What does it take to become one of the most successful investors and entrepreneurs of all time?
Is it all about luck? Can you make it with the right mindset and a little hard work? Or do you need all three to be truly successful?
According to my guest today — famed businessman and incredibly successful investor Ray Dalio — it all comes down to your principles.
Martin Luther King Jr. once said, “No work is insignificant. All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.” And writer T.F. Hodge said, “Fear is the lack of faith in one’s ability to create powerful solutions.” But my friend Ray said:
“Life is like an adventure. If you knew everything, it wouldn’t be nearly as good.” – Ray Dalio
Ray Dalio doesn’t pretend to know everything, but he has learned a lot over his years of working hard to create one of the most successful private companies in the world. He has spent his life making massive strides in the business world — ultimately rising to the top ranks of business owners — and along the way, he’s picked up a lot of wisdom. And today, he’s sharing that wisdom with you and me right here on The School of Greatness!
If you haven’t picked up Ray’s book, Principles, yet, you’re going to want to after listening to this interview. In it, Ray shares the secrets to success that he’s learned over the years. The great Bill Gates said about it, “Ray Dalio has provided me with invaluable guidance,” and Mark Cuban of Shark Tank fame said, “Principles is the book I wish I had as an entrepreneur.”
This guy is big time, and I’m grateful to him for coming on the show today! Let’s dive in!
Ray Dalio is the Founder, Co-Chairman, and Co-Chief Investment Officer of Bridgewater Associates, the fifth most important private company in the U.S., according to Fortune magazine. Forbes named him the 69th richest person in the world, and he has been called the “Steve Jobs of Investing” by Wired magazine, and named one of the top 100 Most Influential People by TIME magazine.
He is also the author of the New York Times #1 bestseller Principles, which explains and outlines the principles that he lives and works by to create massive amounts of success in his life and business. And now, he’s become an author for the second time with his new book The Changing World Order: Why Nations Succeed and Fail. This new book explores the economic turbulence that has defined the past as well as explains why the future will be radically different. It’s a fascinating read — I recommend picking up a copy!
When Ray started out in his entrepreneurial career in 1975, he didn’t have much besides a two-bedroom apartment in New York and an idea. But now, 40 years later, Bridgewater Associates is the largest hedge fund in the world!
But despite building one of the most successful private companies ever, Ray doesn’t see himself as anything special. He fundamentally believes that the principles he’s learned are what set him apart and allow him to achieve such massive success. And now, at this stage of his life, he is ready and excited to pass along his wisdom to anyone willing to listen.
It was such a pleasure to dissect the world’s problems and opportunities with Ray. I loved diving deeper into why pain is the best teacher, how we can use our mindset to achieve great things, why we should always be willing to learn and admit when we’re wrong, and so much more!
Ray Dalio has a unique perspective on pain and its ability to teach us. He doesn’t view pain as a totally negative thing, even though it’s never fun when you’re in the middle of it. Instead, he views pain as an opportunity to learn something. He’s dedicated to learning all the lessons he can from his struggles in life, and in doing so, I think he sets an incredible example for all of us.
“Pain is a heck of a teacher. By comparison … when you get pleasure, then you just keep doing what you’re doing, but it doesn’t teach you to change. … When you put your hand on a hot stove … [it] teaches you … about how to approach it differently. And also, pain teaches you about how reality works.” – Ray Dalio
Things don’t always work out perfectly. If you touch a hot stove, you’re going to burn your hand. As we go through life, there are a million opportunities for mistakes and tragedies. The best we can do is accept the bad things for what they are and take what lessons we can from them.
In our conversation, Ray told me about a time when he lost everything to a bad investment. It was a tough lesson, but it set the stage for all of his financial success:
“You know, it’s easy to be wrong in investing — that’s part of the game. … [After making the investment,] I thought we were going to go into an economic spiral, … and I couldn’t have been more wrong. … I lost money. I lost money for myself. I lost money for my clients. I [had] to let everybody in my company go. I was so broke. I had to borrow $4,000 from my dad. … It was a lot of pain. … And that was one of the best things that ever happened to me.” – Ray Dalio
You might be thinking, “How could that be the best thing that ever happened to him?!” But Ray was being honest. After making that bad investment, he learned a key lesson — how to be wrong without totally losing his confidence in himself, and he learned how to listen to other experts for their advice. Those lessons carried him far in his business, and today, he couldn’t be more grateful.
One of the things Ray spoke about the most was the importance of having a team:
“You could have this ordinary life, or you can try to cross the jungle. … What I learned was that the best way to cross that jungle would be with a team of people — people who I cared about … who could see things that I couldn’t see.” – Ray Dalio
In business and in life, it’s essential to listen to the people around you. Open-mindedness and a willingness to understand someone else’s opinion are essential parts of learning and growing. We’re all better when we work together.
But conflict is an inevitable part of relationships. We’re all going to have differences of opinion and disagreements, and that’s okay! It’s a natural part of living in a society. But we do need to learn how to handle disagreements. If we’re not careful, they can become toxic and ruin our relationships.
