Ray Dalio

 

Quotes

    1. Ray Dalio, who has built up the largest hedge fund in the world on the back of an intense internal culture advocating radical transparency, believes that “the greatest tragedy of mankind — or one of them — is that people needlessly hold wrong opinions in their minds.” ( Link )
    2. The Bridgewater Associates founder and chairman was answering questions on the unusual culture at his hedge fund known as an “idea meritocracy.” The endeavor has led Bridgewater to create a system in which employees rate one another’s credibility on a number of dimensions, and everyone can see the ratings. ( Link )
    3. The data from these assessments are crunched to create a “believability” rating. Votes by employees with higher believability ratings are given greater weight in decision-making ( Link )
    4. “If you want to know the key to whatever Bridgewater’s success has been, it’s not me, it’s not what’s in my head: It’s my ability to deal with what I don’t know,” ( Link )
    5. “But while almost all of us quickly agreed on the principles intellectually, many still struggled to convert what they had agreed to intellectually into effective action. This was because their habits and emotional barriers remained stronger than their reasoning.”
    6. “Make sure those who are given radical transparency recognize their responsibilities to handle it well and to weigh things intelligently. People cannot be given the privilege of receiving information and then use the information to harm the company, so rules and procedures must be in place to ensure that doesn’t happen.”
    7. “Don’t let the little things divide you when your agreement on the big things should bind you.”
    8. “A culture and its people are symbiotic—the culture attracts certain kinds of people and the people in turn either reinforce or evolve the culture based on their values and what they’re like. If you choose the right people with the right values and remain in sync with them, you will play beautiful jazz together. If you choose the wrong people, you will all go over the waterfall together.”
    9. “To be “good” something must operate consistently with the laws of reality and contribute to the evolution of the whole; that is what is most rewarded.”
    10. …human greatness and terribleness are not correlated with wealth or other conventional measures of success. I’ve also learned that judging people before really seeing things through their eyes stands in the way of understanding their circumstances–and that isn’t smart. I urge you to be curious enough to want to understand how the people who see things differently from you came to see them that way. You will find that interesting and invaluable, and the richer perspective you gain will help you decide what you should do.”
    11. “Everyone has weaknesses. They are generally revealed in the patterns of mistakes they make.”
    12. “Observe the patterns of mistakes to see if they are products of weaknesses.”
    13. “The best behaviors one can hope for come from leaders who can weigh the benefits of cooperation, and who have long enough time frames that they can see how the gifts they give this year may bring them benefits in the future.”
    14. “Ultimately, to help people succeed you have to do two things: First let them see their failures so clearly that they are motivated to change them, and then show them how to either change what they are doing or rely on others who are strong where they are weak.”
    15. “Distinguish between you as the designer of your machine and you as a worker with your machine. One of the hardest things for people to do is to objectively look down on themselves within their circumstances (i.e., their machine) so that they can act as the machine’s designer and manager. Most people remain stuck in the perspective of being a worker within the machine. If you can recognize the differences between those roles and that it is much more important that you are a good designer/manager of your life than a good worker in it, you will be on the right path. To be successful, the “designer/manager you” has to be objective about what the “worker you” is really like, not believing in him more than he deserves, or putting him in jobs he shouldn’t be in. Instead of having this strategic perspective, most people operate emotionally and in the moment; their lives are a series of undirected emotional experiences, going from one thing to the next. If you want to look back on your life and feel you’ve achieved what you wanted to, you can’t operate that way.”
    16. “To be principled means to consistently operate with principles that can be clearly explained. Unfortunately, most people can’t do that. And it’s very rare for people to write their principles down and share them.”
    17. “1. Don’t confuse what you wish were true with what is really true. 2. Don’t worry about looking good—worry instead about achieving your goals. 3. Don’t overweight first-order consequences relative to second- and third-order ones. 4. Don’t let pain stand in the way of progress. 5. Don’t blame bad outcomes on anyone but yourself.”
    18. “As a result, I tended to hire people who were the same way—who would dive right into challenges, figure out what to do about them, and then do it. I figured that if they had great character, common sense, and creativity, and were driven to achieve our shared mission, they would discover what it took to be successful if I gave them the freedom to figure out how to make the right decisions.”
