RAY DALIO
EPISODE 45
The second instalment of our investor series puts a spotlight on the 'Steve Jobs of Investing' - Ray Dalio. He is the founder of Bridgewater Associates, the world's biggest hedge fund. He's a champion of radical transparency which he covers in his New York Times bestseller.
SHOW CLIPS
Intro: How Dalio learned to invest
A BLOCK
what is a hedge fund
Bitcoin is a speculative bubble
A bad investment and how it changed his thinking
NAME: Success Is Learning From Mistakes And Learning How To Be Right
B BLOCK
Hitting Rock Bottom And Changing His State Of Mind
Life Is A Jungle - Success
meditation And Seeing Things At A Higher Level
TRANSCRIPT
Hello, and welcome to the moonshots podcast. It's episode 45, a very Merry episode. And I am your cohost Mike Parsons. And as always, I'm joined by the man from Brooklyn. Hello, shadow and morning, man. How are you? I'm full of Christmas cheer. It's very early in the morning here at Sydney. I have created a kind of a Marine light wake up program this morning.
Thanks to you, Chad. I had my cold shower. I dashed to the studio and here I am my cup of coffee at the ready. And I am looking forward to one exciting show. Yeah, we've uh, we've got one investor profile in the bag with Warren buffet and, uh, today we're turning our attention to. A younger, but no less, more successful.
Some might say more successful investor. Ray Daleo of Bridgewater. Yeah, he is. He is one special guy. Hi Chad, because apart from being one of the wealthiest people on the planet, he is a exceptional author. He runs the biggest hedge fund in the world. The one that he created Bridgewater, and he's an enormous.
Philanthropists. I mean, he is a Renaissance man, Chad. Oh. And he's pretty impressive stuff. Huh? I'm I'm really excited to profile him. He I'm sure many of our listeners have seen his book principles at the top of the Amazon business books chart. It is one of my favorite books of the year, but, uh, you'll have to wait.
For my book review a little bit later in the show and yeah, I'm excited because he and Bridgewater have often been kind of shrouded in secrecy. And I think as he's in the middle of his retirement 10 year retirement plan, uh, from Bridgewater, he is beginning to. Open up here in, in his life and work principles, you know, much of his mental models and thinking and how he created such a successful hedge fund.
And then I think probably closer to retirement or after he retires publishing his investment principles. So we have. A ton of really great clips. I mean, he's also just very well spoken and does a good job of explaining, you know, how he thinks about things. So I'm real excited to talk with you about what we're learning from Ray.
Yeah. Right. Dahlia. He's a really special character. I mean, yes. He's a sort of more modern version. Of Warren who he did in the last show. Oh, I love a couple of things about right deli. I, first of all, he had a very humble beginning growing up in Queens, New York. Um, he, you know, he, he was a golf caddy to when he was a young kid, just to earn a couple of bucks.
And interestingly enough, that actually caddying for these kind of wall street guys got him interested in investing and what I love as well for all his success. He's so ready to talk about his failures and in this kind of culture of hero, worship, and perfection from the likes of, you know, Elon Musk and all these Silicon Valley Titans, what's really great is how candid Ray Dalio.
Has been not only in his book, but in some of the clips we've got today, don't you love it, Chad, that he can just say, man boy, did I scuff up? Did I make a million dollar mistake? I find that I find that really refreshing that he's prepared to talk about failure as much as success. Yeah. I'm surprised at just how much he has documented his failures.
I think that is certainly something. I don't want to get too far ahead because we've got some great clips of Ray talking about this, but yeah, I think this is a thing theme maybe that has been in many of our shows that maybe we haven't explicated it, uh, quite so much, but this learning from failure, we've talked about experimentation and pen courage, but yes, I really do enjoy.
Ray's kind of singular focus on learning from failures. That maybe we haven't, we haven't seen from, from some other people we've profiled here on the show. That's right. And what I like about what he has done in capturing his sort of whole approach is, uh, he's put it into this book, principles, life, and work, and very much to the title.
What he's done is decoded a way of kind of. Radical transparency, critical thinking to make smart decisions at work and at home. And we've got somebody who is just perfect for our show. I mean, cause we always ask not only what did they do, but how did they do it? And. Quickly followed by how can we do it?
He, Ray Dalio is absolutely perfect for us at the moonshot show before tra Chad launches our first clip. I think it's, we just want to remind everyone, check out moonshots.io for all of the show notes, the clips or the historical shows where right in the middle of our. Investor series. We recently did an author series.
Uh, Simon Sinek has proved a big hit. So don't forget to check out those shows, um, at moonshots.io. So Chad, over to you, so where shall we begin the journey? Well, I think kind of how we learned a bit about how Warren first got started investing. Um, we have a great clip, uh, about how rate learned to invest.
You've had an amazing success story with Bridgewater. You started the company in your kitchen, I believe 40 years ago, you built it into the most successful hedge fund in the world. When you started, how did you learn to invest and how did your investment strategy change over time? Well, I learned, I learned, I learned from my mistakes.
In other words, my instinct is, um, you know, you go there and you place a bet. Um, I've had winners and I've had losers. And what I did was every time I made a mistake, they became a painful mistakes. But with time I realized that reflecting on those mistakes would give me gems. Um, what I would do is I'd say, why did I make that mistake?
And I would learn from that mistake and I'd write down a rule. So what was helpful for me is that put that rule principles, these principles, I wrote these principles down. Those principles that I wrote down, I then put into algorithms and other words, equations. And what I learned by doing, being able to do that is by if I took my decision criteria, that was principles.
