"How To Build A Company Where The Best Ideas Win", Ray Dalio

22 Sep, 2017 | Management

Ray Dalio is worth about $17 billion1. That puts him in the top 100 richest people in the world. So when Ray talks, people listen. He recently spoke at TED; the below video is the result.

Two things I learned from this video:

I’m a “dumb shit”

If Ray say’s he is a dumb shit2, then I must be one too.

The point is to acknowledge that any one person, with only one set of experiences, will likely make poor decisions at some stage. It’s impossible to individually have all the data points, to ignore all the biases.

The important thing is to acknowledge this, as Ray does, and begin to build tools to help act optimally regardless of this.

The upfront cost of good decisions are high

If you watch the video from 9 minutes, Ray gives an example of a real tool Bridgewater use. It was astonishing to me just how much manual input the tool collects from employees. It seems like a huge amount of effort, and it is. Ray also says employees take about 18 months to adjust to this system, which seems a huge time-cost too.

As with anything, there is a trade-off. Ray clearly believes that all this effort is worth it. The implication is that good decisions are very expensive. But guess what, they are cheaper than bad decisions. This reminds me of the idea of preventative maintenance. Borrowed from the airline industry, preventative maintenance is where there are some ongoing maintenance and cost to keep parts in good working condition so that you can avoid the catastrophic costs of something going wrong mid-air.  The analogy is that spending time and effort on a good system for decisions can prevent the catastrophic outcome of some really poor investment decision. In fact, Ray says the reason he began this system in the first place was due to a catastrophic investment decision that left him bankrupt earlier in his career (4.30m).

If you haven’t seen the video yet, I recommend it. It’s an interesting view into the mind of a super successful thinker.

Related posts:

  1. As of 22nd Sep 2017.

  2. He opens his new book Principles with this very statement. He confirms it on twitter.

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