    19. “Train, guardrail, or remove people; don’t rehabilitate them.”
    20. “I hated school because of my bad memory but when I was twelve I fell in love with trading the markets. To make money in the markets, one needs to be an independent thinker who bets against the consensus and is right.”
    21. “Remember that people typically don’t change all that much.”
    22. “To acquire principles that work, it’s essential that you embrace reality and deal with it well. Don’t fall into the common trap of wishing that reality worked differently than it does or that your own realities were different. Instead, embrace your realities and deal with them effectively. After all, making the most of your circumstances is what life is all about. This includes being transparent with your thoughts and open-mindedly accepting the feedback of others. Doing so will dramatically increase your learning.”
    23. “Reflect and remind yourself that an accurate criticism is the most valuable feedback you can receive.”
    24. “If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.”
    25. “Most of life’s greatest opportunities come out of moments of struggle; it’s up to you to make the most of these tests of creativity and character.”
    26. “Help people through the pain that comes with exploring their weaknesses. Emotions tend to heat up during most disagreements, especially when the subject is someone’s weaknesses. Speak in a calm, slow, and analytical manner to facilitate communication.”
    27. “Leonard Mlodinow, in his excellent book Subliminal, writes, “We usually assume that what distinguishes us [from other species] is IQ. But it is our social IQ that ought to be the principal quality that differentiates us.”
    28. “My business has always been a way to get me into exotic places and allow me to meet interesting people. If I make any money from those trips, that’s just icing on the cake.”
    29. “Reality exists at different levels and each of them gives you different but valuable perspectives. It’s important to keep all of them in mind as you synthesize and make decisions, and to know how to navigate between them. Let’s say you’re looking at your hometown on Google Maps. Zoom in close enough to see the buildings and you won’t be able to see the region surrounding your town, which can tell you important things. Maybe your town sits next to a body of water. Zoom in too close and you won’t be able to tell if the shoreline is along a river, a lake, or an ocean. You need to know which level is appropriate to your decision.”
    30. “Knowing how people operate and being able to judge whether that way of operating will lead to good results is more important than knowing what they did.”
    31. “My approach was to hire, train, test, and then fire or promote quickly, so that we could rapidly identify the excellent hires and get rid of the ordinary ones, repeating the process again and again until the percentage of those who were truly great was high enough to meet our needs.”
    32. “Every leader must decide between 1) getting rid of liked but incapable people to achieve their goals and 2) keeping the nice but incapable people and not achieving their goals. Whether or not you can make these hard decisions is the strongest determinant of your own success”
    33. “there are two broad approaches to decision making: evidence/logic-based (which comes from the higher- level brain) and subconscious/emotion-based (which comes from the lower-level animal brain).”
    34. “Bob Kegan called Bridgewater “a form of proof that the quest for business excellence and the search for personal realization need not be mutually exclusive—and can, in fact, be essential to each other.”
    35. “Most people assume that the challenges that go along with growing a large business are greater than those of growing a smaller one. That is not true. Going from a five-person organization to a sixty-person organization was just as challenging as going from a sixty-person organization to a seven-hundred-person organization—and from a seven-hundred-person organization to a 1,500-person one.”
    36. “Remember that people are built very differently and that different ways of seeing and thinking make people suitable for different jobs.”
    37. Investors think independently, anticipate things that haven’t happened yet, and put real money at stake with their bets. Policymakers come from environments that nurture consensus, not dissent, that train them to react to things that have already occurred, and that prepare them for negotiations, not placing bets. Because they don’t benefit from the constant feedback about the quality of their decisions that investors get, it’s not clear who the good and bad decision makers among them are.”
    38. “Having nothing to hide relieves stress and builds trust.”
    39. “In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.”
    40. “Remember that in great partnerships, consideration and generosity are more important than money.”
    41. “The most meaningful relationships are achieved when you and others can speak openly to each other about everything that’s important, learn together, and understand the need to hold each other accountable to be as excellent as you can be.”
    42. “While I used to get angry and frustrated at people because of the choices they made, I came to realize that they weren’t intentionally acting in a way that seemed counterproductive; they were just living out things as they saw them, based on how their brains worked.”
