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Bridgewater’s Ray Dalio Explains the Power of Not Knowing

To make money in the markets, you have to think independently and be humble. You have to be an independent thinker because you can’t make money agreeing with the consensus view, which is already embedded in the price. Yet whenever you’re betting against the consensus, there’s a significant probability you’re going to be wrong, so you have to be humble.

Early in my career I learned this lesson the hard way — through some very painful bad bets. The biggest of these mistakes occurred in 1981–’82, when I became convinced that the U.S. economy was about to fall into a depression. My research had led me to believe that, with the Federal Reserve’s tight money policy and lots of debt outstanding, there would be a global wave of debt defaults, and if the Fed tried to handle it by printing money, inflation would accelerate. I was so certain that a depression was coming that I proclaimed it in newspaper columns, on TV, even in testimony to Congress. When Mexico defaulted on its debt in August 1982, I was sure I was right. Boy, was I wrong. What I’d considered improbable was exactly what happened: Fed chairman Paul Volcker’s move to lower interest rates and make money and credit available helped jump-start a bull market in stocks and the U.S. economy’s greatest ever noninflationary growth period.

This episode taught me the importance of always fearing being wrong, no matter how confident I am that I’m right. As a result, I began seeking out the smartest people I could find who disagreed with me so that I could understand their reasoning. Only after I fully grasped their points of view could I decide to reject or accept them. By doing this again and again over the years, not only have I increased my chances of being right, but I have also learned a huge amount.

There’s an art to this process of seeking out thoughtful disagreement. People who are successful at it realize that there is always some probability they might be wrong and that it’s worth the effort to consider what others are saying — not simply the others’ conclusions, but the reasoning behind them — to be assured that they aren’t making a mistake themselves. They approach disagreement with curiosity, not antagonism, and are what I call “open-minded and assertive at the same time.” This means that they possess the ability to calmly take in what other people are thinking rather than block it out, and to clearly lay out the reasons why they haven’t reached the same conclusion. They are able to listen carefully and objectively to the reasoning behind differing opinions.

When most people hear me describe this approach, they typically say, “No problem, I’m open-minded!” But what they really mean is that they’re open to being wrong. True open-mindedness is an entirely different mind-set. It is a process of being intensely worried about being wrong and asking questions instead of defending a position. It demands that you get over your ego-driven desire to have whatever answer you happen to have in your head be right. Instead, you need to actively question all of your opinions and seek out the reasoning behind alternative points of view.

This approach comes to life at Bridgewater in our weekly research meetings, in which our experts on various areas openly disagree with one another and explore the pros and cons of alternative views. This is the fastest way to get a good education and enhance decision-making. When everyone agrees and their reasoning makes sense to me, I’m usually in good shape to make a decision. When people continue to disagree and I can’t make sense of their reasoning, I know I need to ask more probing questions or get more triangulation from other experts before deciding.

I want to emphasize that following this process doesn’t mean blindly accepting the conclusions of others or adopting rule by referendum. Our CIOs are ultimately responsible for our investment decision-making. But we all make better decisions by maintaining an independent view and the conflicting possibilities in our minds simultaneously, and then trying to resolve the differences. We’re always in the place of holding an opinion and simultaneously stress-testing the hell out of it.

Operating this way just seems like common sense to me. After all, when two people disagree, logic demands that one of them must be wrong. Why wouldn’t you want to make sure that that person isn’t you?

Raymond Dalio is founder, chairman and co-CIO of Bridgewater Associates, the world’s largest hedge fund firm.

Leave a Comment    (18)

  • POST

I have worked for a fortune 500 automotive seating company in Monclova Mexico. The big senior VP's above me and directors of engineering were always making decisions with out ever asking the most experienced and highest paid senior engineer in the company what he thinks would work best.All these powerful people just shut the doors and make decisions that cost millions of dollars only to loose more and more money because they do not include the people that actually know the answers. So your comment to me really hits home when it comes to talking with allot of people and making the right decisions for the company. Its really amazing to me that companies do not have a better business model. They just keep making the same mistakes.

May 21 2015 at 10:44 AM EST

Rex G. Ames Sr.

This is called "intellectual honesty"

May 09 2015 at 6:35 PM EST


Totally agree, a very cool article from one of the best asset managers in the history!

Apr 10 2015 at 4:56 AM EST

Zubeyr Aciksari

The whole thing resonated except for the last paragraph, klunk! Logic demands one to be wrong? Sometimes sure, but generally I've found life to not be so black and white.

Some of the comments are really good! And I learned a new word, Haecceity, meaning "Thisness".

Apr 09 2015 at 10:57 PM EST


Ray's thought process is largely correct. He is correct about the "glass being half full" You make educated decisions, and them manage the risk (downside) The upside always takes care of itself. But,.I dont think functioning in that environment is for everyone. I believe, from various sources, that the burnout rate at Bridgewater is high. Most people I know who work there say "they are in it for the short haul because the money is so good" We are all different, but the human condition is not designed to constantly be on.

Apr 09 2015 at 10:28 AM EST

Tom P in Connecticut

Have you people not read anything about the crazy place that is bridgewater? Place is a nut house and I look forward to the day when it all comes undone. On CBS News Sunday Morning, Dalio called Bridgewater the 'Intellectual Navy SEALs.' Are you people even listening?

Mar 30 2015 at 6:01 AM EST

Jawn Mack

I call this "sitting in the inquiry" and find that is the place where transformational thinking is born! Few people I have met can process decisions in this manner - Bravo to Ray and his band of decision makers!

Mar 17 2015 at 3:15 PM EST

Ellen Shepard

It sounds all very sensible... If time is on your side. If you want to be nimble, this kind of thinking breeds analysis paralysis. Sure, consult and triangulate but after hearing the feedback get to your decision in a timely fashion or get left behind. Maybe what's good for the hedge fund is not necessarily good for the gander!

