Ray Dalio is a renowned investor and founder of Bridgewater Associates.
According to their website, while some have attributed Bridgewater’s success to Dalio’s unusual way of thinking, he credits it not to something unique about him personally but to his stumbling upon a principled approach that anyone can follow.
This approach produces rapid gains in understanding how reality works and helps with developing principles for dealing with it well.
Below is a brief summary of his approach:
- Life is a journey to learn about your own nature and find the right paths that are consistent with it.
- While on this journey, you will constantly encounter realities that can teach you and help you evolve your ability to deal with reality well. Doing this effectively is the key to living up to your potential.
- Reality works like a machine with everything we encounter being the result of cause-effect relationships.
- Because most everything happens repeatedly in slightly varied versions, by studying many cases of something, you can understand the cause-effect relationships behind how it works and come up with principles for dealing with it well.
- Being explicit about your principles and stress-testing them improves your decision making and likelihood of success.
- In order to be successful, you need to work well with others.
- The most important determinant of the success of a group of people is its culture.
- Having both meaningful work and meaningful relationships is the most effective way of having a successful culture and highly rewarding in and of itself.
- How you deal with what you don’t know is much more important than what you know.
N.B. The views expressed below are his own, not Bridgewater’s.
They apply not just to the current ‘left versus right’ political scene in the USA but most other G7 nations – especially the UK, the Labour and Conservative parties’ apparent lack of credible national productivity plans and the upcoming Autumn budget which all expect to be ‘doom and gloom’ laden.
However, we are more optimistic about the longer term future, despite the divergence of hard left and right views, and believe Dalio’s conclusion that civil war may result from a lack of practical productivity planning and ‘working together’ to be just more ‘doom and gloom’.
Faintly possible, maybe, but a ‘black swan’ or ‘white crow’ event?
- While what we are getting are a lot of big smiles and platitudes, the Democratic Party is lacking what the country needs most, which is a good plan for creating the broad-based productivity that produces the broad-based strength and prosperity that the country needs.
- Similarly, the Republican party’s platform lacks such a plan
- As a practical guy, I want to know:
Where Will the Money and the Productivity that Make Prosperity Come From?
- We hear a lot from both sides about what they are going to give us to bring us prosperity but not much about where the money and the productivity that is essential to pay for these things will come from.
- We do know that those of the left will get some large amount of money by taxing the rich and companies, but we don’t know how much it will be and whether it be in the form of wealth taxes as well as income taxes.
- We also know that those on the right will tax the rich and companies less and will be more inclined to tax imports and cut spending on entitlements.
- In either case, to me it looks like we have ahead of us an ominous mix of deficits, taxes, and benefit cuts, with neither party having a good plan for providing what we need most, which is broad-based productivity.
- My study of history and logic has taught me that the most important thing that a country needs in order to be successful is broad-based productivity which produces broad-based prosperity.
- That broad-based productivity comes from having:
- Broad-based excellent education provided by parents and schools that teach both skills and civility
- Relatively broad-based and equal opportunities.
- Throughout history, successful societies have had these and those societies that didn’t have failed.
- I do not see either side having a credible plan for bringing these to us.
- Those of the hard right believe that it is up to individuals to be productive and that people should experience both the rewards and punishments of what they do — most importantly, that the rewards and the resources should go to those who are productive.
- While I agree that this is true, it is not totally true because the self-reinforcing capitalist cycle will naturally lead those who get rich to put much of their wealth into unproductive self-indulgences and give their children superior educations and opportunities while those who are poor suffer classic self-reinforcing downward spirals which prevent there being broad-based productivity and prosperity.
- On the other hand, those of the hard left believe that it is unfair and greatly harmful to have such huge income and wealth gaps, so they believe that taking a lot more income and wealth from the rich capitalists to help the proletariat is the right thing to do.
- While I agree with a lot of that, I also know that approach fails if it doesn’t produce broad-based productivity that produces broad based prosperity and I don’t see them having a plan to provide that.
- So, to me, neither those of the right nor those of the left have a good plan for helping those people who are falling behind — which is now the majority of people — be productive.
- Yet history has shown that:
- No system/order will be sustainable unless most people are given the training, skills, and opportunities to be productive
- The more that broad-based productivity is neglected, the larger the wealth and opportunities gaps will be, and the closer the society will be to some type of civil war.
- That is just how the “machine” works.
P.S.
- Another big difference between those of the extreme right and those of the extreme left is that those of the extreme right believe that capitalists operating in a free market with little or no regulation will be much more effective than the government in allocating resources to produce productivity, so they are against government regulation.
- Those of the extreme left, on the other hand, believe that capitalists operating in a free market will exploit the people, so they believe that there must be extensive government controls.
- Because the left doesn’t trust the free market and the right doesn’t trust the government, and neither regulation nor lack of regulation works in the extreme, the wise balancing of these positions is unlikely to take place.
- So, to me, the choice is between too extreme controls and government interventions from the Harris-Walz-Democratic side left and too extreme lack of controls and interventions from the Trump-Vance-Republican side right.