Thoughtful Disagreement

I caught a good interview by Charlie Rose on Bloomberg TV the other night of Ray Dalio, founder and head of Bridgewater Associates, the world’s largest hedge fund with some $150 billion in assets under management. Dalio has been making the rounds recently in promoting his new book, ‘Principles’, in which he lays out his beliefs for the investment business and the business of life. Now in book form, Dalio previously offered his work for free and which was downloaded more than three million times. For very good reason, when Dalio speaks, he is listened to even more than EF Hutton.
One of the best things about Dalio (and if you’re unfamiliar with him, please do a search on Google) is his rags-to-riches real life experience and his strong belief that we learn through our mistakes. In his case, his biggest failure and the cause of his near financial ruin was a mistaken bet on a stock market collapse in the summer of 1982. Instead of the market tanking for all the reasons Dalio had (correctly) anticipated, it exploded with a vengeance, creating losses and forcing him to lay off his employees (with whom he held close personal relationships) and resort to borrowing $4000 from his father to survive. For a more detailed version of the affair, here’s a good link.
Staring into his own personal abyss, Dalio vowed to learn from it and set about to do just that, succeeding far beyond what anyone could have ever imagined. What resulted was an organized and disciplined approach to dealing with decisions and mistakes. Please recognize that I am paraphrasing in very simple terms what is a detailed plan for action on his part. In essence, Dalio’s design was to come up with investment ideas not currently widely-embraced (allowing for big rewards if correct), but then to subject those ideas to intense and deliberate critique. In Dalio’s words, the critique should take the form of ‘thoughtful disagreement’. Spend time and energy uncovering and developing new ideas, but then spend just as much effort in trying to uncover what’s wrong with the new ideas (before the market tells you that the idea was flawed). All in all, pretty good stuff.

This post was published at SilverSeek on October 2, 2017.