Ray Dalio talks about the Discovery of Truth, Shapers, Idea Meritocracy, Bitcoin and Digital Currencies, Artificial Intelligence (AI) and Algorithms, Principles, Universal Basic Income, Money, Happiness, and more in the conversation with Lex Fridman.
Raymond Thomas Dalio (@raydalio) is an American Billionaire Hedgefund Manager and the Founder of Bridgewater Associates, the World’s Largest Hedge Fund with over $160 Billion in assets under management. Ray began Bridgewater Associates out of a two-bedroom apartment at the age of 26 and has been influential in building it into what Fortune considers the fifth most important private company in the United States.
Ray Dalio has condensed his years of thoughtful decision making as principles into a book, Principles: Life and Work which is a #1 New York Times Bestselling Book recommended by the likes of Bill Gates and Tony Robbins.
Here are the conversation takeaways put succinctly in this Artificial Intelligence Podcast Ray Dalio Show Notes.
- Ray Dalio advises to not let something that has never been done before to stand in the way of experimentation to find the truth.
- The five-step process recommended by Ray going into the world of not knowing – going after your goals, identifying the problems standing in the way of your goals, diagnosing the problems to arrive at their root cause, designing a plan of action to overcome the problems, doing the action and moving towards your goals.
- Ray Dalio mentions that a lot of successful people score poorly on ‘Concern for Others’ in his personality test. This is attributed to their drive for success of the mission.
- Shapers are people who can focus on the grand vision and at the same time pay minute attention to detail in their work.
- Confident and accurate are almost negatively correlated. Many people who are extremely confident are often inaccurate. This can be solved through an idea meritocratic decision-making process where one can increase the probability of making good decisions by stress-testing ideas with other people to come up with the best ideas.
- Ray Dalio was spectacularly wrong in 1981-82 when he was convinced that the U.S. economy was going to fall into a depression. This stand made him lose all money for him and his clients. He had to borrow $4000 from his father to pay his bills. However, the experience made him change his approach to decision making that eventually led to embracing an idea meritocratic decision-making process.
- Idea Meritocracy is the process of finding the best ideas through ways of thoughtful disagreement with the smartest people who are independent thinkers.
- Ray Dalio’s How the Economic Machine Works in 30 Minutes video is highly recommended to learn about how the economy works.
- According to Ray Dalio, money is a medium of exchange and a store hold of wealth.
- Bitcoin fails to meet the conditions to be considered as money by Ray Dalio because it is not an effective medium of exchange and its value is highly volatile due to speculation and other things.
- Ray Dalio says that digital currencies have a lot of hurdles to cross and have a long way to go before being accepted as money.
- Ray Dalio says that if there is something new that happens, it seems only new because it hasn’t happened in one’s lifetime before. However, history is replete with examples of events occurring over and over again. Hence, Ray recommends people study history to learn timeless and universal principles.
- Most of our decisions can be broken down into principles and converted into algorithms which can then be fed into machines to seamlessly make decisions on our behalf. Machines do not get emotional and can process huge amounts of data, both of which will ensure our best decisions are repeated over and over again.
- Principles in Action app is available for iOS users to help them in coming up with and recording their own principles in life.
- The best decisions can be achieved when the goals of the lower emotional state are aligned with the goals of the higher logical state.
- According to Ray Dalio, opportunity in the early stages of one’s life should be the most important thing and available to all – like education that will put a person in good stead to build his/her own future. He is divided on the Universal Basic Income (UBI) stand because it can have both positive and negative outcomes.
- After a certain level where the basic needs are met and sufficient security is in place, there is no correlation between the level of money and the level of happiness.
- Money, however, gives you the ability to make choices and help make dreams happen in various ways.
- Ray Dalio recommends making work and passion the same thing. Meaningful work with meaningful people is fabulous for most people.
- Ray Dalio says that according to research, the highest level of happiness is reached between the ages of 70 and 80.
- Ray Dalio says that we are tiny bits in the evolutionary process and that his meaning of existence is to personally evolve and contribute to evolution.
Ray Dalio Quotes
- “Don’t let something that has never been done before stand in the way of you doing that particular thing, because almost the only way you understand what truth is, is through experimentation.”
- “What’s common produces only common results.”
- “If the future can be different from the past and you don’t have a deep understanding, you should not rely on AI.”
- “Imaginary genius is at the edge of insanity.”
Finding Truth in an Unknown Quest
Ray Dalio advises to not let something that has never been done before to deter the efforts on experimentation to find the truth. Conventional views on what is true are very often wrong.
- Ray Dalio explains his five steps to go about knowing the unknown
- He explains the five-step process as going after your goals, encountering and identifying the problems that stand in your way, diagnosing the problems to find the root cause of them, designing an action plan to overcome the problems, doing and executing the plan to move towards your goals.
Ray Dalio mentions that ‘Shapers’ are grand visionaries who while working towards their grand vision also take immense care of the minute details. He gives Elon Musk and Bill Gates as examples of Shapers.