    43. “no manager at any level can expect to succeed without the skill set of an organizational engineer.”
    44. “Remember that the only purpose of money is to get you what you want, so think hard about what you value and put it above money. How much would you sell a good relationship for? There’s not enough money in the world to get you to part with a valued relationship.”
    45. “It’s more important to do big things well than to do the small things perfectly.”
    46. “The pain of problems is a call to find solutions rather than a reason for unhappiness and inaction, so it’s silly, pointless, and harmful to be upset at the problems and choices that come at you (though it’s understandable).”
    47. “Remember that most people are happiest when they are improving and doing the things that suit them naturally and help them advance. So learning about your people’s weaknesses is just as valuable (for them and for you) as is learning their strengths.”
    48. “The most valuable habit I’ve acquired is using pain to trigger quality reflections. If you can acquire this habit yourself, you will learn what causes your pain and what you can do about it, and it will have an enormous impact on your effectiveness.”
    49. “When a problem occurs, conduct the discussion at two levels: 1) the machine level (why that outcome was produced) and 2) the case-at-hand level (what to do about it).”
    50. “If you can’t successfully do something, don’t think you can tell others how it should be done”
    51. “Truth – more precisely, an accurate understanding of reality – is the essential foundation for producing good outcomes.”
    52. “It is far more common for people to allow ego to stand in the way of learning.”
    53. “I learned that if you work hard and creatively, you can have just about anything you want, but not everything you want. Maturity is the ability to reject good alternatives in order to pursue even better ones.”
    54. “If you’re not failing, you’re not pushing your limits, and if you’re not pushing your limits, you’re not maximizing your potential”
    55. “Nature gave us pain as a messaging device to tell us that we are approaching, or that we have exceeded, our limits in some way.”
    56. “Having the basics—a good bed to sleep in, good relationships, good food, and good sex—is most important, and those things don’t get much better when you have a lot of money or much worse when you have less. And the people one meets at the top aren’t necessarily more special than those one meets at the bottom or in between.”
    57. “Pain + Reflection = Progress”
    58. “Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life. They can be applied again and again in similar situations to help you achieve your goals.”
    59. “I just want to be right—I don’t care if the right answer comes from me.”
    60. “the happiest people discover their own nature and match their life to it.”
    61. “Imagine that in order to have a great life you have to cross a dangerous jungle. You can stay safe where you are and have an ordinary life, or you can risk crossing the jungle to have a terrific life. How would you approach that choice? Take a moment to think about it because it is the sort of choice that, in one form or another, we all have to make.”
    62. “Listening to uninformed people is worse than having no answers at all.”
    63. “Every time you confront something painful, you are at a potentially important juncture in your life—you have the opportunity to choose healthy and painful truth or unhealthy but comfortable delusion.
    64. Time is like a river that carries us forward into encounters with reality that require us to make decisions. We can’t stop our movement down this river and we can’t avoid those encounters. We can only approach them in the best possible way.”
    65. “Because our educational system is hung up on precision, the art of being good at approximations is insufficiently valued. This impedes conceptual thinking.”
    66. “Unattainable goals appeal to heroes,”
    67. “Look for people who have lots of great questions. Smart people are the ones who ask the most thoughtful questions, as opposed to thinking they have all the answers. Great questions are a much better indicator of future success than great answers.”
    68. “first principle: • Think for yourself to decide 1) what you want, 2) what is true, and 3) what you should do to achieve #1 in light of #2 . . . . . . and do that with humility and open-mindedness so that you consider the best thinking available to you.”
    69. To be effective you must not let your need to be right be more important than your need to find out what’s true. If you are too proud of what you know or of how good you are at something you will learn less, make inferior decisions, and fall short of your potential.”
    70. “Pay for the person, not the job. Look at what people in comparable jobs with comparable experience and credentials make, add some small premium over that, and build in bonuses or other incentives so they will be motivated to knock the cover off the ball. Never pay based on the job title alone.”
    71. “I saw that to do exceptionally well you have to push your limits and that, if you push your limits, you will crash and it will hurt a lot. You will think you have failed—but that won’t be true unless you give up.”
