Idea Meritocracy : A TED talk by Ray Dalio

Continuing from last week, today I will cover a TED talk by Ray Dalio. If you have about 17 minutes, you can listen to this talk on Ted by clicking here. Else please read the following few lines to get the gist of it. Ray Dalio is the founder, chair and co-chief investment officer of Bridgewater Associates, a global leader in institutional portfolio management and the largest hedge fund in the world. They have done extremely well for their clients for more than two decades and he shares the secrets of his success through this talk.

Openness and Algorithms lead to Idea Meritocracy

Can one person be right? Yes sure. Every time? My guess is, No. Ray started playing with Stock market since he was very young and initially made money through luck. Then like everyone else he made mistakes, he learned from the mistakes and started creating his own golden rules. He then put these rules into an algorithm and started using the algorithm to support his decisions. He made even better decisions now. He opened an organization and had clients. He continued to do well, and even predicted a depression. All the time being right made him arrogant, and he went wrong. He had to close his company, lost a lot of money for his clients and had to borrow money from his father to pay his bills.

He learned humility and questioned himself, “How do I know I am right?”. He started pitching his ideas against others, who have diverse views and tried to understand their opinions. He realized that even if one guy is great, it is not best to rely on one individual for decisions.  He believes that collective decisions are so much better, if done right.

In the new organization that he built, he created a culture of Radical Truthfulness and Radical Transparency (Of course limited to business aspects of a person). He has given voice to each one of the team members in spite of the level, rank or experience. Each person rates others on various attributes and each can see what others think of them. An algorithm looks at all this and paints of picture of the individual and creates attributes such as dependability etc. When making decisions they take these factors into consideration and weigh the opinions accordingly.

The result is that they have made money for their clients in 23 out of 26 years despite the share market turmoil. They are successful.

Imagine if you knew what other person was thinking about you and what they were like? and that they knew these things about you transparently? Will that make things easier? He believes so, and he also believes that with algorithms growing in influence, sooner or this is bound to happen. He wishes that we all embrace it.

Stay tuned for more next week.