And then I tested them back through time. I gained a perspective that was fantastic. I could tell. And, um, a hundred years I can test them in different countries and I would learn how those rules work. And I put by putting all those rules together and then how having these algorithms, the computer could replicate my thinking, but it could actually think better than I could because it, what it would do is it would take you, it can process more information yeah.
To process it faster and it can process it less emotionally. So it was like having a GPS that was next to me while I was also making it in my decisions. Like you're driving in a car and you have both operating. And to have that next to me was, um, you know, invaluable, it would learn. I would learn and together we built that sort of the, uh, you really start to see, uh, in, just in that clip, Chad, how he tries to look out at the world and all the organic craziness and define the rules and the logic, and then almost productize it.
Isn't it. Yeah, this, you know, there's a lot of talk about algorithmic trading and quants and whatnot, but Ray was pretty much the inventor of it. And I, I actually think this last clip really explains his biggest innovation in the field of, of, of hedge funds and in financial. Management, because what he did was he created an external brain where he used his human creativity to create rules based on his failures.
And he understood that this new thing coming on the block called the computer could given, you know, a strict set of instructions actually make. You know, make some choices and decisions faster than a human can. And then he has, like he says, he has that computer kind of next to him. That's helping him make decisions as he's, as he's trading.
I mean, you really can't give him enough credit for how kind of revolutionary that was at the time. And it. That I believe is really the source of Bridgewater's success is that that simple workflow of his is, is what they do day in and day out. It's no longer just him. Like he said, he has, has a big team of people that.
Think differently than him that are putting in new perspectives and new rules to more fully flesh out the algorithms from which they're using to trade. But yeah, that's essentially what he's been doing for, for his entire career. Yes. And I think we can learn from that. Not only in the world of investing, but beyond is it's all about seeing the patterns that lead to success.
So in, in your world, Chad, I am for sure that you have developed sort of at least a subconscious level. A number of building blocks of what makes a good story and had to produce a good story and you know, the requirements, good lighting, clear screen, et cetera, et cetera. I think we can all look around us and start to write down the things that are working and why.
And we can almost be little like mini Ray dahlias and try and write the algorithm to our own success. At work in our practice, in our functional craft, if you will, beyond that. And you know, a great example is I know my little algorithm for a good day starts with having a good sleep and exercise and you know, writing in the morning.
Well, these are all part of the formula. I love what he has done here, and I think it should inspire us all to really look for the patterns that, that lead to successful outcomes. Don't you, Chad? Yeah, I'm kind of curious how I might start a little failure journal and then some rules of my own. I can think of probably a couple here in the past few weeks.
Uh, that might be good. Good learning learnings from me. Every everything. Don't try to run 10 miles in a week when you haven't ever that's done that before. Cause you'll injure yourself. Was this a recent escapade, Chad? Yeah. Yeah. And wanted to train for a half marathon next year. And, uh, I went out the Gates strong a little bit too strong.
Ooh, Ooh. But, um, yeah, I, that, that that's really, I, I think what I'm going to take away is yeah. Find a place or a way to, to email myself in the future, making notes of some recent failures and how I might learn from it, this idea of creating rules that help inform decision making. So good. It, it sounds almost like too simple and too easier.
I I'm definitely gonna, gonna try it. Awesome. Check in and see how that goes. In the meantime, I think one of the interesting things is for a lot of us who don't work in wall street, there's all sorts of new vocabulary ideas, um, entities that exist in the world. You know, we hear about the quants and the algorithms and so forth.
Now what's really interesting is Ray Dalio founded and created the world's biggest hedge fund. But actually it's very different to, to say, for example, Berkshire Hathaway, where Warren buffet has been beautifully working for a long time. So this next clip we're going to listen to is a little bit of economics.
One Oh one. This is Ray talking about what is a hedge fund? So it's a structure within which, um, investors can do all different things like a mutual fund. You might say some people are value investors. Some people invest in bonds. Some people invest in stocks. People do all different things within a structure called a hedge fund.
So it's a particular structure. That allows people to do all different things, basically though it allows you to invest with them. Um, um, uh, much in the way have restrictions, traditional ways I can sell short as well as go along. If something's going to go, if I think something will go down, I can sell short.
I can go into any market. I can go into stocks or bonds or commodities or gold or anywhere that I want to go within my agreement with my client. Um, so I give me the freedom to approach the world to look at whatever's good or whatever's bad. And so it's a, it's a vehicle that allows me the freedom to invest.
So the interesting thing here, Chad is he's playing in a much bigger space than that of Warren buffet, because essentially what he's saying is he can go long, short oil. It doesn't matter. As long as it's an investment yeah. Vehicle he's free to play in it. I find that a little overwhelming because I struggled to even keep up with the machinations of my stocks to think of multiplying that into all sorts of different universes, enormous freedom, but it's sort of like an infinite playground.
Really? Isn't it. Yeah, but I think when you marry that with his, with his endless list of, of principles, I think, you know, in many ways Ray has kind of algae, I don't know a way to say he's computationally created these principles and algorithmically programming them. If you remember Warren. Was also talking about things in a similar, probably more basic rudimentary way, but you know, there's only a few, you know, Warren doesn't take many shots because he wants to be sure that the shots he's taking are going to be ones that he made eggs.
And so while I think Ray is good at articulating how that happens and how he does it, I think, you know, at the end of the day, all good investors are doing something. Quite similarly, but you're right in that raised playground with Bridgewater, associates is much larger because they're not kind of hemmed in by more traditional and conservative business models.
Like the conglomerate that. That Warren operates where he's actually buying entire businesses are majority stakes in businesses. And in turning around the operations in such a way to optimize, you know, the, the profitability and sustainability of those companies. I think Bridgewater in most other hedge funds.
I want to be far more liquid, uh, in being able to move their money around. Um, so they're not necessarily interested in, in buying a pole company. Sure. They might buy a bunch of Apple stock, but they're not going to try and buy Apple and tell them how to, uh, How to make the next iPhone. Exactly, exactly what I find.
No, it was what I really like about Ryan. What almost demonstr straights, how well he has critical thinking down is you would think he'd been to every new, hot, new investment vehicle, but that's not quite so is it Chad? No, and I'm sure there's a lot that breaks his rules and because they break his rules, he's simply able to ignore them.
So this entire cryptocurrency craze, I think he has just let, let slide by because I'm. You know, they probably just didn't fit his rules, but here's, here's a great clip of him actually talking about how Bitcoin Bitcoin specifically is a bubble that, you know, he's, he's not really interested in. There are two purposes of a currency.
Is it a medium of exchange? And is it a store hold of wealth? Those are the basic ingredients. Bitcoin is not an effective medium exchange by and large. And if I go, I have a Bitcoin, I want to go buy things. It's not easy to buy things with the Bitcoin. And in terms of a store, hold of wealth. A store, hold of wealth, uh, more reflects like gold, more reflects the opposite of what money is doing, right?
And so you look at it, it's a store. Hold of wealth. Bitcoin is a speculative. Uh, it's a speculative bubble, right? It's price is like a greater fool theory in terms of its price. If you say, what is its intrinsic value? If, if Bitcoin was made into a more effective. Medium of exchange and also, uh, operated in terms of store, hold of wealth, not of the reflection of that volatility.
It would be a viable instrument. It is to me, a vehicle for speculation. That's attracting people in and it has all the classic ingredients of a bubble people leveraging themselves up and it doesn't have that same intrinsic value. Right. Even the privacy value. Okay. Is suspect suspicious. In other words, it has a purpose to some extent, if you're living in a country and you don't know your currency, it was whether it's going to be good or not, and you might hold, try to hold that.
But that thing you're holding is running around like crazy for reasons that you don't understand. And then it's, so it's not going to be an effective store, hold a well, and the privacy will be stress tested. In other words, governments are examining who is. Operating in their own clever ways of what that, and so you can't even assume that it's going to be a privacy vehicle.
So I don't see the effectiveness of Bitcoin. I could see, um, cyber secure, uh, currencies and, and so on. Uh, but cryptocurrencies, but this is not what we're having. It's it's, you know, it's a possibility that I think is, has been captured as a speculative vehicle. That's in the middle of the bubble. How good is that the guy who can invest in anything can, everything who's sort of got the inverse of Warren who, who literally participates in one vehicle on one vehicle alone, at least at Bitcoin it's and says bubble all the way.
And whether you agree with him or not, it's not really the point. It's the fact that he has the clarity of the, the thinking the pursuit of. The truth in his worldview. I think this demonstrates that he's got the courage to think for himself. And quite frankly, I think right, as of recording this show, anyone who's been investing in Bitcoin over the last six to 12 months has probably taken a Priti significant shower on, on that investment because, uh, cryptocurrencies are.
Severely down on where they were at the, at the beginning of the year. So it's a great articulation of his thinking, isn't it? Yeah. Yeah. And you'll notice that he doesn't say that he or Bridgewater has not, or is not investing or divesting from cryptocurrency and Bitcoin. He's, he's just calling it a speculative bubble.
Now, given what I know about how hedge funds operate and specifically Bridgewater. I would not be surprised if they have made millions, if not billions of dollars off of this bubble, but I think they have the clutter 30 to know exactly what it is. And they're not seeing this as a new currency competitor to the Euro or the pound.
For the dollar. I think Ray, in, in his, certainly in his, his trading life does massive amounts of backtesting. Uh, he mentioned this in an earlier clip. So what he does is he creates a rules that says, if this happens in the world, what does this, you know, what happens to the stock? Market or this commodity or this, this financial vehicle that I'm looking at, what does it do?
And if I do this, what happens? And he goes back as far back in time as he can too. To test these models out. You know, he has digitized records of like the two, the Dutch tulip to understand that bubble and kind of every bubble sense, whether it was to lips or spices or salt, or, you know, whatever these come on that had these wild fluctuations where wow, because he just has this insatiable thirst for knowledge of how these markets work.
Yeah. And. Because he's, he's looking for the inefficiencies in the market that's right. Or his profits are. And so he just, he just has to amass more knowledge than everyone else in the industry, because that knowledge will give him the leg up. So if he was able to identify Bitcoin specifically as a bubble, there are trading mechanisms that he can do to take advantage of it.
Yep. Yep. And this all starts to bring to life. This. Principled approach to finding radical transparency, radical truth. He's rigorous. And what's really interesting in this next clip is there's actually sort of a moment. Uh, there's there's sort of a, a spark to this whole approach. So way back in, time on Ray made a really bad investment and it really challenged she's thinking then, and true to his word.
He learns so much from this mistake. And it really put him onto a course of being much more radical in how he's, how he thinks. And he became really true this lifelong journey of learning how to be, right. So let's listen to Ray Dalio and him telling the story of how one bad investment changed, how he thought.
You had started Bridgewater. You'd had many years of being very successful. You'd gotten very confident and you've made this huge controversial bet that we were headed into next great depression. And then right, the debt, the defaults came. Mexico defaulted in August, 1982, I thought, wow, we're going to go in this crisis and everything's going to fall apart.
And that was the exact bottom of the, the stock market. Like I couldn't have been more wrong. Yeah. And it was painfully wrong because I built the company up until that point we had, we're a tight group of small group of people. I had to let everybody grow. I was so broke. I had to borrow $4,000 from my dad.
I had testified to Congress because they asked me to explain this. I hadn't been on wall street week, all of those mistakes. And it was very painful experience and it turned out to be probably the best experience of my life, because it changed my attitude about thinking in other words, rather than thinking I'm right.
I went to thinking, how do I know I'm right. Um, and it created this open-mindedness to be able to then go find the smartest people. Who disagreed with me and to see how they would think about things to balance my bets better. It taught me a radical open-mindedness. It taught me what you're referring to in the beginning of the book that I'm trying to convey that the power of radical open minds and an idea meritocracy is such a powerful thing.
And you talk a lot about how this process of pain. And I can imagine that was just, again, a gut wrenching experience of have to fire all of your friends. You have to rebuild from zero, you start going forward. You have to look in the mirror and say, Hey, I was way too arrogant and confident. I have to effectively relearn.
That's not an easy thing to do. Right. I have a saying pain plus reflection. Equals progress. Right? And I began to develop this knee jerk reaction. If I'm pain is a signal that something is wrong, that you did something wrong. If you make those mistakes and then to take that pain and to calm oneself down and think what would I have done differently in the future?
So my instincts change, I view those experiences now like solving puzzles. That'll give me joy. The puzzle is, would I do differently in the future? So I would get a better result. The gym is the principle that I would write down as I learned it. So literally by writing down the principle, when this one comes along, what do I do with it?
There, everything is another one of those. Like, we have a million of those. And if you start to say, when one of those comes along, how should I bet deal with it? And you're right down that recipe. Those are the principles. So I've found that exercise to be great. And I also found that I could turn those principles into algorithms.
So let's say our investment process, those criteria are built into literally algorithms and data can come in. I've found that process of encountering pain to produce reflection, to produce better ways of doing it to PR principles. And then carrying that forward to the decision making has been invaluable.
And to do that with people who are going to disagree with me and to know how to do that well, that's been the key to have success. Wow. Yeah. I would encourage all of the listeners to go back and listen to that clip another time. I think it really encapsulates Ray's genius in how he has taken this very rigorous approach to.
Deconstructing his mistakes, creating a plan of action for what he's going to do in the future, and then kind of in testing it and being sure that he's getting the results he wants from that. And it's not just with investments, it's in how he runs his company and how he operates just as a human being out in the world.
Yeah. The, the, the thing for me that this gets into, I think, is a huge learning for us, which is. I'm going to hit you with this theory that we learn more through failure than through success chat. Um, so here's the idea, basically success isn't as sharp, a moment as failure. And because of that, we have a more visceral learning moment.
A more emotional moment is triggered in failure. Success is more of an undulating, uh, softer curve. And. You know, you can be, you can realize you're successful. Maybe when you achieve a certain benchmark or you receive an award, but the journey is made up of thousands of little experiences. So it's hard to, to sit there in the moment going, Oh wow.
I'm having a learning moment in success. Whereas with failure. We often have these moments, just like Ray was talking about in that clip that we often have these moments where we are faced with the Valley of darkness. We're like, Oh my gosh, it's broken. And the implications are huge. And we have that feeling in the pit of our stomach where we're like, Oh, I'm in trouble here.
Yeah. Well, I would actually, for me, I think it's a little different. Failure for me is a much greater instigator for change and success. But I also think that our successes can get overlooked. And as, as you're kind of talking about not, not celebrated or even just recognized in many ways and. I just don't want us to lose sight of yes.
It's important to kind of document failures and create principles around the learnings from those failures. But at the same time, I think you should document the successes if something works codified and be sure that you're doing it again. Oh, yes, sir. Yeah. So, but you're absolutely right in that kind of the emotional pain and turmoil that comes with failure is a big instigator for change.
So I think if you're. You know, if you're looking to do something different than you can probably kind of rebound from a failure into that new thing, into that pivot. Oftentimes it's kind of hard to learn from successes. I think as, as you're saying it, we just put so much more emotional weight into our failures.
That's right. And I think what you're, what you're getting into is a very strong point about, I think if you're anyone who who's a. A driven person. You can get into the bad habit of as soon as you're achieved something, rather than enjoy that moment. You're already thinking about the next thing. And when you fail to appreciate what you've achieved, You can get into it.
You just get overworked, like you just become in this unrelenting cycle of demanding perfection. And the greatest irony is that you never achieve perfection because you're striving for perfection. So it's, it's an impossible outcome. And certainly anyone who's very driven can often find themselves quickly falling into the trap of never taking a moment to reflect upon success.
And I think reflection. Was what Ray Dalio did so well when he fell the pain of that bad investment. And if I just step back a moment within this first half the show, we've learned that he's all about this search for radical truth. Through basically finding out what are the algorithms, what are the patterns in how things work successfully and how can he use those?
He has this enormous playground that that is a hedge fund where he can invest in anything. And he has the self discipline. To call things like Bitcoin in his mind, what he thinks they truly are, which is a speculative bubble. What a nice package of inspiration so far, Chad, I mean, you really start to think he's, he's like this human CIBO computer.
Who's calculating the way in which the world works. It's pretty, it's pretty cool. Oh, right. Yeah. I love his, his equation pain plus reflection equals progress. The, the questions that he asks himself, like, how do I know I'm right. Or, you know, what is true? What can I do in the future to get a better result, his application of the scientific method to both kind of personal and professional.
Development is a really fascinating, so he might say, well, I have a hypothesis that if these two countries are in a positive trade relationship, then the price of corn always goes up. And then he takes that hypothesis and puts it through all of his back-tested of hundreds of years of data to see if that's true.
He also has conversations with people who have the opposite hypothesis of him and they debate it. And. He is never satisfied until he has exhausted all means and methods to figure out if he is right. I love what you called out there. That, that thoughtful disagreement that he actually encourages in his firm.
And he talks about that in his book. Doesn't he? Yes. This is a great chance. Uh, for us to, to bring up his book principles, uh, again, which I highly highly recommend. Uh, I think I've gifted it to three people. I haven't quite figured out how Amazon Australia works, Mike, but, uh, might you might be getting a copy here pretty soon.
Um, it's uh, yeah, it's, it's a really. Interesting book, because as I said, he, Ray had been quite secret in the way he, the way he did, I traded his own personal philosophies and how he operated Bridgewater. While this book doesn't get into to his in investments. Uh, strategy and algorithms. It does tell his own personal story from when he was a kid all the way up through, through founding.
And now as he's leaving Bridgewater, cause that's kind of the first section of the book. Then he gets into talking about all of his principles and his principles span everything from the kind of existential question of like, what is true. And what is my purpose to more deliberate things about. Um, you know, how to communicate effectively and, and, and kind of the practicalities of, of running a business.
And then at the end of the book, it's, it's kind of just a list and there's like hundreds of principles and, and kind of sub principles. I'm flipping through the book here and there's just, there's so many, and what I really enjoyed was you can. You can skip either part. So if you just want to know about radar it's history, you can, you can.
Uh, read just the first portion. Although I think actually probably most everyone's interested in the principles, but I would not skip the first part because I think it really helps inform you with how and why Ray began to document and came up with many of these principles. He kind of shares the practical lessons that he learned along the way and where these principles came from.
And then. I've actually been using it as a bit of a desk reference in a way, or kind of like a, not quite a daily dose of a Daleo, um, going in and, and, and looking at an unpacking a principal and maybe making it a focus for my day or for my week to see how it might apply to me or not. And if it does, maybe I, I kind of stick with it.
And if, if it doesn't, maybe I modify it or. Or discard it, but his to structured thinking about thinking and, sorry, sorry to get all meta here. Yeah. It was the most fascinating thing to me because the book is Holy really different than any other business books I have ever read. Whoa, just, just in the way that it's written and structured.
Because it's more of a book of thinking about thinking than it is about like, Hey, here's how to tell a good story. Here's how to build a good team. It's much. Yeah. He's kind of operating in a different altitude here. I mean, as you can hear, like, this is, this has probably been my most diffusive, uh, book reviewed today.
Um, I know it's a really long book. It's thick. You know, it'll slam down on your bedside table, but it's a really worth picking up in if, if the only thing you read and take away is just the outline of the principles. I think, you know, you could pick it up and flip through that in the bookstore and really start to see some of the value of what he's written.
I mean, you know, there's a reason that he. Has kind of been so popular in Bridgewater has been held up as like, uh, the Paragon of, of hedge fund investing. Um, it's really readily apparent and in what he's written in the book, and I'm kind of curious from you, Mike, like what, what questions you might have of, you know, what's in the book or, and I've, I've been.
I been speaking so highly of the book, I'm kind of curious what your thoughts or questions are. Oh, I, I think it sounds, I love the way you positioned it, thinking about thinking. And so my question really would be, would you say this is the perfect holiday break interview, cleaning, cleaning your head out a little bit, maybe.
Re-imagining 2019 with a bright new canvas. Would this be a good book to take over the holiday break? I'm I'm kind of torn it. The book is only going to cause you to think harder and deeper. So while there are some answers in the book, I think if you really take what it's saying to heart, it will accelerate.
Yeah. Thinking and just like give you more ideas. If you're not ready for that. I would maybe hold off, but yeah, I think, yeah, I read it maybe six months ago now that I have it in front of me again, I actually know what I think I might, it might make it into my suitcase. Um, for my holiday travels, I might, uh, I might revisit it if not to, uh, to review it again and then give it to my dad.
I think my dad would, would really enjoy it. Oh, super. Okay. So what we're seeing here is that we're talking about the book principles life and work by Ray Dahlia. I think we can take it from our resident book expert Chatto and it is a rather hefty. Substantial read to be in that head space. When you open it up, it's going to provoke a lot of new thinking, new questions.
And so if you're in that kind of zone, this, there could not be anything better. So thank you for, you know, a very, very energetic and very, uh, Praiseworthy, but, uh, I thought a very heady warning to, to watch out for some, for a book that's coming your way, that is really going to be quite disruptive to your state of mind.
Chad. Yeah. And I would, uh, encourage any and all listeners that have read the book or are reading the book. Kind of where wherever you are in time as this podcast lives out in the ether, uh, shoot us an email@helloatmoonshots.io. I would love to kick off a conversation with you, uh, about the book. As I said, it is very thought provoking book.