    72. “The greatest gift you can give someone is the power to be successful. Giving people the opportunity to struggle rather than giving them the things they are struggling for will make them stronger.”
    73. “Above all else, I want you to think for yourself, to decide 1) what you want, 2) what is true and 3) what to do about it”
    74. “Meditate. I practice Transcendental Meditation and believe that it has enhanced my open-mindedness, higher-level perspective, equanimity, and creativity. It helps slow things down so that I can act calmly even in the face of chaos, just like a ninja in a street fight. I’m not saying that you have to meditate in order to develop this perspective; I’m just passing along that it has helped me and many other people and I recommend that you seriously consider exploring it.”
    75. “I also feared boredom and mediocrity much more than I feared failure. For me, great is better than terrible, and terrible is better than mediocre, because terrible at least gives life flavor. The high school yearbook quote my friends chose for me was from Thoreau: “If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away.”
    76. “Managers who do not understand people’s different thinking styles cannot understand how the people working for them will handle different situations.”
    77. “Focus more on making the pie bigger than on exactly how to slice it so that you or anyone else gets the biggest piece. The best negotiations are the ones with someone in which I say, “You should take more,” and they argue back, “No you should take more!” People who operate this way with each other make the relationship better and the pie bigger—and both benefit in the long run.”
    78. “d. In designing your organization, remember that the 5-Step Process is the path to success and that different people are good at different steps. Assign specific people to do each of these steps based on their natural inclinations. For example, the big-picture visionary should be responsible for goal setting, the taste tester should be assigned the job of identifying and not tolerating problems, the logical detective who doesn’t mind probing people should be the diagnoser, the imaginative designer should craft the plan to make the improvements, and the reliable taskmaster should make sure the plan gets executed. Of course, some people can do more than one of these things—generally people do two or three well. Virtually nobody can do them all well. A team should consist of people with all of these abilities and they should know who is responsible for which steps.”
    79. “The most important thing is that you develop your own principles and ideally write them down, especially if you are working with others.”
    80. “There were only two big forces to worry about: growth and inflation.”
    81. “Weigh second- and third-order consequences.”
    82. “Distinguish between you as the designer of your machine and you as a worker with your machine.”
    83. “The evolutionary process of productive adaption and ascent—the process of seeking, obtaining, and pursuing more and more ambitious goals—does not just pertain to how individuals and society move forward. It is equally relevant when dealing with setbacks, which are inevitable. At some point in your life you will crash in a big way. You might fail at your job or with your family, lose a loved one, suffer a serious accident or illness, or discover the life you imagined is out of reach forever. There are a whole host of ways that something will get you . At such times, you will be in pain and might think that you don’t have the strength to go on. You almost always do, however; your ultimate success will depend on you realizing that fact, even though it might not seem that way at the moment.This is why many people who have endured setbacks that seems devastating at the time ended up happy as (or even happier than) they originally were after they successfully adapted to them. The quality of your life will depend on the choices you make at those painful moments. The faster one appropriately adapts, the better. No matter what you want out of life, your ability to adapt and move quickly and efficiently through the process of personal evolution will determine your success and your happiness. If you do it well, you can cahnge your psychological reaction to it so that what was painful can become something you crave.”
    84. “When encountering your weaknesses you have four choices: 1. You can deny them (which is what most people do). 2. You can accept them and work at them in order to try to convert them into strengths (which might or might not work depending on your ability to change). 3. You can accept your weaknesses and find ways around them. 4. Or, you can change what you are going after. Which solution you choose will be critically important to the direction of your life. The worst path you can take is the first.”
    85. “I saw pain as nature’s reminder that there is something important for me to learn.”
    86. “Typically, by doing what comes naturally to us, we fail to account for our weaknesses, which leads us to crash. What happens after we crash is most important. Successful people change in ways that allow them to continue to take advantage of their strengths while compensating for their weaknesses and unsuccessful people don’t.”
    87. “Over the course of our lives, we make millions and millions of decisions that are essentially bets, some large and some small. It pays to think about how we make them because they are what ultimately determine the quality of our lives.”
