Ray Dalio: Learning From Financial Loss, Humility, And The Jungle

Johnny HopkinsRay Dalio

In this interview with Money Maze, Ray Dalio discusses the painful mistake that taught him the importance of not always assuming one is right and highlighted the greatest tragedy of individuals and humanity as a whole—confidently thinking they are right without stress-testing their ideas with the input of intelligent, dissenting voices. Here’s an excerpt from the interview:

Dalio: So I lost money for my clients. I lost money for me. Was so broke that I had to borrow $4,000 from my dad to pay for family bills.

And that was very very painful.

And that was what changed my life. That was the most powerful thing because it gave me the humility I needed to balance with my audacity.

Or in other words it made me think how do I know I’m right?

It made me think of the risks of being wrong and that led me to deal with that and I dealt with it in two ways.

First it gave me an uncertainty, that was a healthy uncertainty, that allowed me to make changes.

At that time I’ll tell you what it was like. Risk and return go together, and I said to myself in order to have a terrific life, I want the best life possible, I’m going to have to do risky things.

But I cannot continue to do this I’m going to… it’ll be terrible.

So it felt like I was on one side of a jungle that if I can cross the jungle I could… and in that jungle were all sorts of threats, and how would I cross the jungle to get to the other side of the great life, great success that I wanted.

Or would I stay on the one side of the jungle.

In other words I was faced with a choice. Am I going to put on a tie commute to New York on the train and live that life or am I going to do something else.

And I realized how do you go in through that jungle.

So the way I went through the jungle is first to find other people who could see things I couldn’t see who were on the same mission to go into that jungle and to be successful.

And so I tried to find the smartest people I could who disagreed with me and would challenge my thinking so we could explore what was going wrong, and then I also learned that diversification properly done could reduce my risk by up to 80% without reducing my return.

So I learned out of that painful mistake an approach to life that I really want to pass along. In other words that power. Don’t always assume you’re right.

The greatest tragedy of mankind, that’s a big statement, what’s the greatest tragedy of mankind.

The greatest tragedy of individuals and then collectively of mankind is confidently thinking they’re right without stress testing their thinking with the smartest people.

It’s a tragedy because they could so easily improve their decision making and how to work together if they can recognize that those smart people who see things differently working that through intellectually can get you into a better position of more likely to be right and also working together.

You can watch the entire discussion here:

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