Um, and I'm very curious, kind of what your takeaways and learnings from the book are. It's also a reminder that you can find links to this book and all of our clips and things. We referenced here in the show@moonshots.io. Nice. But this show's not over. We've got quite a few more clips, right me. Oh yeah. I think we're going to now go into a world of behaviors, attitudes, how Ray Dalio sees the world and how he got there.
And so I think there's lots of great tips here for. You know, entrepreneurs, founders, innovators, product designers, you name it. There's something for you this next couple of clips. And I think we're going to go and start with. How really get into the kind of fundamentals of reg hitting rock bottom, Korea, and how led to changing his state of mind.
So if you want the sort of transformation moment, get ready, because we're going to listen to Ray Dalio talking about hitting rock bottom. You made all these mistakes and learn from them without going bankrupt, which is what happens to a lot of investors or did you go bankrupt a few times in that period and then come back?
No, no, but I had one, I had one crash, 1982. I did calculations that, um, um, American banks had went much more money to emerging countries than those countries were a little bit paid back. And, um, and I. Those calculations, very controversial, those country, common, uh, calculations, right? Um, the countries, uh, Mexico in August of 1982 defaulted, a number of countries happened.
We had this big debt crisis. I thought the economy was gone and the stock market would go down a lot. The startup economy and stock market went up a lot. I, um, I was so. Uh, I lost money for me. I lost money for my clients. I was so broke that I had to borrow $4,000 from my dad. This was very, very painful.
But it turned out to be the best thing that ever happened to me because it gave me, um, it gave me a change in mindset. It gave me a realization. Essentially. I went from a state of mind thinking I know to a state of mind of thinking, how do I know. Um, and, and then trying, and it gave me an open mind mindedness.
It gave me a fear that balanced with my human, with my aggressiveness, but the most important thing that I learned is that okay, if that fear and the humility in order to balance those bets, Hmm, humility to make those bets, like, is that not where it really comes to, right. Yeah. And like, to be clear, we're talking about losing millions and millions and millions of other people's money.
It's not, it's not like stubbing your toe. Uh, it's a, it's much worse than that. I think you don't hear like despair or distraughtness kind of in his, in his tone as he's recounting this story, he really saw it as a, I never want this to happen again. What do I need to do to ensure that that doesn't happen again?
Here's where he is writing down his principles and then using those to guide his way forward again. Yeah, the, um, I, I just think that we, we are starting to see. That he, as soon as he encounters a failure, a mistake, he is teaching all of us that this should be a launch pad to something better to really take it as an sort of a spark to ignite the question.
How do I know how to make the right decision? How do I know what the truth really is rather than dwelling in self pity? Uh, he's feeling the pain. You can hear it, but he's like, And almost immediately, this is how do I do it better next time? And I think that's that resilience that way we've seen in a number of people that we've studied on this show, you know, it comes to mind that, you know, Branson has had his ups and downs without doubt.
I'm sure Elan is having some ups and downs at the moment, but all of these people that are using them, their success lays. In this continuous learning, improving and not letting these things hold you back. Yeah, he, he is quite a bit different from. For many of the ones you just mentioned, you know, I'll throw in the likes of Steve jobs and others in there.
The others have a bit of what people have called a reality distortion field around them to kind of insulate them from and give them the environment they need to go out and place big bets in creating products or creating innovative new services. I think Ray kind of has the opposite of a reality distortion field.
He has like the truth. Reagan I'll call it, you know, he's just like, he wants to know the absolute truth about things. Yeah. So in a way he's creating an environment through rattle can transparent, radical transparency and openness to shine as much sunlight into the system as possible. And it's, it seems to be working for him.
Yeah. But that's an interesting distinction that I think I would make between him and some of these other entrepreneurs and innovators that. I mean, I'm sorry, Elan, but like, you're not really quite living on planet.
Oh boy. Is that the truth? But you know, what is such a good point, Chad? Like he, he thrives. In knowing exactly the facts and what is really happening. He hates the distortion field, Ray Dahlia. I mean, he's the polar opposite of Steve jobs. He wants to know where it is and what's really, really thought provoking.
Is he thrives on navigating the truth? In fact, There's this body of thinking that we have in this next, even if it hurts a whole lot. Yeah. Yeah. But wait for this. Yeah. He loves the cheese, the challenge of navigating through the facts and the truth of the puzzle, the Mays. He wants to overcome that. In fact, he thrives on seeing life.
As a jungle and he wants to experience all the ups and downs and get on the other side, like he thrives he's success comes from overcoming the facts and not sort of living in an alternate universe. So you've just set us up perfectly here. Chad let's have a listen to Ray Dalio. Talking about life is a jungle.
I, I don't, I don't think that's a success is like a lot of people believe it is. And for any really successful person, I think that, um, everybody's always struggling. And what happens is, you know, you just struggle at a higher level. It's like learning how to ski or play some sport. And you're just kind of doing this higher thing, but it doesn't feel like that if it just feels like I'm struggling.
And I think it's, um, uh, And, and it, and it's a good feeling. I, the way I think of it is, um, I've always thought that it's like in order to be successful in life, you have to cross a jungle or you can stay on the other side of the jungle and not cross the jungle. But if you choose to cross the jungle, the jungle has all sorts of things that can do your harm and bite you and everything along those lines.
