Ray Dalio, The Steve Jobs of Investing

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“Pain plus reflection equals progress.”
– Ray Dalio

Ray Dalio (@raydalio) grew up a middle-class kid from Long Island. He started his investment company Bridgewater Associates out of a two-bedroom apartment at age 26, and it now has roughly $160 billion in assets under management. Over 42 years, he has built Bridgewater into what Fortune considers the fifth most important private company in the U.S.

Along the way, Dalio became one the 100 most influential people in the world (according to Time) and one of the 100 wealthiest people in the world (according to Forbes). Because of his unique investment principles that have changed industries, CIO Magazine dubbed him “the Steve Jobs of investing.”

Ray believes his success is the result of principles he’s learned, codified, and applied to his life and business. Those principles are detailed in his new book Principles: Life and Work.

In this interview, we cover a lot, including:

  • How Ray thinks about investment decisions, how he thinks about correlation, etc.
  • The three books he would give to every graduating high school or college senior
  • How he might assess cryptocurrency
  • And much, much more…

Enjoy!

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Want to hear a podcast featuring another great investor?  — Listen to this conversation with Naval Ravikant. In this episode, we discuss the habits and behaviors of both highly successful and happy people (stream below or right-click here to download):


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QUESTION(S) OF THE DAY: What was your favorite quote or lesson from this episode? Please let me know in the comments.

Scroll below for links and show notes…

Selected Links from the Episode

Bridgewater Associates | Principles.com | Twitter | Facebook

Show Notes

  • Ray describes his middle class childhood in Long Island and what got him hooked on investing at the tender age of 12. [06:33]
  • What Ray learned about business as “a professional mistake-maker.” [08:29]
  • “Pain plus reflection equals progress.” [12:01]
  • Many mistakes are avoidable if we remember to look outside of the events of our own lifetimes and experiences. [14:39]
  • What Ray has learned about patterns from examining history — on a grand scale and in everyday life. [16:42]
  • How evidence-based meritocracy works at the radically truthful, radically transparent environment at Bridgewater. [20:07]
  • Ray talks about the function of his company’s “pain button” app. [23:21]
  • On the “invaluable” benefits of Transcendental Meditation (which Ray has been practicing since 1969). [25:59]
  • Ray gives us the specifics behind his daily TM routine (and what he does when he’s not in his usual surroundings). [29:54]
  • Other tools developed at Bridgewater that promote the company’s culture of truth and transparency. [33:29]
  • Ray explains the three things that go into nurturing an “idea meritocracy” in a company culture — and its benefits. [36:33]
  • The “Two-Minute Rule” and other protocols for preventing disagreement from boiling over into emotionally charged fighting. [40:35]
  • Why does Ray remember early failures more vividly than early successes — and what does this tell him about both? [43:14]
  • What helped Bridgewater win out over some of its more established competition? [46:59]
  • The three ingredients of a successful life. [47:12]
  • What makes intelligent people unhappy? [48:22]
  • Our personal experiences with clinical depression. [49:41]
  • Four protocols Ray’s son Paul follows for dealing with bipolar disorder. [53:24]
  • What I’ve recently learned about observing a consistent, earlier bedtime. [56:03]
  • Why it’s important to work toward removing the stigma of mental illness. [56:57]
  • Ray talks about some of his own positive influences and role models growing up. [1:00:24]
  • What is Ray’s reading process? [1:02:18]
  • Books in Ray’s current reading list. [1:04:31]
  • How does Ray choose what to read? [1:08:00]
  • The three books Ray would give to every graduating high school or college senior. [1:09:49]
  • The best investors I’ve met almost all have a fascination with evolution. Why is that? [1:11:50]
  • Good ways to explore or investigate someone else’s reasoning behind their conclusions. [1:14:42]
  • Ray clarifies one of his most misunderstood maxims: “Don’t pick your battles; fight them all.” [1:16:32]
  • What Ray considers the overarching challenge we all face, and how our challenges adapt over time. [1:17:50]
  • How does Ray define and think about risk? [1:22:54]
  • A deep dive into data sets and the layers on uncorrelated bets. [1:29:43]
  • Learning the basics: Ray explains economics as “a pretty simple machine” in his famous 30-minute video. [1:37:40]
  • How would Ray begin to assess if a new investment opportunity — such as cryptocurrency — is worthwhile? [1:38:38]
  • Assessing the motivations of buyers and sellers. [1:42:05]
  • How should the decreasing value of a favored asset class change an investor’s behavior? [1:45:00]
  • How is Ray’s diversification approach unique? [1:48:00]
  • What advice would Ray have for someone who has the majority of their concentrated portfolio in a particular asset? [1:48:47]
  • What would Ray’s self-talk be like if he found himself stuck in a difficult investment position? [1:51:38]
  • Has stress ever caused Ray to liquidate all positions and start over? [1:53:17]
  • Psychology is a big deal in the markets. Here’s how Ray uses technology to remove a lot of his own emotional stress from the equation. [1:54:46]
  • Wrapping up: making transitions and sharing principles. [1:57:40]