Mar 14 2015 at 2:29 PM EST


I greatly admire the enlightened detachment Ray has mastered and has contributed to his success. the spirit of open-mindedness, I would have to point out that, "when two people disagree, logic demands that one of them is wrong," is sometimes wrong. It happens regularly that that both parties are wrong. Moreover, it also happens [rarely] that both are right, sometimes for wrong (a) reason(s), in different but still highly relevant time frames.

Mar 12 2015 at 1:40 PM EST

Gene D Donney

@teresalo, yes, both can be wrong. But then, if a manager isn't taking an active "bet" - one way or the other - then he's not doing any work. Maybe the unmentioned option is waiting for the right pitch. But ppl don't hire active managers to do nothing. At least, not for long. Right?

Mar 11 2015 at 12:11 AM EST


It sounds like Mr. Dalio has succeeded (to a certain extent) in creating internal markets for revealing and vetting knowledge within his firm, which is quite an achievement if your goal is to make better decisions.

Mar 09 2015 at 9:55 PM EST

David Haarmeyer

I understand Ray's assurance that he has seen it all. How can you argue with someone with a track record like Ray's? With great humility. So in my humble experience, talking to a million detractors adds marginal value. Few conviction positions can be sure-bets, so eventually the gambler's ruin issue with run you over. So better strategy for preservation is simply to diversify with other low-correlation positions no matter how strong your conviction is, and always practice prudent and disciplined risk management plans.

Mar 09 2015 at 9:48 PM EST

Howard Siow

"After all, when two people disagree, logic demands that one of them must be wrong." -- actually, both of them could be wrong.

Mar 09 2015 at 6:03 PM EST


While reading the article, the phrase ''smartest people'' had my attention.

When it comes to bringing up different perspectives to the table, how much of an importance and priority, does being smart have? Would that be the first thing to look for in a person , to have a diversified discussion with ?

It may be an essential ingredient, but for an efficient debate of various point of views, many other qualities may also be equally important . Especially if risk is one major ingredient to shape ideas around.

When creating a discussion group, some other traits to enrich the outcome may be , discussion group members :

Having character traits :
Awareness , observatory and questioning approach in life, attention to details. Understanding of risk as a whole in daily life , even in family relations.

Thirst for knowledge : Not having a problem with learning a new thing from anyone anywhere, yet looking for it.



Greed : for motivation to move forward , prosper , be better...this may already be in the basket since the smart and educated tend to have this coded in already.

Besides the character traits:

Coming from different backgrounds: from childhood past to life experiences up to day. Especially for the fear factor that the evaluations will have. People having different majors may not be sufficient to attain different perspectives, since they pass through similar education system channel.

Sometimes a taxi/truck driver , a hunter trading his own money in markets , with survival instincts may have more points to make, may bring out more heads up, than an IVY league graduate.

Coming from various living societies : this may range from members of the group living in different states to living in different countries. Even following similar US tv shows, having talks on same hobies/recent sport events may create a common point of origination and urge for unconscious conformity among the group members, that may create a similar approach which infact may not be desired. The produced stances may look distinct but in fact have the same tendency, only in disguise.

From various ages : being a veteran may not guarantee making more sense than a youngster. Meanwhile a youngster with lesser market experience may underestimate or find the experienced shaped point of view of the veteran too risk conscious.

More qualities can be added in similar manner. The meeting shall excite the attendees and seem as an oppurtunity to learn and challenge self, rather than a routine obligation.

Everyday being a brand new day, the meetings shall be looked as unique. No member shall over shadow another one in the next meeting just because his idea had worked in the previous.

The content of the meeting is another factor, where presence of different members may be required each time accordingly.
All is to prepare the best battle ground in the practise, to come up with the best strategy for the game ahead.

Mar 09 2015 at 3:28 PM EST

Fatih Tavli

Rabbi ------- had a standard approach to evaluating new suggestions: "Whenever we raised new ideas . . . he would always involve us in his decision-making. His analysis . . . always followed the same path: First, was there any prospect of harm arising in the future from what was being proposed? Second, might there be any harm in the present? Third [even if it will do no harm], would the proposal be positively beneficial? Only after considering these questions, would he arrive at his verdict."

It very much seems that the order of the analysis is
significant: It is important to consider possible harm before considering possible benefit in order to give it the weight it is due. All too often, once one has considered the possible benefits, their dazzling attraction will be so strong as to not allow one to consider the possible harm with the seriousness that it deserves. Therefore it is important to consider the harm that may result from a particular policy before thinking about the benefits. Just imagine: if gamblers thought about their possible losses before dreaming about their possible winnings, they might lose a lot less money.

Mar 08 2015 at 8:29 PM EST

M Plaut

I try to make my own independent decision when providing advice to clients, based on extensive research of opinions of others and my own data research. I tend not to run with the pack and 'consensus' analysts' opinion, frustratingly find myself to be wrong in the short term, losing credibility and confidence just to discover some time alter that my judgement was correct, but the timing was wrong

, often find myself being wrong in the short ter, , lopsing con. fideznce abd credibility but so often rightg in longer term outcomes. Need shift wrong in teh short term, which erodes my confidence and often disregard consensus opinion among analyst, I am frequently wrong, in the short term, but

Mar 06 2015 at 5:21 PM EST

joanna hill

I agree.

Mar 06 2015 at 3:08 PM EST


for someone who claims to listen well to others, he's written a comically obvious, common-sense piece to which everyone in their right mind would agree. and though he claims to seek expert feedback, he clearly didn't consult an editor. i can only imagine the ego of someone who feels the need to preach in this way.

Mar 06 2015 at 2:37 PM EST