For 40 years, investment firm Bridgewater Associates has managed portfolios and partnerships with a tremendous level of success. Today, the company manages about $160 billion for approximately 350 global clients, including public and corporate pension funds, university endowments, charitable foundations, supranational agencies, sovereign wealth funds, and central banks. Ray Dalio, Founder of Bridgewater Associates and Harvard Business School MBA grad, is a big reason for this success.
Alumni Spotlight: Ray Dalio
Dalio was born in Queens, New York and began investing by age 12 when he bought shares of Northeast Airlines for $300. It turns out, Dalio was a natural. His investment tripled following a Northeast Airlines merger. Dalio explain on the Tony Robbins Podcast that “the markets were hot” in the early 1960s, so he used the money he had earned as a caddy to buy stock in the only company he had heard of that was selling for less than $5 a share.
“The only reason I bought it is, I figured I could buy more shares, so if it goes up I would make more money,” Dalio says. “That was a dumb strategy.”
Dalio, HBS MBA and founder of Bridgewater Associates / Photo via Heidi Gutman, CNBC
After dipping his toes into the world of investments, Dalio earned his bachelor’s degree in finance from Long Island University before taking to the floor of the New York Stock Exchange, where he traded commodity futures. Dalio would then go on to earn his MBA from HBS in 1974. A year later, he took his business school knowledge and all his prior experience and founded Bridgewater Associates out of his apartment. The firm would eventually move to a proper office in Westport, Connecticut in 1981. And shortly after, it became one of the largest hedge funds in the world.
Dalio told Business Insider that he developed Bridgewater’s core investment principles through the 1980s, but it wasn’t a perfect process.
“What I did every time I made a mistake—they became painful mistakes—but with time I realized that reflecting on those mistakes would give me gems,” Dalio says. “And I’d write down a rule.”
Dalio write down all of these rules and developed an employee handbook titled “Principles“, which is now available online.
“Because you know the same things happen over and over again,” Dalio says. “The same things happen over and over again in the markets — everything that we’ve been through, every cycle. Everything has happened in the past. The same thing happened over and over again in politics. Same things happen over and over again in our lives.”
You can watch Dalio discuss how became successful in this interview with Business Insider Editor in Chief Henry Blodget on “The Bottom Line,” Business Insider’s new weekly business news show.
In addition to his handbook, which was originally intended for employees at Bridgewater Associates, Dalio also has some advice for college graduates: “A successful life essentially consists of doing [the same] five steps over and over again… This is your personal evolution.”
What are Dalio’s five steps? As outlined in his Principles For Success miniseries, they are:
- Set and Pursue Your Goals: “Step one is to know your goals and run after them. What is best for you depends on your nature, so you need to really understand yourself and know what you want to achieve in life.”
- Identify Hurdles and Roadblocks: “These problems are typically painful. If handled badly, some of them can lead to your ruin. But to evolve, you need to identify those problems and not tolerate them.”
- Look deeper into the problem: “Step three is to diagnose these problems to get at their root causes. Don’t jump too quickly to solutions. Take a step back and reflect in order to really distinguish the symptoms from the disease.”
- Identify a solution: “Design a plan to eliminate the problems. This is where you will determine what you need to do to get around [the blocks].”
- Execute that solution: “Step five is to execute those designs, pushing yourself to do what is needed to progress toward your goal.” Ultimately, Dalio says his strategy is built for continual personal development: “As you push through this often painful process, you’ll naturally ascend to higher and higher levels of success.”
When he isn’t giving advice via his YouTube channel, Dalio can be found on Reddit giving advice in the form of AMAs to anyone seeking some insight. In his first AMA, Dalio spent two hours answering questions about investing, entrepreneurship, and career strategy.
One post asked Dalio,
“If there is one thing you could teach a 20-something year old, what would it be?”
Dalio’s response?
“To know how to simultaneously think for yourself and know that you know virtually nothing, so that you have to take in the best thinking that’s available to you and critically analyze it.”
Another question was what Dalio would tell a younger version of himself if he could go back in time and do everything over again, to which he replied:
“Recognize that you are a dumb shit [who] doesn’t nearly know what you need to know in order to have the life you want to have, and that life is an adventure in which making mistakes and knowing how to learn from that is the best part.”
If that isn’t honest career advice, I don’t know what is. But when you’re talking to the founder of a multi-million dollar hedge fund, you shouldn’t want anything but the truth.
You can hear more from Dalio by watching his Principles For Success miniseries below:
