Editor’s note: This article was first published in November 2014; its figures of Bridgewater with $150 billion in assets and Ray Dalio’s fortune estimated at $15.2 billion are from 2014.
His firm, Bridgewater Associates, is the largest hedge fund in the world, with $150 billion in assets. Dalio’s personal fortune is estimated at $15.2 billion. Not bad for a man who started from scratch. He truly lives up to those rags-to-riches stories. How did he do it?
Nobody questions Ray Dalio’s brilliance, even though he has sometimes been criticised for his unusual approach to management. Dalio has a rule at his firm called “radical transparency”, which means that all meetings and interviews are recorded and archived, and employees at every level are encouraged to criticise one another when necessary.
Every employee is given a copy of a 123-page leadership manual written by the billionaire himself.
You can read the manual for free. In it there is a section where Dalio describes the habits he believes helped him go from a lower-middle-class childhood to being one of the most brilliant and powerful people in the world of finance.
(Read also: Ray Dalio explains how the economy’s cycles work so that anyone can understand them)
Which habits took him from poor to rich?
1. Working for yourself, not just doing what others want you to do
Dalio says he hated school because he couldn’t see any useful application for all the things he had to memorise. He knew he didn’t want to be poor. He wanted to succeed. And he knew that to succeed he needed motivation, and that to be motivated he had to work for himself.
See also: 15 habits and choices for success in business and your career
He started delivering newspapers and mowing the neighbours’ lawns to earn some extra money, and at 12 he got a taste for the stock market, making his first investment.
Dalio says that every job he did was exactly what he needed to do to get what he wanted, and that he never felt obliged to do anything.
(Read: 25 habits of successful people)
2. Surrounding yourself with smart people and learning how they think
Anyone, from a famous investor to your barber, can give you good advice in their own field. But if you can work out how successful people think, you’ll find that they all have a lot in common, just as less intelligent people also tend to share the same ways of thinking. You decide who you want to learn from.
As we’ve said more than once, surrounding yourself with people who already are the way we want to be is one of the few shortcuts to success.
3. Being wary of overconfidence and limiting your exposure to risky situations
Whether in business or investing, Dalio has made his firm the largest in the world in its field because he has reduced his risk as much as possible before making a decision.
In his words, he doesn’t make unintended bets, and he tries to limit his bets to the small number of things he is confident about. It isn’t about not taking risks, but about knowing those risks and making sure a bad decision doesn’t have an impact we haven’t counted on.
Risks will never go away. They’ll always be there, just like problems. So success isn’t about dodging those risks, but about limiting them and facing them. Clearly, once we know they exist, we can prepare much better, and preparation is already a way of limiting risk in itself.
In the same way, the biggest falls come from overconfidence. So we also need to keep overconfidence in check.
(Read: 7 things the world’s most successful people have in common)
4. Reflecting on how decisions are made and working out why they led to success or failure
Dalio says that learning to appreciate failure early on was very valuable to him.
He explains that he came to see every mistake as probably reflecting something he was doing wrong, so if he could understand what that was, he could learn to be more effective. In the same way, the things that have led us to success only need to be identified so we can repeat them.
If you don’t stop to analyse which decisions led you to a successful or a failed result, you run the risk of making decisions blindly, with results that depend entirely on luck.
And as is often the case, Dalio isn’t saying anything extraordinary. These are very simple habits that anyone can adopt, although for some reason, even though we know them, hardly anyone puts them into practice.
Further reading
- The 4 most notable differences between how the rich think and everyone else
- 8 habits found among millionaires
Featured image: RufusNunus, CC BY-SA 3.0, via Wikimedia Commons.
