Balancing Audacity With Humility for Risk Management in Decision Making
Learning and developing from the costly and painful, 'I couldn’t have been more wrong. I was dead wrong' experience
Ray Dalio wasn’t always this way — intelligent yet realizing he doesn’t know it all. Confident yet humble. He had to suffer first, learn the hard way and then engage in some personally-led, committed, professional development.
The renowned investor and hedge fund manager has served as co-chief investment officer of the world's largest hedge fund, Bridgewater Associates, since 1985, a firm he founded in 1975 and he recently talked about how he went from his lowest low to regularly, more reliably making outstanding decisions.
Dalio tells the story about a severe business miscalculation early in his career that proved catastrophic, hurt others more and traumatized him.
"I couldn’t have been more wrong,” he told interviewer Dickie Bush in an interview clip that Bush posted on X. “I was dead wrong."
Not many people, even decades later, can set aside their ego to bring themselves to this level of admirable, honorable humility, privately and especially, publicly.
“I lost money for me, I lost money for my clients,” Dalio recalls.
It was bad, really bad.
“Bridgewater was a small company then, maybe 8 to 10 people. I had to let those people go,” he admits, adding that he had to borrow $4 thousand from his dad to pay the bills.
“So that was a very painful experience. But it turned out to be one of the best experiences that ever happened (to me) because it changed my approach to decision making,” Dalio brightly says now.
He goes on to specifically explain how he created financial and career gold out of the biggest error in his life to that point.
“It gave me the humility I needed to balance with my audacity,” Dalio confesses point blank. “It made me think, ‘how do I know I am not wrong?’ And that changed my whole decision-making process.”
Audacity was a strength of his that allowed Dalio to succeed for other people and himself beyond his wildest expectations and make a sterling, business reputation for himself. Yet that trait alone was dangerous Dalio found out. He needed more cognitive and emotional skills. So he pursued it, learned it, became it: Humble.
He concisely describes specifically how that developed.
“That decision-making process meant that I would try to find the smartest people I knew who would disagree with me so that I could so I could understand their perspectives,” Dalio details.
He, and more precisely, his ego, didn’t fear other people, especially smart ones. They were not his enemy. There were assets to what he wanted to accomplish and he knew it and valued them for what he didn’t know and wanted to know.
“I would use triangulation, I went to diversification. I went to a number of things that significantly increased my probabilities of being right.”
That — being right — didn’t lie solely in him. It lied in communication that confirmed, disproved or accented what Dalio believed. That was powerful.
He knew what he was after: humbly realizing that he might miss something important or critical if he relied only on what he knew and his biases, Dalio wanted to, at all costs, prevent it.
So, his decision-making process now involved safeguards for risk management by tapping into the intellect, industry experience and knowledge of other smart people.
That was, in his mind, the golden ticket, to be less wrong, more correct and more profitable, much more profitable.
This process improved his confidence in his decision making. It didn’t create frustration, doubt or anger.
“It meant that I wanted to create a real idea meritocracy,” Dalio says. “I wanted to bring in the smartest, independent thinkers to disagree with me so that we could disagree well.”
He hated the idea of being wrong and failing, from his trauma, more than he did learning that he may not be right. He respected independent thinkers, intelligent ones and invited them, with facts, perspective and ideas, to disagree with him, if for nothing more than to see greater dimension to what he was thinking.
He wanted to mushroom, figuratively speaking, his thinking.
Dalio elaborated on his trust and commitment to “thoughtful disagreement” where he leans on wise, independent thinkers and listens to them because of what it provides.
“It’s like going from black and white to color or it goes from two dimensions to three dimensions and all of a sudden you’re seeing the world in a much richer way,” Dalio communicates to Bush.
“That notion of approaching it that way instead of the way that it’s normally approached, which is this barbaric ‘I’m angry at you because you disagree with me?’ Isn’t that so stupid?”
That’s a strong word that Dalio uses to describe how he sees our inflammatory reactions to people disagreeing with us. He’s tamed his ego. It’s challenging. Dalio did it and does it because he benefits from not reacting in a barbaric manner because it realizes the risk and the past pain.
He wants and invites disagreement from you if you’re smart, well researched, thoughtful and insightful because he knows he will have a fuller, clearer picture. It also aids in protecting invaluable trust, the quality of outcomes and reputation, on which influence and persuasion rely.
It’s an approach that maybe we all could benefit from professionally and personally.
This newsletter — Reputation Intelligence — is written by Michael Toebe, and is a product of Reputation Intelligence - Reputation Quality, a firm which helps individuals and organizations assure a greater peace of mind, provide stress relief through reliable decision analysis, consulting, advisory and communications.
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