    88. “Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside.”
    89. “Remember not to be overconfident in your assessments, as it’s possible you are wrong.”
    90. “What was most important wasn’t knowing the future—it was knowing how to react appropriately to the information available at each point in time.”
    91. “Remember that weaknesses don’t matter if you find solutions.”
    92. “To be principled means to consistently operate with principles that can be clearly explained.”
    93. “what was most important wasn’t knowing the future—it was knowing how to react appropriately to the information available at each point in time.”
    94. “Don’t hire people just to fit the first job they will do; hire people you want to share your life with.”
    95. “I should add, though, that putting responsibility in the hands of inexperienced people doesn’t always work out so well. Some painful lessons that you’ll read about later taught me that it can be a mistake to undervalue experience.”
    96. “As much as I love and have benefited from artificial intelligence, I believe that only people can discover such things and then program computers to do them. That’s why I believe that the right people, working with each other and with computers, are the key to success.”
    97. “Understand the differences between managing, micromanaging, and not managing.”
    98. “The key is to fail, learn, and improve quickly. If you’re constantly learning and improving, your evolutionary process will be ascending. Do do it poorly, it will be descending. So I believe evolving is life’s greatest accomplishment and its greatest award.”
    99. “It’ll be decades—and maybe never—before the computer can replicate many of the things that the brain can do in terms of imagination, synthesis, and creativity. That’s because the brain comes genetically programmed with millions of years of abilities honed through evolution. The “science” of decision making that underlies many computer systems remains much less valuable than the “art.”
    100. “When a line of reasoning is jumbled and confusing, it’s often because the speaker has gotten caught up in below-the-line details without connecting them back to the major points.
    101. no matter what asset class one held, there would come a time when it would lose most of its value. This included cash, which is the worst investment over time because it loses value after adjusting for inflation and taxes.
    102. “Remember that most people will pretend to operate in your interest while operating in their own.”
    103. “circumstances life brings you, you will be more likely to succeed and find happiness if you take responsibility for making your decisions well instead of complaining about things being beyond your control”
    104. “You better make sense of what happened to other people in other times and other places because if you don’t you won’t know if these things can happen to you and, if they do, you won’t know how to deal with them.”
    105. “Around this time, McDonald’s had conceived of a new product, the Chicken McNugget, but they were reluctant to bring it to market because of their concern that chicken prices might rise and squeeze their profit margins. Chicken producers like Lane wouldn’t agree to sell to them at a fixed price because they were worried that their costs would go up and they would be squeezed. As I thought about the problem, it occurred to me that in economic terms a chicken can be seen as a simple machine consisting of a chick plus its feed. The most volatile cost that the chicken producer needed to worry about was feed prices. I showed Lane how to use a mix of corn and soymeal futures to lock in costs so they could quote a fixed price to McDonald’s. Having greatly reduced its price risk, McDonald’s introduced the McNugget in 1983. I felt great about helping make that happen.”
    106. “Remember that when it comes to assessing people, the two biggest mistakes you can make are being overconfident in your assessment and failing to get in sync on it.”
    107. “However, rather than blindly following the computer’s recommendations, I would have the computer work in parallel with my own analysis and then compare the two. When the computer’s decision was different from mine, I would examine why. Most of the time, it was because I had overlooked something. In those cases, the computer taught me. But sometimes I would think about some new criteria my system would’ve missed, so I would then teach the computer. We helped each other.”
    108. “People who do this fail because they are stubbornly stuck in their own heads.”
    109. “Learn about your people and have them learn about you through frank conversations about mistakes and their root causes.”
    110. “If something went badly, you had to put it in the log, characterize its severity, and make clear who was responsible for it. If a mistake happened and you logged it, you were okay. If you didn’t log it, you would be in deep trouble.”
    111. “I’ve often thought that parents and schools overemphasize the value of having the right answers all the time. It seems to me that the best students in school tend to be the worst at learning from their mistakes, because they have been conditioned to associate mistakes with failure instead of opportunity.”
    112. “I believe one of the most valuable things you can do to improve your decision making is to think through your principles for making decisions, write them out in both words and computer algorithms, back-test them if possible, and use them on a real-time basis to run in parallel with your brain’s decision making.”
