Ray Dalio shares career lessons, big mistakes, and key investing principles in a new MasterClass. Here are the 16 best quotes.
Hollis Johnson
- Ray Dalio reflects on his career and lays out his investing philosophy in a new MasterClass episode.
- The Bridgewater founder recalls punching his boss, and almost going broke after a bad bet.
- Dalio touches on Chicken McNuggets, the Olympics, Navy SEALs, and the changing world order.
Ray Dalio lays out the key lessons he's learned, biggest mistakes he's made, and his investing philosophy in a MasterClass episode released this week.
Dalio is the billionaire founder of the world's largest hedge fund, Bridgewater Associates, and the author of "Principles" and "Principles for Dealing with the Changing World Order." In the episode, he recalls buying his first stock, nearly losing everything after placing a bad bet, and helping to make McDonald's Chicken McNuggets a reality.
The top-flight investor also tells the story of how he got fired for punching his boss, argues that beating the market is harder than competing in the Olympics, and underscores the challenges facing the global economy today.
Here are Dalio's 16 best quotes from his MasterClass episode, lightly edited for length and clarity:
1. "I figured this game is easy, and I liked the game. But of course I learned with time, this game is anything but easy." (Dalio was recalling how he used his earnings as a golf caddy to buy his first shares, which tripled in value after the company was acquired.)
2. "That was an epiphany, it made me a macro investor, and I had a realization. The same thing happens over and over again throughout history, so one has to understand the cause-effect relationships." (Dalio spotted a direct parallel between President Nixon taking the US off the gold standard in 1971, and President Roosevelt doing the same in 1933.)
3."I realized that the only way that I could succeed was understanding how reality works as a machine. And that way of thinking made my career and my life work a whole lot better." (Dalio saw that factors such as personalities, group interactions, monetary policy, and changes in inventiveness are all interconnected.)
4. "On New Year's Eve, I got into a fight with a boss. We had too much to drink and it ended up where I decked him, and I also did some other rowdy things. It was clear to them that I wasn't necessarily a model employee, and clear to me doing things on my own might be a better path." (Dalio was explaining why he decided to strike out on his own.)
5. "That's how Chicken McNuggets first got its pricing and came into existence in the volatile markets." (Dalio helped a chicken producer hedge against changes in its corn and soybean costs by purchasing futures, which allowed it to offer McDonald's the fixed price for chicken it needed to launch the famous menu item.)
6. "In the early 80s, I made one of the biggest bets of my career, and I couldn't have been more wrong. I lost money for me, I lost money for clients. I was so broke that I had to borrow $4,000 from my dad in order to pay for my family bills. I didn't know whether I was going to have to go back, put on a tie, get on the train, and commute to a Wall Street job or not. This was a very painful experience, and yet it was probably one of the best experiences that happened to me, because it changed my way of thinking." (Dalio thought Mexico defaulting on its debt would tank the stock market, but it rallied instead.)
7. "I made a mistake of betting too much on my opinions. I realized I needed to open my mind up to other people's perspectives to make better decisions."
8. "I don't think that I'm in any way intrinsically better or more capable than most people. I think my approach to pain, mistakes, and weaknesses is a differentiating characteristic."
9. "I'm a professional mistake maker, meaning I would say probably one third of the decisions that I make in the markets is probably wrong."
10. "Probably for a third of the people who've come, maybe 40%, it's not for them, it's too difficult, or they may have bruised egos. For the others, they can't work anywhere else because of the ability to challenge anything, to say anything, to see everything, and to have that idea meritocracy. Which means that not everybody makes the cut, not everybody gets a trophy. It's like an intellectual Navy SEALs or something, it's that kind of culture." (Dalio was discussing Bridgewater's encouragement of radical transparency in the workplace.)
11. "The holy grail of investing is to have 15 good, uncorrelated investments. If you can do that, you can decrease the risk by about 80% while keeping that returns the same."
12. "What knocks people out is the risk of ruin. It's that one time that gets you."
13. "If you want to know the key to our success over such a long period of time, it's that we've survived."
14. "Assume the worst. Assume that after inflation and taxes and everything it falls in half, so have twice as much money as you need. When you've got that, you've got freedom, you've got power." (Dalio was describing how much money an everyday investor should keep in the safest of their portfolios."
15. "The way that you play the game is first to know what you know, and know what you don't know. To succeed in the markets is more difficult than to succeed in the Olympics — there are more people who are trying to do it, they've got more money and resources."
16. "When these three forces come together, it can lead to terrible times with bad economic conditions and often a new world order. I can't tell you whether we're going to go over the brink or not, but I would say that the odds of some kind of irreconcilable differences are higher than they've been in our life before." (Dalio was describing his three main concerns: debt levels, internal conflict, and external conflicts.)
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