- Bridgewater Associates co-chief investment officer & co-chairman Ray Dalio was recently interviewed by Reid Hoffman. Here are some insights from their talk.
Bridgewater Associates co-chief investment officer & co-chairman Ray Dalio leads a firm that manages $160 billion. Recently, LinkedIn co-founder and Greylock partner Reid Hoffman interviewed Dalio on his podcast “Masters of Scale.” And Dalio explained that seeking talent who are not afraid to disagree with you can be the key to success.
In 1982, Dalio had his investment portfolio on the decline of the economy. At that time, the stock market was at the bottom and a bull market began after that. So Dalio lost his money and the money of his clients. As a result, he had to let everyone at his company go and had to borrow $4,000 from his dad to pay for family expenses.
“Pain is a great teacher. It gave me the humility I needed, it made me think, ‘How do I know I’m right?’ And that changed my approach,” said Dalio during the interview. “How do I find the smartest people I know who disagree with me – and are willing to disagree with each other but who really care about your outcome? You learn a tremendous amount and that raises one’s probability of being right.”
Hoffman agreed with this notion. Hoffman said that when people who are starting a new venture or going about your life tend to seek out agreements in order to feel secure and supported. However, agreement on its own can lead to confirmation bias and it is better to seek actively encouraging disagreement. At Bridgewater, the investment firm sets up “probing sessions” to stimulate critical thinking with potentially differing opinions in the form of questioning and answering.
“I’ve got a principle that it’s ok to make mistakes but it’s not ok to not learn from,” Dalio added. “I think every organization, or every relationship, requires people to decide how they’re going to be with each other. I’m going to be radically truthful with you and radically transparent and I would expect you to be radically truthful and transparent with me. And so that’s really how it started.”
Dalio also pointed out that he wanted his company to have an idea meritocracy where the best ideas win out wherever they come from. Dalio wanted to be challenged himself and others to be challenged.
This inspired an idea for Dalio. Dalio suggested that whenever you are in a position of making an important decision, you should write down your criteria or principles for doing it especially as your organization becomes larger. These principles for Dalio became an internal memo and then a downloadable compendium called “Principles.”
“I had this compendium that we did, I put a PDF online and it was downloaded about three million times, and a lot of people asked me about it and so on. So I felt a little bit more comfortable and I saw that it was helping a lot of people,” explained Dalio. “And then when I decided that I’m in my transition out of the second phase in one’s life to the third phase in one’s life, I decided that I would put it all together and put it out as a book to pass it along.”
The book became a New York Times bestseller. And then it was ported over to animated videos and a native iPhone app. Plus the Principles Instagram account now has about 300,000 followers.
