Interview with Ray Dalio Founder of Bridgewater Associates and author of Principles: Life And Work

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Ray Dalio speaks at TED2017 - The Future You, April 24-28, 2017, Vancouver, BC, Canada. Photo: Bret Hartman / TED
Hey Everyone,

Recently I hosted Ray Dalio Founder of Bridgewater Associates, which is one of the largest hedge funds in the world with $160 Billion under management. Ray joined us to talk about his bestselling book Principles: Life And Work.
 
From the Amazon description: “In Principles, Dalio shares what he’s learned over the course of his remarkable career. He argues that life, management, economics, and investing can all be systemized into rules and understood like machines. The book’s hundreds of practical lessons, which are built around his cornerstones of “radical truth” and “radical transparency,” include Dalio laying out the most effective ways for individuals and organizations to make decisions, approach challenges, and build strong teams. He also describes the innovative tools the firm uses to bring an idea meritocracy to life, such as creating “baseball cards” for all employees that distill their strengths and weaknesses, and employing computerized decision-making systems to make believability-weighted decisions. While the book brims with novel ideas for organizations and institutions, Principles also offers a clear, straightforward approach to decision-making that Dalio believes anyone can apply, no matter what they’re seeking to achieve.”

His talk covers the following topics:

    • Different stages of life
    • Radical truthfulness and Radical Transparency
    • 5 – Steps to success: Audacious Goals, Failure, Learning Principles, Improving and Achieving goals
    • Meritocracy
    • The Two “You’s” (thoughtfulness and emotional)
    • “Two Minute Rule” when you disagree
    • Key to success
    • Metamorphosis
    • How meditation connects the conscious mind with the subconscious mind
  • And so much more!

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Notes from the talk:

Ray Dalio: “Principles” | Talks at Google

    • 0:32 Entering the third stage in life
        • First stage is learning from others, depending on others; you’re a kid
        • Second stage in life is you’re working, others are depending on you and you’re trying to be successful
      • Third stage in life is others are successful without you and that you’re free “Free to live and free to die” – Joseph Campbell
    • 2:58 Radical truthfulness and radical transparency
    • 4:15 (SLIDE) Audacious Goals > Failure > Learning Principles > Improving > Achieving Goals
    • 23:14 The Two You’s
        • Thoughtful you that’s in our conscious mind
      • Emotional you which is in our subconscious mind
    • 34:20 Any group of individuals can decide whether they’re going to be radically truthful, transparent and on the same mission
    • 38:25 The key to success in life is knowing what you’re good at and who can you be at those things so that you can lean on each other and be effective
    • 46:47 Wealth inequality and populism
  • 55:55 How meditation connects the conscious mind with the subconscious mind

JBT Questions:

    1. 23:03 I’d like to start off with the concept of “The Two You’s” and how that affects our thinking process and feedback?
    1. 25:10 What are some tips that people can help themselves get through the “Two You’s” issue to make them more resilient to feedback?
    1. 28:15 When you have this dialogue and discussion about feedback, it might turn into a tense situation with disagreement. Are there mediumss of exchange that you prioritize because I see some people who will go towards email but when you use email you miss tone, content and context
    1. 29:15 Now let’s say an organization goes through a calamity and there’s a trust issue in the organization. How does the company go about rebuilding trust within employees?
    1. 32:11 Why do you think organizations aren’t going towards radical transparency?
    1. 34:07 What’s important for the mission of Bridgewater? Is it having meaningful relationships? Have you found that with this transparency, you’ve been able to supercharge the relationships that you’ve had in the company?
    1. 35:28 When you created “Principles”, has there been processes where you said, “Maybe this principle worked at this point but now we need to reevaluate it?”
    1. 38:17 Of the five-steps, what do people have the most trouble with?
    1. 39:32 In the book you mentioned Joseph Campbell’s “Hero’s Journey”. [How did his work impact] you with your philosophy?
    1. 45:06 We know a lot of your principles but as far as your father and your mother, what type of principles did they teach you?
    1. 46:31 We were talking about the psychological wealth of having a good family but then there’s an economic component and you’ve been talking a lot about wealth inequality and populism. I thought you could talk a little bit more about that here.
    1. 51:51 If you had a magic wand and you could just write three pieces of policy that could be passed by our congress and approved by the Senate, what would they be to solve this issue that’s going on right now or do you believe it?
    1. 52:58 After the post one period, I mean we had this situation where the threat of WWII kind of united all Americans towards one cause and then after WWII, it left to social progress and I thought after 9/11 happened, we had a period of time where we came together but then just collapsed.
    1. 55:46 You practice meditation. What got you into meditation and what has it done for you?
    1. 59:04 Has it (meditation) helped you analyze your emotions and the heat of an argument?
    1. 58:35 Have you ever found yourself as I found myself start meditating and I’ll start to feel much better and then I’ll say, “Oh, I don’t need meditation anymore so I’ll stop”
    1. 1:00:07 Since the book has came out, what are your thoughts about the reactions to the book? Did you expect the reactions to go the way they currently are?
    1. 1:01:37 Now the apps that you mentioned in the book, when are you planning to release those?
  1. 1:25:09 You’re talking about the evolving process, sometimes it can feel like it shot the gut over and over again. What can you do to make the process easier? 

