In this interview with RWH, Ray Dalio discusses the importance of humility and caution when making decisions in unfamiliar areas, using China as an example.
He relies on extensive experience, starting in 1984, and insights from highly knowledgeable and trustworthy individuals to triangulate information and form conclusions.
Dalio prioritizes diversification, investing only what he’s comfortable losing, and avoids overexposure. He seeks guidance through debate with credible, honest experts, emphasizing the importance of character and expertise.
His strategy revolves around developing deep understanding, treading carefully, and maintaining a balanced portfolio of 15 uncorrelated investments to optimize returns while managing risk effectively.
Here’s an excerpt from the interview:
Dalio: No, you’re articulating well, and I can answer your question.
First of all, I should say that I start with a real humility in operating and saying, I don’t know if I’m wrong or not. And I don’t like to go into areas that I’m no expert in, except in the case of China. It’s a particular case. I’ve been going there since 1984, and I have contact with the highest-ranking, most immersed people, Chinese and non-Chinese.
So, I triangulate. I speak with—well, I won’t name them all—but this one or that one. They are immersed in it, and I get the triangulation. That leads me to whatever my conclusions are. Then, I don’t invest more than an amount of money that I can be comfortable getting whacked with.
So I diversify. I become highly informed through the triangulation and the expertise that I have developed. If it were a place where I didn’t develop much expertise, I would be driven to have a certain amount of understanding. I would also know who are the really, not only smart but straightforward, honest people—people of good character who will not mislead me.
It’s the curiosity of the debate between them that helps guide me. Then I tread gently in that direction by putting in not too much, but not too little. It goes back to having 15 good uncorrelated investments or return streams. That’s how I would do it and how I do it.
You can watch the entire interview here:
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:
