At 69, Ray Dalio runs the world's biggest hedge fund, Bridgewater Associates and is worth a reported $18.6 billion.
And yet, according to Dalio: "I'm really a very ordinary guy, who through trial and error discovered some things that worked that helped me" achieve success, he said at the 2018 Summit conference in Los Angeles in November.
Earlier in January, Dalio tweeted a video of his Summit talk.
Dalio went from an "ordinary guy" to a financial guru by excavating lessons from his own successes and failures, and then using that information to inform future actions.
"I would go after audacious goals, and then I would succeed and fail," Dalio said at Summit. "Most importantly, I benefited from failure.
"[Y]ou go after your goals and you then encounter your problems or your failures. How you're dealing with those problems is one of the most important things," Dalio explained. "I started to realize ... that pain plus reflection equals progress."
In other words, said Dalio, "that painful situation, if you can diagnose what produced that failure, and then develop principles for dealing with it different[ly] ... and then you take those principles and you improve, you learn, you change things" you will succeed, and even "go on to more audacious goals," he said.
Dalio broke down his process into five steps on podcast Recode Decode.
1. Set goals. "You have to have your audacious goals."
2. Notice your mistakes. "As you go to those, you are going to encounter your failures, your mistakes. You have to identify those and not tolerate them."
3. Understand why you are making those mistakes. "You have to get the diagnosis to the root cause of them, which could be that you have a weakness or somebody has a weakness."
4. Fix your mistakes. "You have to design what you are going to do about it to get around it."
5. Persevere. "You have to push through to results."
The steps are simple, but the process is not.
"I think probably the greatest problem of mankind ... is individuals who have in their minds wrong opinions that they're attached to," Dalio said at Summit. "They could so easily [test] those ... put them out there and find out if they're strong or weak ... opinions, and to move beyond that to make better decisions," Dalio says.
It took Dalio almost failing with Bridgewater Associates in the early days — and having to borrow $4,000 from his dad to pay his bills — to learn his own arrogance.
After that experience, he started questioning his assumptions and developed his five-step process, which he implemented at Bridgewater.
"What I needed [at Bridgewater] was independent thinkers who also had audacious goals, who would go after those together and would challenge my thinking, and we would challenge each other's thinking, and try to give to the best answer, and I realized it didn't have to come from me," Dalio said.
"And if you keep doing that over and over again, you will inevitably succeed," Dalio said on Recode Decode. "You do it over and over again because you have determination — you will inevitably succeed."
See also:
Hedge fund billionaire Ray Dalio: 'Capitalism basically is not working for the majority of people'
Billionaire Ray Dalio: You will 'inevitably succeed' if you follow these 5 steps
Billionaire Warren Buffett says 'the real problem' with the US economy is people like him
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