Ray Dalio is one of finance’s most influential figures—there’s simply no other way to put it. The legendary Bridgewater Associates, founded by Ray Dalio in 1975, is the world’s largest hedge fund with over $150 billion in assets under management. His net worth is estimated at around $18 billion dollars, making him one of the wealthiest men in the world. He’s also well-regarded for his philanthropic causes; according to Forbes, Ray Dalio has given $768.9 million to support microfinance, inner-city education and nature conservation through the Dalio Foundation.
Ray Dalio was born in Queens, New York in 1949; an only child of jazz musician, Marino Dallolio and homemaker, Ann Dallolio, he was an average student at school but, by age 12, his entrepreneurial bent of mind was already beginning to take shape. From the tips he made as a golfer’s caddie, Dalio bought his first ever stock for less than $5 a share. And he was hooked to the market.
Dalio’s biggest mistake
After completing his MBA from Harvard University, he started Bridgewater Associates from his two-bedroom apartment in New York City. Not seven years later, he almost ran his company into the ground. In 1982, Dalio was certain that the global economy was going to crash and so he traded his stocks accordingly. Instead, the market soared. In his book, Principles: Life and Work, he says, “I was dead wrong … The stock market began a big bull run, and over the next eighteen years the U.S. economy enjoyed the greatest noninflationary growth period in its history.” According to CNBC, Dalio had to lay off all of his employees and take a loan of $4,000 from his father to make ends meet. This was when he was 33.
Dalio’s greatest learning
When Ray Dalio sat down for an AMA on Reddit in May this year, he shared this experience and told Redditors what he learned from it. “You can be worlds smarter and raise your chances of making better decisions if you could simply be humble and worried enough about being wrong to have the smartest people who are willing to disagree with you and challenge you so that you could examine their reasoning.”
Dalio believes that the surest way to success is to critically examine one’s own ideas, without getting too attached to them, by defending them to people who are opposed to them.
Principles: Life and Work
Today, Dalio’s Bridgewater Associates runs on this principle; the billionaire calls it ‘idea-meritocracy’ or “a decision-making system where the best ideas win”. Ray Dalio explains, “No human being has anywhere near the capacity to make the great decisions as great collective decision-making.”
Not just this, Dalio has codified an entire set of tenets or investment principles that skyrocketed his company’s growth, starting from the year 2006. He believes that identifying best practices and the creating processes out of those is an incredibly effective way to minimise risk and improve channels of communication.
The tendency to think that you know what’s best is not unique to Dalio; most of us feel this way, especially when we’re younger. However, experience (and failure) teaches you humility. It’s only when you fail can you re-examine your decision-making process and tweak it—at this stage, it is crucial to listen to what others have to say and learn from their mistakes. Or, in other words, to hedge your bets.