Dalio: Overlaying historical data archetypes is key to investment rule-making
Ray Dalio · a16z Podcast | Principles and Algorithms for Work and Life · Jan 2, 2019 · at 9:28
Ray Dalio, founder of Bridgewater Associates, describes his quantitative research methodology of superimposing historical macroeconomic data across centuries to identify recurring market patterns and build decision algorithms.
0:00 / 0:33exact quote · 33.2s
▶ Watch the full episode on YouTube → 720p mp4 · rendered on demand · StarZero watermark
“So, in other words, Let's take all of those cases and put them together, and if they're, if they have data associated with them, let's say a bubble, then you just plot the data on top of each other so you could see each one unfold, and then you can then say, what is an archetypical one, and then what is the deviations between that one archetypical and the others, and can you explain that, and then when you get the explanation, then you get a rich understanding of the dynamic behind it, It's a very effective way of making rules. So this kind of making rules has been key to our investment perspective.”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from Ray Dalio
Dalio: Diversification provides far more benefit than picking winning assets
“And if you really look at that, the marginal benefit of diversification is much more powerful than the marginal benefit of goodness.”
Dalio: Visionary leaders like Jobs and Musk prioritize mission over feelings
“The one that you're referring to is there's a test call in workplace inventory, which is called concern for others, and it doesn't really mean concern for others. What it means is that when faced with the choice of whether the mission is Or the individual's fe…”
Dalio: The bottom 60 percent of Americans have seen no income growth
“There is the top 40% and the bottom 60%. And if you just carve out and you say, what is the economy and life like of the bottom 60%? There hasn't been income growth, prospects of having a better life than your parents.”
Dalio: 15 uncorrelated bets cut portfolio risk by 80 percent
“The key in embedding, I believe, is to find 15 good, they don't have to be great, Uncorrelated or low-correlated return streams, because if you have, let's say, a 60% correlation between those items that you're about, and you could have a thousand, and you're …”
Dalio: Adults can improve psychological weaknesses by at most one standard deviation
“I've examined that at length, both in terms of our populations, and then I've really enjoyed working with psychologists to try to figure out, they're the pros, and doing that, and generally speaking, with a lot of hard work, you can change by about one standar…”