why? Because it’s that kind of approach that’s much more important than anyone’s soap opera-like story.
CS: To what do you ascribe Bridgewater’s success?
RD: Well, I’m going to say it in one long sentence. It’s a real idea meritocracy, fleshed out in those work principles, in which the goals are to have meaningful work and meaningful relationships through radical truth and radical transparency.
Ok, so now I’ll explain. An idea meritocracy is that the best ideas win out; people are not particularly attached to their particular ideas. They can get past disagreements and the like. The meaningful work and the meaningful relationships are, to me, comparable rewards. I think being on a mission to do something great is great, and to be on that mission with people who you have really meaningful relationships with—that you enjoy the relationships and you’re close, and you’re there with it—not only provides both types of rewards, but it’s mutually supportive. Because you can have tough love, you can have toughness to hold each other accountable to be excellent, but there’s also the love part of that in terms of the caring for each other, and when you have the caring you can be tougher on each other. Some people describe it as an intellectual Navy Seals. They’re tough high standards, but on the other hand they’re close. So, meaningful work and meaningful relationships through radical truthfulness and radical transparency.
And I just want to explain this: In order to have an idea meritocracy, one needs to do three things. First, they have to put their honest thoughts on the table, for everyone to look at and everyone to work through. Second, they need to have thoughtful disagreement, by which there are quality exchanges, in which there’s open mindedness and the realization that no one has all the right answers. And you can work through that and get to better answers because good collective decision making is much better than any individual decision making. And so, first you have to put your thoughts on the table. Second, you have to have thoughtful disagreement. And third, you have to have ways of getting past the disagreements if they remain. Idea meritocratic ways.
By the way, I think these things are basically true for any good relationship. If you’re going to have a good relationship with either family members or the people you work with, the question is can people be honest with each other? Can they have thoughtful disagreement to have the back and forth? And when they inevitable have disagreements, do they have ways of getting past those disagreements that they both agree are fair or appropriate. So that’s why—it’s kind of a long-winded answer to your question—but that’s why we’ve been successful.
CS: Reading about radical transparency and radical honesty, and really thinking about it, I found the idea to be personally very powerful. I would compare it to the first time I read life is suffering, and it was like, ok, that takes the heat off a little.
RD: You know, that’s really great. And this is transformative, because you can change your perception of it. You know the expression I use: Pain + Reality = Progress. What I found is that my attitude changed totally because whenever I would have a painful mistake, I started to view that as puzzles that would give me gems if I could solve the puzzle. So, it made me thoughtful—what should I do differently next time? That was the puzzle. And the gem was some principle for handling the same thing when it came along again, and then I would write it down. And by writing it down and referring to it, and also being able to show it to other people so that we could agree that that was a good way of handling that thing—that was very, very powerful.
Then of course we went on to put them into algorithms, and we’re still doing that, which is a step beyond. But that notion, what you’re talking about, is what—your describing what you’re experiencing is perhaps the change in your reaction to suffering.
CS: I think that’s going to help a lot of people. I really do. You talk about nature working as a guide, in particular evolution. I think you say it’s the greatest force in the world.
RD: Well, everything evolves. So evolution is the only thing that exists through time. That is true for computers, or people, or a business. And they all evolve in that same way. We tend to see things in a static way, and so you see what is. Even in looking at ourselves, what we really are is essentially vessels for our DNA that keeps evolving through time. So seeing that and embracing that reality, and thinking of everything as kind of this perpetual motion machine in which you embrace reality—you don’t wish it was different. You realize that it’s your puzzle to interact with. You interact with it well, you evolve yourself, and you contribute to evolution—that seems to me realistic. And when you see it that way, you accept things. A lot of people, I think get stuck wishing reality was different. And not seeing all these pains as contributions toward that evolutionary process—so if people can say, OK, here’s reality, here’s evolution, and when I’m falling I’m evolving and that’s just the way it is and I have to deal with it well. That helps.
CS: By just about every measure, you've been a huge success. But what is it you are looking for in life?
