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Ray Dalio: “Know What You Don’t Know”

Posted by Larry Doyle on October 25, 2011 9:24 AM |

Ray Dalio occupies a very special place in the Sense on Cents Hall of Fame.

Dalio is widely regarded as running the most successful money management operation in the world today, that being Bridgewater Associates.

While I certainly admire Dalio’s financial acumen, I most appreciate Dalio’s philosophical approach to the markets and the world as a whole. Our country would be in a far better position if we were able to get the political crowds in Washington and our state capitols to listen to and embrace Dalio’s approach and his perpetual pursuit of the truth.

Dalio was recently interviewed by Charlie Rose. While the interview runs for 37 minutes, the wisdom Dalio shares lasts a lot longer than that. What does Dalio highlight? 

In terms of monetary and fiscal programs and policies, he believes, “we’re out of ammunition.”

In terms of what is the only thing he needs to give his children, Dalio maintains they “need to be able to be self-sufficient.”

In terms of understanding markets and the world at large, Dalio continually emphasizes, “what is true” and “finding the truth”.

In terms of managing risk, Dalio stresses it is far more important to “know what you don’t know.”

If I were to choose one video which embodies and espouses the core principles of Sense on Cents, I would select this video. I hope everybody reading this will set aside the time to view it. I especially encourage those in school and preparing to go into the working world in the near future. Dalio delivers a wealth of knowledge and wisdom which will help you navigate accordingly but also lays a foundation for a way of life.

Watch, listen, and learn from this master.

Charlie Rose Interview with Ray Dalio

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

 

  • Pacioli

    At the 12:30 mark, Dalio makes the following statement:

    “The economics for the gov’t work the same pretty much as the economics for the individual…”

    At this point, I stopped listening to the interview, because this demonstrates the same disastrous misunderstanding of our modern monetary system that leads to idiotic calls for austerity at this time.

    • LD

      Pacioli,

      You are certainly free to listen or not but dare I say I think Dalio is talking about the forest while you are focused on the trees.

      • Pacioli

        On the contrary, I have read some of Dalio’s writings where he extols the importance of understanding the “machine” (his analogy for fully understanding the underlying mechanisms and structures prior to approaching solutions to the problem at hand).

        Yet this comment demonstrates such a horrendous misunderstanding of the “machine” (i.e. how money actually transacts through the economy) that any solutions he provides are going to suffer from “garbage in, garbage out”.

        This exact fundamental misunderstanding is incredibly pervasive. It is the reason so many pundits/bloggers/”experts” continue to beat the dead horse of ‘we have a problem’, yet cannot even begin to contemplate credible, practical solutions.

        • Bruce

          @Pacoili.

          I’m listening. What is your solution to the tremendous problem (debt) overhanging the WORLD today?

          Bruce

        • LD

          Pacioli,

          First off, welcome to Sense on Cents. I would join with fellow reader Bruce in calling for your ideas as to how we may move forward. The simple fact is I have been highlighting that our nation’s issues are structural in nature for the last three years. Let’s first acknowledge that fact so we can start to addressing how we go about making structural changes.

          Let’s start also by acknowledging the massive waste in government programs as Mr. Dalio points out.

          Let’s accept that our public education system, especially in urban settings, is a joke.

          Let’s accept that the breakdown of the nuclear family is a central factor in the breakdown of the social and moral fabric of our nation.

          Let’s accept that the incestuous nature of the relationship between Washington and Wall Street is a large part of our nation’s problem.

          If we can agree on those principles and basic matters,(as Dalio asserts) now we can start to move forward with implementing real reforms in public policy along with real reforms within our selected industries, starting with our financial services industry, which suffer from a massive case of regulatory capture.

          We need to stop abusing capitalism in the manner in which we have for not only the last three years but also twenty three years.

          Let the market work and enforce properly drafted and executed regulations.

          Reform the tax code so it does not promote a division within our nation.

          Reward savings and investment so we are not beholden to foreign capital.

          This is a start….how about you?

    • fred

      Picioli,

      Is a pure Keynesian response any more appropriate than draconian austerity measures?

      If you had continued watching, you would have heard Dalio discuss that government spending was necessary, but due to the size of our national debt, spending had to be more productive and should require a return on investment and a definitive future payback.

      How might Dalio’s theory work in real time? Rather than giving the unemployed a check, why not require ‘effective’ skills retraining as a condition. Rather than building bridges to nowhere, why not build bridges to somewhere and put up a toll booth. Why couldn’t ‘able’ seniors collecting social security checks help out with our nations child care needs,(it might even provide theraputic benefits)?

      I’ll even add my 2 ‘sense on cents’ that I’m sure Dalio would agree with; rather than having the poor pay no tax and collect entitlement checks, have them pay a token tax so they might begin to understand the basics of double entry accounting and begin to care whether their tax dollars were being spent wisely or being wasted.

      • Pacioli

        “…spending had to be more productive and should require a return on investment and a definitive future payback…”

        Do you suppose he could be any less specific in his prescription? Perhaps his failure to offer concise, specific, pointed solutions results from his utter misunderstanding of the mechanics of the “machine”.

        • fred

          Pacioli,

          Understand where Dalio is coming from, he does not have to provide or implement solutions to our problems, bureaucrats do.

          As a money manager, his job is to invest client funds wisely while performing his fiduciary responsibilities.

          Dalio’s enduring performance certainly adds credibility to his approach to investing and to his understanding of global economic realities.

          • Pacioli

            I certainly agree with you that “he does not have to provide or implement solutions…” (thank goodness!)

            He is an incredible money manager.

            I am simply offering readers some offsetting realism in contrast to the blog author’s approbation of “Dalio’s philosophical approach to the markets and the world as a whole”, which seems disingenuous given Dalio’s obvious blatant misunderstanding of the US monetary mechanics.

    • Shannon

      Did you ever listen to the rest? I’d like to hear your analysis based on what he actually said.

  • Donald

    “We” are hardly out of ammunition.

    The administration would rather ignore possible solutions even if this depression drags on for years: and it will.

    Obama is afraid he will not be reelected if he does the ‘right’ thing, presidents generally put themselves above the people they serve, taking the easy way out.

    Obama plays to lose–and so far it is working out well. For him!






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