    113. “you choose to push through this often painful process of personal evolution, you will naturally “ascend” to higher and higher levels.”
    114. “When faced with a choice between achieving their goal or pleasing (or not disappointing) others, they would choose achieving their goal every time.”
    115. “While it’s easier to avoid confrontations in the short run, the consequences of doing so can be massively destructive in the long term. It’s critical that conflicts actually get resolved—not through superficial compromise, but through seeking the important, accurate conclusions.”
    116. “Know that nobody can see themselves objectively. While we should all strive to see ourselves objectively, we shouldn’t expect everyone to be able to do that well. We all have blind spots; people are by definition subjective. For this reason, it is everyone’s responsibility to help others learn what is true about themselves by giving them honest feedback, holding them accountable, and working through disagreements in an open-minded way.”
    117. “Teach and reinforce the merits of mistake-based learning. To encourage people to bring their mistakes into the open and analyze them objectively, managers need to foster a culture that makes this normal and that penalizes suppressing or covering up mistakes.”
    118. “Don’t be afraid to fix the difficult things.”
    119. “Getting a lot of attention for being successful is a bad position to be in.”
    120. “Slow down your thinking so you can note the criteria you are using to make your decision.”
    121. “Diagnose Problems to Get at Their Root Causes”
    122. “Be evidence- based and encourage others to be the same.”
    123. “there are far fewer types of people in the world than there are people and far fewer different types of situations than there are situations, so matching the right types of people to the right types of situations is key.”
    124. “While making money was good, having meaningful work and meaningful relationships was far better. To me, meaningful work is being on a mission I become engrossed in, and meaningful relationships are those I have with people I care deeply about and who care deeply about me. Think about it: It’s senseless to have making money as your goal as money has no intrinsic value—its value comes from what it can buy, and it can’t buy everything. It’s smarter to start with what you really want, which are your real goals, and then work back to what you need to attain them. Money will be one of the things you need, but it’s not the only one and certainly not the most important one once you get past having the amount you need to get what you really want. When thinking about the things you really want, it pays to think of their relative values so you weigh them properly. In my case, I wanted meaningful work and meaningful relationships equally, and I valued money less—as long as I had enough to take care of my basic needs. In thinking about the relative importance of great relationships and money, it was clear that relationships were more important because there is no amount of money I would take in exchange for a meaningful relationship, because there is nothing I could buy with that money that would be more valuable. So, for me, meaningful work and meaningful relationships were and still are my primary goals and everything I did was for them. Making money was an incidental consequence of that. In the late 1970s, I began sending my observations about the markets to clients via telex. The genesis of these Daily Observations (“ Grains and Oilseeds,” “Livestock and Meats,” “Economy and Financial Markets”) was pretty simple: While our primary business was in managing risk exposures, our clients also called to pick my brain about the markets. Taking those calls became time-consuming, so I decided it would be more efficient to write down my thoughts every day so others could understand my logic and help improve it. It was a good discipline since it forced me to research and reflect every day. It also became a key channel of communication for our business. Today, almost forty years and ten thousand publications later, our Daily Observations are read, reflected on, and argued about by clients and policymakers around the world. I’m still writing them, along with others at Bridgewater, and expect to continue to write them until people don’t care to read them or I die.”
    125. “I didn’t value experience as much as character, creativity, and common sense, which I suppose was related to my having started Bridgewater two years out of school myself, and my belief that having an ability to figure things out is more important than having specific knowledge of how to do something. It seemed to me, young people were creating sensible innovation that was exciting.”
    126. “Great cultures bring problems and disagreements to the surface and solve them well, and they love imagining and building great things that haven’t been built before.”
    127. “If you want to have a community of people who have both high-quality, long-term relationships and a high sense of personal responsibility, you can’t allow a sense of entitlement to creep in.”
    128. “Don’t have anything to do with closed-minded people. Being open-minded is much more important than being bright or smart.”

 

References

  1. CNBC
    • Ray Dalio says ‘greatest tragedy of mankind’ is people clinging to wrong opinions
      Link
  2. Goodreads

 

 

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