RD: I didn’t know it at first, but it's clearly evolution. It is to evolve myself and to contribute to evolution. And I believe that’s the purpose for everybody. We find different enjoyments—like, when I started out, I didn’t have any notion of that. I just went after the things I wanted. And then I evolved, and when you get some of the things you want you no longer just want that thing, you want something else, and you keep evolving. So it’s not the thing. Success is not in obtaining the thing. Because there’s always another thing. And then you look back on it, and for me, through my evolution, yes I have success by most measures—but for me, when it comes to the greatest joy of reward, there’s an emotional element and there’s an intellectual element. Emotionally, my greatest joy was the personal relationships I’ve had. That was the greatest joy. Intellectually, my satisfaction was that I do feel I’ve evolved well and I’m doing my best to contribute toward evolution.
CS: Have you always been a learner?
RD: Sort of somewhere in between. I always was curious. I was always an experiential learner, not a memory-based learner. I have a bad rote memory, but I tend to learn through my experiences. So I was always curious and had those experiences. And then when I went into the markets, and then starting my business and building my business as an entrepreneur, that affected my thinking a lot, too, because in order to be successful as both an investor and an entrepreneur, one has to be an independent thinker and bet against the consensus and be right. Because the consensus is built into the price, and if you’re not an independent thinker in the markets you won’t succeed. And if you’re not an independent thinker as an entrepreneur starting out, you’re not going to bring anything special.
That experience itself taught me humility and contributed to the open-mindedness, and writing it all down evolved step-by-step. First I did it whenever I would make a trade in the markets: as a discipline I had this yellow legal pad where I would write down the criteria that I used to make the trade, so when I closed the trade I could reflect on it. Then I discovered, inadvertently essentially, that by writing that down clearly I could express that in algorithms and then test how those decisions worked over time. So that was a great discovery that helped me to make decisions better. And then also by writing it down and having other people look at it, we could get in sync about how we could work together and what we should do. And so one thing led to another, and I would urge everybody to do that. Whenever you’re making a decision about anything, whatever that thing is, it’s going to come along hundreds or thousands of times in the future. Everything happens over and over again pretty much. And so if you think, just go slowly, what are the criteria for that decision, and you write them down—like a recipe—it becomes something that evolves over time and leads to these incredibly beneficial results. So one thing led to another for me to do that.
CS: You’ve been into meditation for a long time, right?
RD: Yes. Since 1969.
CS: So that’s one similarity we know you share with Steve Jobs. How has that helped you to evolve as a person?
RD: Meditation gives you two things. It gives you equanimity and it gives you creativity. And it does that by taking one from their conscious mind, where there’s all that noise and chaos and so on, into the subconscious mind where there’s quiet and where creativity emanates from. You have a mantra, a sound, that doesn’t have any meaning, and when you repeat it over and over again, all those thoughts that are jumbling around in your brain go away because you shift them to that mantra, that sound. And then eventually that sound disappears, and then you’re left not conscious or unconscious—you’re left in this subconscious state, and by opening that up, first of all you get control of it. Everything seems slower than it really is, and so it allows you to approach it that way. And it gives creativity because creativity really comes from the subconscious brain—intuition, imagination—so it’s not like you can go there and say, I’m going to go be creative now. Maybe you can, but the real way you get creativity is, you know, you’re taking a hot shower and great ideas come to you from the subconscious. Essentially, meditation opens a pipeline between the conscious and the subconscious.
CS: You’re working on your next book, right?
CS: Can you describe what it is and when we can expect to see it.
RD: Economic and investment principles. And I assume we can see it in 18 months to 2 years.
CS: And you wrote Principles before you wrote that book for a reason, right?
RD: Everybody learns something in their lifetimes. I considered where I’ve learned something where I can claim to have a demonstrated unique understanding that’s worth passing along. And my understanding of economics and investments is different from a lot of others, so I thought that was important. But I felt that much more fundamental was the approach to life and work. So when faced with the choice of which would I should do first, I started with life and work principles, because they’re more fundamental. And then I’ll come out with economic and investment principles after.
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