People Mentioned

Posted on: September 13, 2017.

Please check out Tribe of Mentors, my newest book, which shares short, tactical life advice from 100+ world-class performers. Many of the world's most famous entrepreneurs, athletes, investors, poker players, and artists are part of the book. The tips and strategies in Tribe of Mentors have already changed my life, and I hope the same for you. Click here for a sample chapter and full details. Roughly 90% of the guests have never appeared on my podcast.

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58 comments on “Ray Dalio, The Steve Jobs of Investing

  1. Yes, Tony Robbins introduced me to Ray .. I read Money Master the Game cover to cover.. that book led me to Rays videos on youtube … I saw all of them … yes in Lessons of history…will durant says clearly ” devaluated the currency”
    A hyperinflation is on its way … also Robert Kiyosaki’s aquantance .. Mike Malony has some awesome videos to make the delusion clear.. thanks Tim really appreciate your efforts to save people like me ..

    Like

    • Jack, same for me, Tony Robbins book Money Master the Game introduced me to Ray Dalio. I like Ray’s clarity that most likely has roots in his consistent meditative practice. I especially like the 2 minute rule. @tim thanks for bringing Ray on your show @ray thank you for sharing your wisdom and your son’s story.

      Like

  2. Awesome. I love the way Bridgewater has been a focus of Dr. Kegan and Dr. Lahey’s work on Deliberately Developmental Organizations as well. Check out An Everyone Culture.

    Like

  3. Tim – Ray mentioned we are repeating the social/political environment of the 1930s. Has he expressed how he thinks this will play out? If so, would you reference where I might find his comments. Thanks for the interview.

    Like

  4. Thanks for all that you do. Have been following, listening, reading a variety of your works over the past 6 months. Lot of personal growth, which I appreciate… When I am listening to a pod cast, I am often making quick notes. It would an awesome feature to be able to quickly hit a 10 sec rewind button to re-hear something noteworthy and, for me, to make sure I got it right. I find myself scrolling back a minute or ten and spend another couple trying to get back on track… Wanted to share a minor pain-point. Certainly no great issue. Love the work!!

    Like

  5. Amazing podcast as always Tim. As a potential podcast idea, have you ever though of interviewing icons who had retired? We hear so much great stuff from these current elite performers but am curious on the perspective of some of the greats now they are in their older years and what wisdom they have to offer.

    Like

  6. I’m not even 25 minutes through and loving this completely already…had to stop to look up the “pain button” app which it truely genius but somehow evading me. Where can we find this if it is in fact a program or app and if not, how do we find further info on the method of self analysis to implement on our own?

    Liked by 1 person

    • Used to work for bridgewater, the apps are inhouse. Many of the apps are based on his principles (you can find an old version here)

      [Moderator: link to downloadable PDF removed.]