Audience Questions:

    1. 1:01:59 I really enjoyed your commentary about the kind of secret of life and finding your blind spots. When you talk about that, it reminds me of our own project Oxygen and we talk about the same principles you have in terms of making decisions. So how do you address that because I think one way that we addressed it is through diversity..finding your blind spots. So I think using consensus as a way to measure believability and correctness, so how do you balance those two things? Having everyone having a consensus about an idea versus making sure you have a truly comprehensive range of opinions
    1. 1:04:43 I guess it’s hard because subjectivity is and I think especially in this era of social pressures, I actually think there’s time “Three You’s” (?) right there’s “Are you” (?) and then there’s the intellectual you. Then there’s time the pressures of who should we be and it’s hard when you have something subjective. How do you know?
    1. 1:06:19 One of the things about transparency that you talk about, you argue that it’s great to have it and you give just one exception that kind of itched me when I read/listened to it, which was sharing the compensation information from the employees and you gave arguments that wouldn’t work but I could use the arguments for transparency against that. So I was wondering how you approached that?
    1. 1:09:01 I just wanted to get your perspective on how you see your sort of organizational principles being adopted more widely and more different organizations in particular. I think you had the relative luxury of being able to being the head of your organization. Be able to design the organization – you know operate according to those principles and effectively say you know if you don’t like the way our principles work in this organization you can kind of get lost. Most of us are not in that position. I was wondering how do you see these principles being adopted more widely by people starting organizations that operate according to a set of principles from day one or do you have any advice on how those of us had more of the bottom level of the hierarchy, can influence things at a more local, workgroup level?
    1. 1:11:08 (Online Question) Measurement is a big thing in your book. How do you approach measuring teams whose work has only second-order effects for example product aesthetics or who prevent bad things from happening so you don’t have the counterfactuals?
    1. 1:14:19 One question I keep coming back to is assessing the right timing because we don’t operate in a vacuum coming up with a correct decision, is kind of one thing to be radically truthful when giving feedback but how do you kind of assess the timing around giving that type of feedback or coming to those or executing those decisions?
    1. 1:16:17 I [have] a question regarding the organization group or decision you mentioned that you want the disagreements to be discussed there. I’m wondering if we spend too much time to persuade each other to graduate this discriminate take some time to reach the consensus in the group and miss the opportunity because we take too much time on the group consensus?
    1. 1:17:47 (Online Question) In your book, you talk about making decisions as expected value calculations, I find estimating payoff a lot easier than estimating probability of success given people in general are bad estimating probabilities. Can you share some techniques you found to work well?
    1. 1:19:22 Having read the book, I definitely agree that having principles is a good thing and they help you spot another one of those kind of situations but one thing that I didn’t see covered in the book is at what point do you decide that you’ve seen enough of these situations? That they need a principle because you could have a principle for every event that you see but then you might be overfitting there. On the other hand, you could wait for too many of these. At which point do you mean you’re probably over generalizing?
    1. 1:21:22 I think the process of decision-making in conflict resolution that you’re talking about makes a lot of sense but I’m wondering if a precondition for it is that the group agrees on a general goal even if not knowing how to do it. Well you know in Bridgewater and here at Google but in the public policy arena, I’m not sure how that works because people represent different interest groups and they fundamentally have a different objective. Do you see any modifications that’s required for that case?
    1. 1:22:45 My question pertains to the “Dot System” that you mentioned. You seem to have calculated the believable score for a person all the time collecting information to help you with the digital making process. Has there been, in your thought system, being proven wrong where you calculate someone’s billables called to be very low when over time, he’s been shown that this person is very billable?
    1. 1:24:42 Is there a plan to open Soulstice so that the system can be shared and used by many organizations?
    1. 1:26:25 I started reading the “Principles” PDF that was released I think a couple of years ago and [became happy] that you released the book. These ideas of about radical transparency in the workplace have been coming more into the cultural zeitgeist really good. Your principles have made you a lot money. You’ve had a very successful career and that’s awesome. My question is when you think about your principle of how you’ve chosen to spend your time since you could have retired many years ago, i’m curious how you thought about that and in terms of right now? I think you’re using your time to promote these ideas of principles and decision making and radical transparency and I think you know, hopefully will have a big effect in companies in the world. I’m curious as to why you’ve chosen to do it now instead of earlier and in general, [what] you think about because you haven’t needed to work for a long time. I’m wondering why you chose to continue to work?
    1. 1:29:51 (Online Question) Ray, how do you address the tolerance paradox and organization while striving for radical transparency? You may have some people who will argue views that undermine open discussion
    1. 1:30:30 What’s your believability score?
    1. 1:31:16 Thanks for sharing all the principles that you’ve acquired over your lifetime. My question is slightly off topic, I’m a big believer in value investment and my beliefs been kind of formed by reading the books by Ben Graham and Seda (?) Klarman. Recently, I read the book by David Swenson and he mentions that the biggest determinant and portfolio returns is not stock picking but capital allocation. I’m wondering what’s your views on that?
    1. 1:33:30 Which is Bridgewater’s midterm two year economic outlook for the US?
  1. 1:35:12 I know that Bridgewater’s been producing investment thesis since the beginning. What extent are you willing to and maybe this is a request, are you willing to open those up also possibly pass ones and previous examples?

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