And so the West best way to do that is to go into that with people who can see things differently and watch themselves and struggle to make it to the other side. And then what I've discovered along the way is that it's always a struggle and I enjoy being in the drug goal. I don't want to get to the underside.
I don't want to get out. So that's what it feels like to me. Hmm. It it's really interesting. His, uh, analogy to the jungle reminds me of the definition of, of flow from Mihai. She sent me high in you'll have to go to moonshots.io for the spelling of that. But if you just search for flow, uh, on Wikipedia, you'll, you'll come up with, with the book and the body of research, uh, this idea of kind of struggling with something that's just outside of your ability and comfort level.
I mean, it seems like you're just doing lots of hard work, but if you kind of step back and look, you actually can understand that you're kind of moving up in skill, uh, you know, moving up in, in, in, in the levels. And I, you know, I think that's what I'm taking away. As he's describing the jungle, the jungle is kind of that place.
That's just dangerous enough, just challenging enough, just enough of the unknown, where it will stretch you and your teammates far enough to, you know, To get out there and do something really novel and innovative. Yeah. The, the, my thing that I really, really appealed to me for here is there's almost like, Oh, he's still struggling.
Like he just said, I, you know, I just struggle at a higher level. I, I liked the idea that, you know, this comes back to what we were saying about perfection. Um, and to always be striving for, uh, his, he is working as hard now as he was, you know, in 1982, when he faced those challenges. What I love is that he.
Thrives on the challenge of going through the jungle. He's not trying to get around it. He's not trying to shortcut. He likes, it's almost like there's a football field. He knows where the, the try line is the sideline, the goalposts. And he's not going to try and go round it. He's going to go through it. By by learning better by thinking better by knowing the truth.
I found that very intense. Yeah. And it's, it's no secret, uh, that Ray has some, some personal practices that he uses, I think, to, to make the chaos of the jungle, uh, probably a bit more, more manageable. Um, I think I first heard him on. Interviewed by Tim Ferris talking about meditation. So of course, Tim and Ray are gonna geek out about meditation, but I think it's one of the first explicit mentions from the innovators.
We've profiled that it's, it's such an integral and important practice for them. I know many of the others that we've spoken about meditation was a big part of their lives. Like Steve jobs and others included. But we have this, this interesting clip from, from Ray talking about meditation and how it's helping him achieve, uh, you know, a different, uh, a different perspective.
There are different parts of our brain that have a very big influence on us. The amygdala is the part of the brain that has the fight or flight that produces anxiety. Um, the prefrontal cortex is the part of the brain, which we call for executive functioning, where it's the part that's reflective. It's the part that, um, we, we are calm and we say, do we want to do that?
Do we not want to do that? We put things in perspective, those two parts of the brain are fight for, with each other. In other words, the passion I'm going to do that because it's exciting, but it may be harmful. The other part of the brain says. And you don't want to do that. And so that whole emotional fight or flight part of the brain during meditation, um, through brain imaging, they see that that comes down and the prefrontal cortex lights up.
So. Um, that open-mindedness creates, um, where creativity comes from because creativity is not coming from the working the brain and the, I will work hard and think of that. And in that I will muscle it through, it comes from this relaxation. It's just like, it's an opening up and, you know, take a hot shower and don't be thinking of something and some great idea comes through and you grab the great idea.
So meditation is very much, um, like that it opens, it opens the mind, creates an openness, a freedom it's in which that, I don't know whether we would say intuition or those that creativity just kind of comes through and it creates an equanimity that in other words, you could step back and you can, um, put things in perspective.
It doesn't lessen your emotions, the emotions of the same, but you can step back and say, I'm not going to be controlled by that emotion or let me put things. And I think it then helps to see things at a higher level. Yeah. Seeing things at a higher level. I mean, you can almost feel as he's speaking there that, that sort of 35,000 feet perspective that he seems to have.
And I think. The parallel that I'm, I'm drawing from this and, and really learning about is in sport and business. If we let our emotions get the better of us, we can make very silly decisions because the emotion blinds us to the truth. And what I love is how he gives us a very practical suggestion here that through meditation, he can calm the mind.
Calm the emotions be more thoughtful, more reflective and draw better insights any, and I liked how he said, well, you still re react emotionally to things, but you can almost go to a place where you can come down. I thought that was really powerful, Chad. Yeah. And I think he, I don't think this is the only source of inspiration and creativity, but I think he's absolutely right in, in engaging, engaging with a meditative.
In a meditation or meditative, like practice does an opening or a window for creativity to flow through. Now you can literally sit down and, you know, do a transcendental meditation with a mantra, or like for someone like myself, you know, I treat walking my dog as a sort of moving meditation for, for others.
It's sports, you know, swimming or running. Um, I think. All of those States can, can achieve much of what Ray's talking about and kind of quieting the lizard brain and awakening the preform, the prefrontal cortex. Oh, Chad, I'm so glad that you, uh, helping free us of our lizard brains. I mean, thank you. Um, it, my reflection on this would also be in relationship to creativity and inspiration.
People need not only calmness, but they, I need safety, a sense of space. And when those things are there, you will be literally amazed at the human capacity. For creativity for inspiration, for ideas. I think it lays within us. I think those that are creative are just better at getting it out quicker and getting it out.
And I do believe that we've all got some creative potential inside of us. Kind of sad that we're at the end of, of the show. Don't let your lizard brain take over, sitting here looking at the like 900 pages of, uh, Principals. So I can, I can dive right back into, uh, into, to raise thoughts here. Oh my God. Oh my gosh.
