Ray Dalio, The Steve Jobs of Investing (#264)

“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

• Principles: Life and Work by Ray Dalio
• Connect with Ray Dalio:

Bridgewater Associates | Principles.com | Twitter | Facebook

• Einstein’s Mistakes: The Human Failings of Genius by Hans C. Ohanian
• Us v Them: The Birth of Populism by John B Judis, The Guardian
• Schism Atop Bridgewater, the World’s Largest Hedge Fund: Bridgewater Associates Founder Ray Dalio and Presumed Heir Apparent Greg Jensen Called for Votes on Each Other’s Conduct; Using the ‘Pain Button’ by Rob Copeland and Bradley Hope, The Wall Street Journal
• Employees at the World’s Largest Hedge Fund Use an App to Rate Each Other on Over 100 Traits — Here’s How It Works by Richard Feloni, Business Insider
• Ray’s TED Talk: How to Build a Company Where the Best Ideas Win
• My most recent TED Talk: Why You Should Define Your Fears Instead of Your Goals
• Paul Dalio on Being Proud to Be Bipolar, Charlie Rose
• Touched with Fire
• Could It Be Bipolar? 14 Signs to Look For by Timothy J. Legg and Kathryn Watson, Healthline
• Sapiens: A Brief History of Humankind by Yuval Noah Harari
• The Undoing Project: A Friendship That Changed Our Minds by Michael Lewis
• The Upside of Inequality: How Good Intentions Undermine the Middle Class by Edward Conard
• The Serengeti Rules: The Quest to Discover How Life Works and Why It Matters by Sean B. Carroll
• From Bacteria to Bach and Back: The Evolution of Minds by Daniel C. Dennett
• A Magic Web: The Forest of Barro Colorado Island by Christian Ziegler and Egbert G. Leigh
• The Hero with a Thousand Faces by Joseph Campbell
• The Lessons of History by Will Durant and Ariel Durant
• River Out of Eden: A Darwinian View of Life by Richard Dawkins
• Ray’s famous video: How the Economic Machine Works (in 30 Minutes)
• The Quiet Master of Cryptocurrency — Nick Szabo
• Unshakeable: Your Financial Freedom Playbook by Tony Robbins
• More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby

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

• Steve Jobs
• Bill Gates
• Albert Einstein
• Richard Nixon
• George Soros
• Karl Popper
• Rick Rubin
• Chase Jarvis
• Paul Dalio
• Saint Christopher
• Abraham Lincoln
• Winston Churchill
• Pyotr Ilyich Tchaikovsky
• Joseph Campbell
• Will Durant
• Ariel Durant
• Richard Dawkins
• Sigmund Freud
• Tony Robbins
• David F. Swenson

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