Ray Dalio’s book Principles is unlike any book you have ever likely read before. Beginning with a brief autobiography, he quickly moves on to identify his organically grown set of principles (fundamental truths that serve as the foundations for behaviour that gets you what you want) for building a successful life and business. As the founder of Bridgewater Associates, one of largest hedge funds in the world with approximately $160 billion of Assets Under Management, Dalio’s ideas are worth listening to. Although Bridgewater itself has been criticised by some for being cult-like (its culture built on the foundations of Radical Truth and Radical Transparency), that Dalio began the company in his two bedroom apartment in New York in 1975, makes him not just one of the world’s greatest investors but also one of the world’s greatest entrepreneurs and leadership visionaries.
You should read Dalio’s book to learn about his principles and consider your own – “because we all have our own goals and our own natures, each of us most choose our own principles to match them” – but this post will focus on the fascinating research that Dalio himself undertook into what he calls shapers.
In a landmark study undertaken between 1984 and 2004, Wharton Professor Philip Tetlock showed that the average expert’s ability to predict the future was only slightly better than a layperson using random guesswork. His latest project, which began in 2011, has since shown that there are some people with real, demonstrable foresight. These are often ordinary people who have an extraordinary ability to predict the future with a degree of accuracy significantly greater than the average. In his book Superforecasting: The Art & Science of Prediction, co-authored with Dan Gardner, Tetlock identifies how you can improve your ability to predict the future and become a superforecaster.
Howard Marks is the Chairman and cofounder of Oaktree Capital Management and author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor. According to the book’s sleeve, he is renowned for his insightful assessments of market opportunity and risk. He is sought out by the world’s leading investors, and his client memos brim with astute commentary and time tested fundamental philosophy. On a more personal note he’s one of my investing heroes. A value investor at heart, his broad thinking and eloquent expression is pertinent to anyone with investment and business interests both professional and personal. In The Most Important Thing he lays out, over 20 chapters, the building blocks to successful investing. All are equally important and essential “guideposts” that together create a “solid wall” that keep investors focused on the most important things for successful portfolio management.
I’ve summarised two of my favorite ‘most important things’. In this post, the importance of second level thinking, a key skill for any contrarian investor and in another post, Howard Marks (and Nassim Taleb) on the role of luck and randomness in life and business.