A Peak into Ray Dalio’s Process

July 19, 2011

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The New Yorker conducted had a great long read with Bridgewater’s Ray Dalio. While much of the piece focuses on Dailio’s philosophy and Bridgewater’s culture, the article mentions a a few pieces of information Dalio considers in his investment process. Here is a link to Dalio’s Principles, and a CNBC interview here.

A few notes :

Corporate Culture

“Dalio encourages people to challenge one another’s views, regardless of rank, in what he calls a culture of “radical transparency.”

“I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.”

“I believe that all successful people operate by principles that help them be successful,” a passage on the second page said.

One such principle is to “constantly worry about what you are missing. Even if you acknowledge you are a ‘dumb shit’ and are following the principles and are designing around your weaknesses, understand that you might still be missing things. You will be better and be safer this way.”

“Our greatest power is that we know that we don’t know and we are open to being wrong and learning.”

“Dalio declares that acknowledging errors, studying them, and learning from them is the key to success. He writes, “Pain + Reflection = Progress.”

“An agnostic and a self-described “hyperrealist,” he regards it as self-evident that all social systems obey nature’s laws, and that individual participants get rewarded or punished according to how far they operate in harmony with those laws.

“Creativity comes from open-mindedness and centeredness—seeing things in a non-emotionally charged way.

“I’m always trying to figure out my probability of knowing,” Dalio said. “Given that I’m never sure, I don’t want to have any concentrated bets.”

Investment Process

“If inflation-adjusted interest rates decline in a given country, its currency is likely to decline.”

“Over the long run, the price of gold approximates the total amount of money in circulation divided by the size of the gold stock.”

“Dalio pays particular attention to the amount of credit that banks and other financial institutions are creating, which he regards as a key factor in over-all spending.

 

The process is not entirely quantitatively driven. The management committee must all agree before taking a position

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