Ray Dalio, the head of the world’s largest hedge fund with more than $165 billion under management, says to be a successful investor you have to be an independent thinker, you have to be humble and, related to this, you should always seek out thoughtful disagreement. In a recent blog post, Dalio says truly seeking out thoughtful disagreement is really a matter of getting “over your ego-driven desire to have whatever answer you happen to have in your head be right.”
Ray Dalio on the importance of always fearing being wrong
If you’re always afraid of being wrong, you constantly question your opinions, and that’s a good thing according to Ray Dalio. The only way to get close to a real understanding of the truth is to see all sides of an issue, and the way to do that is asking questions and understanding the big picture, and avoiding the mental/rhetorical trap of “defending a position.”
Continued from part one... Q1 hedge fund letters, conference, scoops etc Abrams and his team want to understand the fundamental economics of every opportunity because, "It is easy to tell what has been, and it is easy to tell what is today, but the biggest deal for the investor is to . . . SORRY! Read More
Self-confidence is one thing, but misplaced confidence due to not asking enough questions to really understand the subject at hand can often lead to expensive mistakes.
Finding “thoughtful disagreement”
Dalio says the key to productive thoughtful disagreement is to truly understand the reasoning in the mind of the person you are thoughtfully disagreeing with. He describes the process as “…holding an opinion and simultaneously stress-testing the hell out of it.”
“Radical truthfulness” at Bridgewater weekly research meetings
Dalio emphasizes the importance of being radically truthful about your investments. A brief quote from the Bridgewater website elucidates what he means. “Bridgewater’s unique results are a product of its unique culture. Truth and excellence are valued above all else. In order to be excellent we need to know what’s true, especially those things that we would rather not be true, so that we can decide how best to deal with them. We want logic and reason to be the basis for making decisions. It is through this striving to be excellent by being radically truthful and transparent that we build meaningful work and meaningful relationships.”
He also points to the practical value of this kind of process at meetings. Dalio says he knows he’s “in good shape” to make a decision when a general consensus is reached, but if there’s still disagreement and the reasoning for it is not fully worked out in his head, then he knows yet more thoughtful disagreement is needed.