So it's Chad, the journey we've been on seems to really, it's all about the search for this radical truth and looking for patterns and adopting different behaviors, different, you know, Mental models to get to whatever truth applies for all of us. Ray's really inspiring us. Look for the patterns, create your own so-called.
Algorithm and, you know, really use the challenging moments to jumpstart you into new opportunities, to do things better and just enjoy that, that wrestle or as, as Ray would call it, enjoy going through the jungle and use tools like meditation to help you get through. Right. Yeah. One thing that I'm reflecting on, I don't do the kind of documentation that Ray does both kind of personally and professionally.
To kind of create, to learn from my failures and create my own rules. That's one thing that I'm really curious. I carry kind of a, a pocket notebook with me all the time. Maybe, maybe that can be a place for me to write down my, my observations and, and create some, some rules and algorithms for myself. Uh, I think for me, that's going to be the biggest takeaway is, you know, I learned a lot from the book and in doing this show with you here today, Mike.
I've I've got to, I got to start documenting and learning from my mistakes and in, in much the same way that Ray has. Yeah. Yes. And, and I, I find, you know, what I've already started working on is sort of my review of 2018, my review of the second half making already making some notes, like, Oh, what did I do?
Well, what did I not do? Not so well, Like just having, having whatever works for you, Chad, for our audience, for me. Some ability to just reflect. I think Ray is evidence enough that reflects election is so important in our lives. If we want to do things a little bit better, then we we've got a reflect.
Right. That's that's without a doubt, that's what he's encouraging us. Just think, take a moment and just think about what you've done. What did you do? How'd you do it? Why did you do it? . I love this, this, uh, this framework I've used in a lot of executive workshops called stop start continue. That's a very simple, very powerful way in which we can say, okay, um, what would I stop doing?
What do I need to start doing? What's really working. What can I continue doing? That's perhaps a nice way. As we go into this reflective time of the year, right? Yeah. Who knows that this a foray into the world of investors would be so thought provoking for you and I, who, you know, we're not, uh, we're not high rollers.
We're not investing millions or billions of I was here, but I feel like already with the Warren and Ray, um, have a lot of really great practical. Uh, yeah, amazingly thoughtful. Surprisingly, if you will, a little bit beyond the world of finance, what maybe we're learning here is to thrive in a sort of quantitative world of finance.
You need all these qualitative human ethical. Reflective traits. It's quite interesting. Yeah. Yeah. At the end of the day, you know, the economy is people. Yeah. So if that's what they're trying to map and, and react to then yeah. I think that deep understanding of, of people is. Gonna give you a big leg up, no matter the numbers you crunch and algorithms you, you create.
I totally agree. I totally agree. So Chad, before we, before we wrap up, who's going to be next wonderful journey and investors. We've done. Warren, we've done, uh, Ray Dalio. So very much a one, one traditional one contemporary look at the traditional world of wall street. What's next. We're going, uh, we're going a little West here to the land of Silicon Valley, a, a cofounder of Y Combinator, uh, in very famous Silicon Valley investor, uh, and essayist Paul Graham.
Now what's so interesting about Paul Graham is he has a body of work. With a lot of wisdom, even though he's not by trade, right? No, he's the programmer, right? I mean, he started, he started as a programmer. Yeah. He is definitely a decoder of patterns. Very much in the vein of, of Ray Dalio. Wouldn't you agree?
Yeah. And what's interesting, you know, for our audiences. His, his vehicles are many of the times companies that we have talked about and profiled on the show and others in Silicon Valley. So that the entrepreneurs and people that are he is working with are founders of startups. And, you know, he's making investments in them and, and, and taking them through the Y Combinator program.
Yeah. Yeah. I mean, to put that into perspective, uh, he's invested Neely and too. Thousand startups and the value of his portfolio. He already, and you're ready. This portfolio includes like Airbnb, Dropbox, Stripe, Reddit, Twitch, et cetera, et cetera. The value of the startups that he participated, coached, invested in is over $100 billion.
I feel like it's a $100 billion, but it is. Quite profound. And Ian Mark Andreessen, who we reviewed on the show, he says the Y Combinator, the, the, the program that Paul created is the best program for creating top end entrepreneurs that has ever existed. So he sincerely saying this guy is the Uber coach of the best entrepreneurs in the world.
Um, yeah, I'm, I'm really excited and I've already spotted a few, uh, talks that I would like to, uh, break down and, and bring some wisdom to you. All of our lists. Super well. Chad, thank you to you. Thank you to our audience. We've done another delightful, inspiring, and somewhat surprising show where just the series.
Just keep giving. Inspiration to us both. I mean, I just really can't say thank you enough. It's it's a total blast and I can't wait to jump on the show and look at the world of Paul Graham and Y Combinator next week. It sounds like you're going to have lots of reading. Lots of YouTube talks to look at over, over the holiday break.
Are you pumped? Uh, for your, for your journey and eating too much drinking too much and reading too much, Chad. Yeah. Yeah. But, uh, say happy 20, 19 to all of you listeners of the show while Mike and I are still stuck in 2018, you'll be, you'll be listening to this fresh, a new, and in the brand new year of 2019.
Fantastic. Well, Chad, thank you again. We wish all the best to our listeners and we'll see you next show where we get into the world of Paul Graham. Chad, take it easy and we'll see you, our audience on the next moonshots podcast. That's a wrap.