To deal with conflict in a healthy way, Ray strongly recommended having certain “protocols” that you follow:
“There are three things you have to do. Basically, first you put your honest thoughts on the table and have the other person put their honest thoughts on the table. Then … there are certain exercises you could do. … I have a two-minute rule. You speak [for] two minutes without the other [person speaking.] … You [can] have a mediator … somebody [who] … we mutually agree … will be our mediator. … And then number three, you have to have a way of getting past that decision and moving on.” – Ray Dalio
Having protocols like a mediator or a jury who makes the final decision really sets you up for a healthy disagreement. That way, you and the other person can both put your views on the table, respectfully disagree, and come to some kind of decision. Your disagreements will stay healthy, and hopefully, you both can learn from the experience.
Ray Dalio is an extremely thoughtful and intellectual person, and recently he’s spent a lot of time studying historical economic trends. I was excited to ask him about trends he’s seen in all of his research and how they apply to our society today.
“There are three things that are going on now. … The first is: What is going on with money and credit when you get to something like a zero interest rate and … the government needs buying power but they can’t tax it. So what we have is the production of a lot of debt. … The second [thing is] wealth and political gaps that are causing great conflicts throughout history. … So then the third thing is the rise of a great power to challenge an existing great power.” – Ray Dalio
Let’s break that down a little bit. Essentially what Ray is noticing is that throughout history, countries have a pattern of getting to a place where the government is in a lot of debt, the gap between the rich and poor is expanding, and other major powers are rising up to challenge the dominant power. And we see that happening in our country right now. The United States government is in a lot of debt, the economic gap between rich and poor is big and growing, and for the first time since WWII, we’re starting to see another large power — China.
To further illustrate his point, Ray told me a little bit about the philanthropy work he and his wife do. According to Ray, his home state of Connecticut has the largest wealth gap of any state in the country. Ray and his wife noticed that a lot of the high school students there were considered “disengaged” or “disconnected,” and they need help to stay in school to get the education they need in order to have strong economic opportunities. So, Ray and his wife chose to give back. They purchased 60,000 computers for students in the state, and they’re working to help these kids stay in school.
The truth is, our economic problems are not going to go away if we don’t join together. We have to spend time getting to know each other and understanding each other’s perspectives. And when we can, we have to give back.
Ray has also spent his lifetime learning the ins and outs of investing and managing money, and I couldn’t wait to ask him for his advice. I asked him to give his best pieces of advice for millennials learning to manage their money well, and he had some great wisdom to share.
Ray’s first tip for financial wellness? Get your savings right:
“Once you start to realize that deferred gratification is going to make you better and so on, and you start to count … how many days, weeks, months, or years [you can] live if [you] don’t have money come in, and you start to focus on that, that’s the first step.” – Ray Dalio
Ray recommends that you have a few months or even a year of money stashed away in savings before you even think about investing money anywhere. Simply by saving enough money consistently to live within your means gives you some financial security, and when you have a little bit of a backup plan in case your investments don’t work out, you can feel a little better knowing that you have a little money in the bank.
Once you have a few months’ worth of spending set aside, you can start thinking about investing. When it comes to making wise investments, Ray recommends investing in yourself first.
“What are the most important things that you’re closest to? Is your business first? … What are the things that are most important for [you]? And then you start with your business or your residence. … Investing in yourself … that may be your best investment.” – Ray Dalio
If you’re a business owner, invest in your business before you invest in anything else! If you can totally control the money, you’re much more likely to have that drive you need to make a return on that investment. And if you still have money leftover that you want to invest, just remember this keyword: Diversify.
“Diversification … will reduce your risk without reducing your return. So if you know how to diversify well, that’s critical.” – Ray Dalio
When you’re thinking about where to invest, make sure to diversify your portfolio. When you have lots of smaller investments in different areas, even if one or two of your investments cause you to lose money, you still have a good chance of making money overall. Check with an accountant or investment expert to learn how to diversify, and watch your money grow!
This episode was both inspiring and informative. Ray has spent his life learning and growing, and now he’s dedicated to passing on everything he’s learned. I want to acknowledge him for coming on the podcast today and sharing his wisdom with us. I know his financial advice has the power to improve everyone’s financial wellbeing, and his wisdom about handling relationships and disagreements has the power to change the world.
I hope you enjoyed this episode as much as I did! I’ll leave you with Ray’s definition of greatness:
“Greatness is self-actualization. I think it’s evolving well and contributing to evolution.” – Ray Dalio
I think that Ray’s done an amazing job of that. He is using his unique gifts and talents to make the world a better place, and he’s improving thousands of lives along the way!
Thank you so much for joining me today! I hope you learned something from this episode — I know I did. If you got value out of this episode, please share a screenshot along with your biggest takeaways on Instagram! And make sure to tag Ray, @raydalio, and me, @lewishowes, so we can hear from you!
If you’re ready to create financial success, develop principles, and understand your purpose, join me on Episode 1,042 with Ray Dalio! And don’t forget to make it a great day, guys!
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