Author: Ray Dalio
Translation: Tencent Finance
Editor's note:
Recently, renowned hedge fund investor Ray Dalio sold his remaining shares in Bridgewater Associates and stepped down from the board, marking the end of a turbulent power transition at the hedge fund he founded.
On August 1, Dalio reflected on his 50 years of operation at Bridgewater Fund on his social media, revisiting his principles on life, work, and investment. He said, 'Pain + Reflection = Progress; ensure the probability of unacceptable losses is zero.'
Here is the full text published by Ray Dalio:
Many people ask me how I feel about the legacy of founding Bridgewater over the past 50 years.
I am very excited about this! I think it has been a truly wonderful journey, and I remember almost every moment vividly:
From the beginning, when I created Bridgewater with a guy who played football in a two-bedroom apartment, to building Bridgewater into the world's largest hedge fund with an excellent team of about 1,500 people, to the fact that we have made far more money for clients than any other hedge fund—up until now, as of July 1, completing the final step of passing the baton of Bridgewater to the next generation, I firmly believe they are fully capable of continuing the company's brilliance and prosperity for another 50 years. What a wonderful journey! How delightful!
Most importantly, I am very excited about this because I love to see that Bridgewater thrives without me, even better than when I was at the company. This is because I see it as a natural lifecycle, I am a 76-year-old elder, and I love Bridgewater and its employees (I have worked with many of them for decades), from my perspective, this process is like watching my child thrive even without me, which is certainly much better than a 76-year-old parent having to take care of children.
I have witnessed the process of Bridgewater becoming strong at 50 years old. It was founded and operated by a 26-year-old young man, and now it is operated by a group of people who are 25 to 50 years younger than the current founder, as well as those who co-founded with me and are now managers at Bridgewater—most importantly, Bob Prince, Greg Jensen, Karen Karniol-Tambour, and Nir Bar Dea, who are also experiencing their own lifecycle in the same beautiful way.
I see these important members continue to modernize Bridgewater, following the efficient principles that established Bridgewater 50 years ago, while also adhering to new traditions developed by the next generation. This makes me very happy because I can now freely focus on the exciting and fulfilling things I love to do. I particularly enjoy passing on valuable things I have to others, especially those principles that have helped me. I still enjoy playing the investment game, I love having more time with family and friends, ocean exploration brings me endless joy, and like Jacques Cousteau, I present all of this to people through media (you can check out the show on Disney Plus (OceanXplorers)).
At this stage of my life, one of my main goals is to pass on the principles that have helped me, so I want to share some of the most important principles that have driven Bridgewater's success over the past 50 years. If you are interested, I want to tell you how to learn and gain more principles like these. They include both work principles about how to run an organization and investment principles about how to make money in the market.
I believe the most important 'principles of work' that have driven Bridgewater's success over the past 50 years are:
1. Choose the right people and culture.
2. Choose people with excellent qualities and outstanding abilities, and build a culture of intellectual elite. The culture of intellectual elite is achieved through extreme sincerity and extreme transparency to accomplish important work and important relationships.
3. Create a culture of tolerance for mistakes, but it is unacceptable not to learn from them.
4. Pain + Reflection = Progress
To fully understand my work principles, please refer to my book (Principles: Life and Work).
The most important investment principle behind Bridgewater's success is:
1. Reality is like a machine, so it is necessary to understand how the machine works and to have reliable good principles to handle these operations.
2. Understand the causal relationships that drive change, because there is a cause before there is an effect, so understanding these causal relationships will help you predict what is going to happen.
3. Clearly define decision-making criteria, backtest these criteria, systematize them, and then computerize them, so that a well-thought-out and thoroughly tested game plan can be executed.
4. Recognize that knowing what you don't know is much more important than knowing everything.
5. Know how to diversify well, because doing so can reduce risk by 80% without lowering expected returns.
6. Seek out the smartest people, even if they disagree with you, as their thoughtful dissent will pressure-test your thinking, increasing your chances of making the right decisions and teaching you a lot.
7. Ensure the probability of unacceptable losses is zero.
If you are interested in my investment and economic principles, please look out for my next book, and these principles are now also included in the online Dalio Market Principles course offered by the Singapore Wealth Management Institute—where you can also hear my latest thoughts on investment principles.
