Ray Dalio is the founder of Bridgewater Associates, the largest hedge fund in the world. He’s also a billionaire investor with a net worth of $19.1 billion.
My brothers and I read his famous book, Principles, where he shares lessons that have helped him win in business and life. In the book, he details his surprising origin story - a humble beginning involving the small two bedroom apartment in New York City where he started his massive enterprise that now has thousands of employees and is responsible for assets valued at $150 billion.
Below, we’re detailing the top 5 takeaways we’ve picked up from this trailblazing investor, entrepreneur, and maverick.
Warning: Ego Leads to Errors
Ray Dalio’s leadership style is one of the main factors that has contributed to the rapid and sustainable growth of Bridgewater Associates, and it heavily involves risk. Risk is a common buzzword in real estate and investing in general. In the book, Ray Dalio cites ego and blind spots are two critical weaknesses of many smart people with strong work ethics. According to him, it’s these two factors that keep them from reaching their full potential. Ray defines the ego as “... your subliminal defense mechanisms that make it hard for you to accept your mistakes and weaknesses. Your deepest-seated needs and fears - such as the need to be loved and the fear of losing love, the need to survive and the fear of not surviving, the need to be important and the fear of not mattering - reside in the primitive parts of your brain such as the amygdala.”
A person’s blind spots are the weaknesses we all have that we don’t pay attention to. Failing to assess yourself and your performance through an objective lens is a fatal mistake, because it leads to the repetition of the same errors over and over again.
So how can a person solve these problems? Onto the next takeaway.
Mind Your Mindset
To overcome their ego, investors should first accept the fact that they don’t know everything. One of our favorite pieces of wisdom we’ve picked up from our mentors is that the older you get, the more you realize you don’t know. Ray Dalio takes this a step further, arguing that the people who disagree with you might have access to useful information that can help you make more informed decisions. But in order for these conversations to take place, we must have an open-mind and hold the perspective that we’re adding to a pool of knowledge rather than fighting to prove who is right.
When it comes to dealing with blind spots, Ray Dalio suggests investors go to credible people and ask good questions. These credible people should have a track record or experience. This idea reminds me of Robert Kiyosaki’s advice on only learning from “real teachers,” or people who actually practice what they preach, and do it well. We need to be willing to learn from people who are wiser than us. This helps us identify where we are weak, and improve in these areas.
One Man’s Thoughts Are Another Man’s Treasure
Ray Dalio understood the importance of leveraging the knowledge and experience of others when he was getting his start in the investment space. He asked multiple people - from his barber to his stockbroker - for their opinions on investing. When he asked these questions, he wasn’t looking for their market opinions. He wanted insight into how they thought. By learning the way they reasoned, he was able to develop his own method of trading with accuracy.
He expanded on this in the book by explaining that every person thinks differently. These differences are an asset if an organization is able to identify a person’s given expertise and facilitate a way for them to use it to help the organization as a whole achieve its mission. At Bridgewater and Associates, every employee takes a personality test to determine these traits. My brothers and I have applied this by identifying our natural strengths and weaknesses and creating distinct lanes we each can thrive in.
Here’s an example of a personality test.
The Road To Riches Starts With Goals
The image above is a visual representation of Ray Dalio’s 5 Step Process.
According to Ray Dalio, a majority of people use the process of setting a goal, identifying problems, and then finding the solutions to those problems in order to reach their goal. This linear path is not as effective as the one Dalio outlines.
Here’s the breakdown of this process that Dalio uses to achieve his goals:
Step 1: Identifying a clear goal is key because it allows you to know what your end destination will be. There’s no point in us getting into a car and driving if we don’t know where we’re going.
Step 2: Defining the problems that we might confront along the way is the next step. Digging deep to refine the core causes of these issues will help us make sure any solution we come up with is relevant and effective.
Step 3: Designing a clear game plan to overcome these problems is the next step.
Step 4: Taking action to implement the game plan and overcome the problems.
Step 5: On this step, we’ll revisit our goals, a reflection of Dalio’s argument that the pursuit of any goal should be iterative. It’s appropriate to go through the process again with the wisdom you gained from the first run-through.
A Billionaire’s Take On Life and Meaning
One of our top takeaways from Dalio is his perspective on what gives his life meaning. As someone who has accomplished a lot from a worldly perspective, his insights are both unique and refreshing.
Dalio explains that meaningful work and meaningful relationships are the two things that fulfill him. He argues that having meaningful work, hobbies, or passions makes the process more enjoyable and reduces the discomfort that comes with the obstacles that arise. Meaningful relationships - both professional and personal - are critical to a happy life, according to the Bridgewater Associates founder. In one of his most memorable quotes, he says that if you “make your work and your passion one and the same and do it with people you want to be with,” you will win in life.
We’re willing to take the bet that he’s right.