      As for the idea meritocracy- from my experience, it is great in theory, but doesn’t work well in practice

      Liked by 1 person

  7. I, too, have read your books Tim, as well as, Tony Robbins books. Ray Dalio has always seemed like a wizard behind a curtain working his financial magic. How refreshing to hear his existentialist views. Great podcast.

    Like

  8. You five-bullet-Friday, music you are listening to, Gipsy Project, reminiscent of Dan Hicks and His Hot Licks (sans vocals) … fabulous! Thanks, Sarah

    Like

  9. Tim:
    Brilliance reflected both in your questioning and Ray’s responses. Timeless insights into human interaction, history and foibles. Almost at the level of Socrates and Plato… Well done!

    Like

  10. Hi Tim,

    The thing about Ray that intrigues me is his study of pain.

    Let’s face it, most of us avoid pain like the plague. At least the old me did. But when I saw fear and pain as joint gifts, I got to analyzing why I was in such fire straits years ago.

    I ducked my fears, and when I felt pain in any area of my life, I shied away instead of leaning in and feeling it. This is where you learn why you do what you do, and also, how leaning into fear and feeling pain helps you see where you need to go sometimes, to succeed.

    It was not no pain no gain for me; it was, dodge the fear, and suffer pain. Loss of everything pretty much seemed to plague me before I did that reflection that Ray speaks of.

    Actually Tim, per your insistence, and that of Tony Robbins, I have been doing the icy cold shower on waking for months. 20 minutes meditation, 20 minutes yoga, then in the shower I go.

    I got to cheat a bit in places like Thailand, Qatar and Myanmar – all of which we visited earlier this year – but being here in the NE USA, I am not cheating anymore as some nice fall time temps bless us, and the ice shower.

    Super exercise for feeling and embracing fear, and pain during the colder winter months, because when I get that deep cold ice stream for a few seconds even, the headache kicks in and that pain courses through my body. Not a masochist so I only tolerate this for a moment or 2, but goodness it has accelerated my blogging and business growth quite rapidly, these fear-feeling and sometimes, pain-experiencing sessions in the ice shower.

    Thanks for all you do Tim.

    Ryan

    Like

  11. Loved this interview and appreciating Ray’s perspective on how much psychology plays into the markets, as well as his focus on both his mitakes and studying the past to inform future decisions. Thank you, Tim!

    Like

  12. Hey Tim, I love the bit from Ray Dalio about his implementation of the “Pain Button” at his company. A high EQ solution at a high IQ institution –– both unusual and impressive! I recently attended Tony Robbin’s Life & Wealth Mastery in Fiji (bula bula!), and discovered his “Mood Meter” technique where you are to chart your mood throughout the day/week. Sounds very similar to Ray’s idea! I then discovered the MOOD METER app on iTunes and thought you might find it a helpful tool for your listeners. http://moodmeterapp.com/

    Like

  13. Great to hear Ray’s stories about his sons journey through his mental health to wellness. Also loads of investment lessons that have sparked my interest! Brilliant episode again Tim, thanks. Scott

    Like

  14. please interview Da Hongfei, co-founder and CEO of NEO. China’s first open source blockchain.
    He’s a smart guy and has a great project, deserving a great interviewer about this cryptocurrency in general and NEO.

    Like

  15. Great job Tim,

    This is one of those podcasts that will go in the history books, or probably in the Tools of Titans v2 book. With such valuable insights that you are able to extract from the worlds greatest, that book should be on its way in a couple of years I suppose.

    There’s a ton of value in this podcast, definitely worth relistening to it from time to time.

    Thanks for the great work,
    //Felix

    Like

  16. Hey Tim, excellent podcast as always. I’ve heard so much about Ray, so it was refreshing to hear him on this cast. Looking forward to more.

    Like

  17. Great podcast Tim. The focus on mistakes was obviously essential as it is essential to Ray’s story and success. But..

    “What About Failure?”

    Taking things a logical step farther have you considered creating an entire segment of the TFS or at least having a few guests on who didn’t quite make it, but were oh so close? Or those that rose and fell in a notable way? As we just heard from this fantastic podcast, mistakes and failures are life’s great teachers.