The commonalities of Shapers, according to Ray Dalio are,
- Excitement for the call for adventure
- Ability to focus from the big picture to the smallest details
- Ability to deal with people to achieve the mission
- Knowing how to deal well with their not knowing
He notes that Shapers score poorly in the ‘Concern for Others’ part of his personality test because to them there is nothing more important than achieving the mission. Even social revolutionists like Muhammad Yunus and Geoffrey Canada scored poorly in ‘Concern for Others’.
Ray Dalio’s Bridgewater Associates has embraced the idea meritocratic decision-making process where the best decision wins.
He notes that a lot of people who are extremely confident are often inaccurate and they can improve their chances of being right by stress-testing their ideas with other smart people so that the best ideas win.
- Ray Dalio was convinced of a U.S. economic depression in 1981-82 that he bet on it and failed. He lost his money and his client’s money and had to borrow $4000 from his father to pay his bills. The experience made him come up with strategies to reduce his probability of being wrong which eventually led to the idea meritocratic decision-making process.
- Ray Dalio hires smart people who are independent thinkers and involves in ways of thoughtful disagreement with them to bring out the best ideas.
- One way of practicing thoughtful disagreement is through triangulation whereby a smart person is invited into a topic of discussion between two people to explore the truth. The whole process is done with open-mindedness and assertiveness at the same time.
Bitcoin and Digital Currencies
According to Ray Dalio, money is a medium of exchange and a store hold of wealth. Based on this, Bitcoin fails to meet the criteria to be referred to as ‘money’.
However, he also says that every currency has ended as a currency and has devalued as a currency over long periods of time.
- According to Ray Dalio, Bitcoin is not an effective medium of exchange and not an effective store hold of wealth because its value is highly volatile and affected due to speculation and other things.
- Ray Dalio feels that Facebook’s Libra currency has advantages over Bitcoin as being a better medium of exchange and store hold of wealth because of being linked to a lot of other digital assets.
- In Ray’s opinion, some digital currencies are likely to succeed more or less based on their ability to be a medium of exchange and a store hold of wealth.
- He is concerned if the central banks would allow digital currencies to exist. There are a lot of hurdles and a long way to go before things get sorted.
Artificial Intelligence and Algorithms
Ray Dalio’s Bridgewater Associates makes use of a lot of algorithms in their decision-making process. He makes his point by saying that AI is good at processing a lot of information and if the decision-making process can be broken down and fed into machines as algorithms, they can help us repeatedly make the best decision.
- According to Ray Dalio, any notion of thinking as processing, machines can do better than humans. And, any notion of thinking as being creative or other things, humans can do better than machines.
- Two ways to come up with algorithms,
- You can put your thinking into the machine as an algorithm
- You can put a lot of data into the machine and use Machine Learning (ML) to come up with the algorithm
- Ray Dalio recommends people take the time to write down their decision-making criteria before making a decision or just past making a decision which will then become their principle that can be applied to similar situations in the future.
Automation, Future, and Emotions
Ray Dalio believes that while a lot of decision-making processes can be automated, the need to care for emotions will not make our entire lives automated in the future.
He says that people need to achieve an alignment between the goals of their lower emotional-self and higher logical-self to make the best choices for themselves. He finds meditation to be very helpful in achieving this alignment.
Artificial Intelligence can be used as a force for good. However, there is a need to address the emergency situation playing out with the wealth gap, opportunity gap, and inequality arising due to AI.
Universal Basic Income
- Ray Dalio believes that everybody should be given equal opportunity in the early stages of their development, like equal opportunities in education to fend for themselves in society.
- However, he thinks that Universal Basic Income (UBI) can have both positive and negative impacts depending on the beneficiary and their motives.
Money and Happiness
- Ray Dalio believes that after a certain level where the basic needs are met and sufficient security is in place, there is no correlation between the amount of money and the level of happiness.
- He says that money definitely helps in the ability to make choices.
- Money also helps dreams come true in various ways.
- Ray Dalio advises people to make work and passion the same thing because for most people meaningful work with meaningful people is fabulous.
- According to research, the highest levels of a person’s happiness is between the ages of 70 and 80.
- Watch Ray Dalio’s How the Economic Machine Works in 30 Minutes video to learn about how the economy works. There are many other informative videos available on his YouTube Channel.
- You can get Ray Dalio’s Principles for Navigating Big Debt Crisis book free as a PDF online or buy a print book of it.
- Ray Dalio himself is amazed at times at how the economy works at such a large scale seamlessly.
- If there is something new that happens, it seems only new because it hasn’t happened in one’s lifetime before. History is replete with examples of events occurring over and over again. Ray Dalio recommends people to study history to learn timeless and universal principles.
- If we believe that the future can be different from the past and don’t have a deep understanding of the cause-effect relationships leading us to make a bet in a particular space, we should not rely on AI.