Ray Dalio: The Principles That Made Me a Billionaire

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My First Million #842: Ray Dalio, The Principles That Made Me a Billionaire

Sam Parr and Shaan Puri with Ray Dalio. Duration: 1h 0m 36s

Listen on YouTube · Listen on Apple Podcasts · Follow Ray · PrinciplesYou Personality Test

Timestamps 0:00 Intro 0:49 Hitting rock bottom 8:28 Personality traits of the 1% 14:22 Partnerships that win 18:25 Pain + Reflection = Progress 23:30 What’s the money for anyway? 26:26 Principles 28:41 Ray’s hiring philosophy 30:43 Being a caddy 35:16 Mistakes smart investors make 37:01 What Ray spends his money on 39:13 Aliens 41:00 The 5 Big Forces 46:35 Investing in Gold and Bubble Mechanics 52:55 How Bridgewater became the biggest hedge fund 55:40 The gap between the best and everyone else 59:26 The 1 Big Takeaway

Dalio starts with his mantra: “How do I have the upside without having the downside?” That question drove everything Bridgewater built. He borrowed $4,000 from his dad after losing everything in 1982, then turned that failure into a system that created the largest hedge fund in the world. Here is what I kept coming back to.

  1. Find fifteen good uncorrelated return streams. This is the holy grail of investing. Dalio looked at the math of diversification: 15 uncorrelated assets reduce risk by about 80% without reducing returns, increasing your return-to-risk ratio by 5x. “You can get the upside without having the downside.”

  2. In 1982, Dalio predicted a depression after Mexico defaulted. He testified to Congress. The market boomed. He lost everything, laid off his five employees, borrowed $4,000 from his father. Two lessons came from that failure: humility to balance his audacity, and how to diversify bets so no single miss could wipe him out.

  3. Pain plus reflection equals progress. Dalio trained himself to see pain as a puzzle. When something hurts, he asks: “What does this tell me about how reality works?” The answer becomes a principle he writes down and eventually codes into his decision systems. Skip the reflection and you stay stuck in the pain.

  4. Hire for values and abilities, not skills. Dalio hired an ex-Bible salesman with no finance experience to sell research. Skills can be taught. Values and abilities cannot. His priority order: values first, abilities second, skills last. “Most people look at the resume to determine skills. In my opinion, it’s the opposite order.”

  5. Dalio created PrinciplesYou, a free personality test, and gave it to Elon Musk, Bill Gates, Reed Hastings, and Muhammad Yunus. He found a rare type he calls “shapers”: people who go from visualization to actualization and obsess over details at both the 10,000 foot and 10 cm level. “Success is you knowing your nature and then finding the best path through that nature.”

  6. Partnerships that win come from complementary weaknesses. Dalio’s business partner sent 77 emails over 4 years to book this episode. They couldn’t be more different as people. That is the point. “People who think differently from you who you ordinarily can get annoyed at are your paths to success.”

  7. The jungle is better than the zoo. After 1982, Dalio had a choice: a safe job or go back into the “jungle.” He chose the jungle. “I loved being in the jungle so much I didn’t want to get out even after I achieved.” He would rather struggle and learn than be safe and bored.

  8. There’s no correlation between money and happiness. Dalio says this flatly. “You have to have a purpose. What do you want to do with the money that is so important?” He spends on what he actually enjoys: an ocean exploration ship he shares with scientists. Not yachts, not watches, not jewelry.

  9. Write down your principles. Every time Dalio made a decision, he studied how it would have worked historically. Then he turned it into a rule and programmed it into a computer. After 35 years he has thousands of coded principles, each one “timeless and universal.” They trigger wherever the pattern appears, anywhere in the world.

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