    I would imagine that those guests would have some really interesting perspectives. Would they point to one event or moment as defining? Was it a series of habits or lack thereof that created their path?

    I know the show is dedicated to greatness, but failure is its close cousin. Of course every guest you have on does share worthwhile stories of failures and successes. However, I am sure some very interesting and talented (and probably famous) people who are just not quite where they want to be have some amazing stories to share as well.

    Love the show..thank you for your work.

    MTI

    Like

  18. Hi, great podcast as always.

    P.S.

    small but could be useful idea:

    As I often listen podcast on the go, afterwards I go back and forth listening parts of the audio and making my own notes.

    it would be super cool if you could click on these show notes time stamps and get directly on that particular part of the podcast.

    -nenad

    Like

  19. I’ve been an avid listener of your podcast recently (100+ in the last two months). Among my favorites were Tara Brach, Maria Popova and Debbie Millman, but this episode is THE one that will make me 100% trust this podcast. I was skeptical about this one because I am not actively into investing, but I am blown away by the conversation here, and will never have a doubt before listening again. Thank you for all that you do.

    Like

  20. First time hearing about Ray Dalio, but him talking about servant leadership was perfect. I picked this up to talk about in my own blog post.

    [Moderator: link to blog removed.]

    Like

  21. I have a question about TM. Is it necessary to go to the organization and use a teacher? I understand the organization may be sane at the bottom where most people practice, but I have read as some people go deep it may take on a religious connotation. How do you avoid that? Can you simply practice TM on your own?

    Like

  22. To the person behind the screen reading this,

    After watching Ray Dalio’s video I was left wondering if the market will survive the “economic crash”.
    If it does, where should I invest?
    If it doesn’t, what type of system will take its place & how do i learn more about it?
    what can i do before the market crashes to prepare my self ?
    How do i manage funds to optimize savings ?

    The leading cause of debt for millennials is student loans, most of which could not get a job in their respected fields due to market congestion causing liability spending with no returns. As a millennial what can i do to get myself out from underneath a crushing student loan to invest in my future?

    any help in this matter would be very helpful, Thank you.

    From the “middle class” consumer.

    Like

    • Hey there. I guess the book he was mentioning was ”The greek way” by Edith Hamilton. He might have made a mistake while mentioning the book, having also ”The Hero with a Thousand Faces” in mind. Hope you’ll enjoy it.

      Like

  23. I think there’s a mistake on the reference to Unshakable Tony Robbins book, in the podcast the one mentioned where he interviews Ray, its actually Tony’s previous book “Money Master the Game”

    Like

  24. This is my favorite podcast. Though I find myself saying that often after I started listening to your podcasts a year ago, It was after my brother recommended The 4-Hour Workweek. I wish I read your book when it first came out, but I am not sure I would have appreciated it then. Though I am starting to get past what you call middle age. It sounds like your goals like Ray Dalio’s are to learn, teach, and pay it forward. If that is the case, I want to say “Thank You” and you have been successful.

    Like

  25. So what is the up-date on the “homework” from this interview? What have you dug-up found or can add to this interview and show notes?

    Thanks for this interview and the show generally

    Like

  26. You would think Ray would open source their apps. Not a bad marketing / recruiting play. I’d really like to use the pain app.

    Like

  27. One of the key mantras of Ray Dalio is diversification. I believe in true diversification. This means using different strategies with different assumptions. There’s more to investing than buy and hold.

    Like

  28. What a great episode his book and TED talk are INSANE! I was introduced to him through T Robbins’s money books which I found through you. Thank you so much for the help and for the new concepts. Ray is the man, thank you for the ‘introduction’

    Have an awesome week!
    Clay

    Like

  29. So much of this resonated. Especially the unread stack of books staring me in the face…has anyone here tried book summaries available online? There seem to be more and more ‘Sparknotes’ for pop science type books, but not sure if any are worth the time?

    Like