How to get rich by admitting you’re dumb

Billionaire Ray Dalio is known for his incredible ability to “beat the market,” sidestepping financial crises and making money in all economic conditions. From a humble, middle-class childhood, he became an investing legend via his Bridgewater hedge fund.

His bestselling book Principles talks a lot about criteria and algorithms for effective decision making. By constantly learning and refining your personal decision system, you won’t be overwhelmed by the apparent complexity of the world.

Many people make bad decisions because they simply don’t know what’s true. They base their choices on what they wish were true or what ‘should’ be true. But we succeed only when we commit to making a radical embrace of reality. 

The world advances through evolution, and it’s the same at a personal level. Constantly learn and strive to improve. Dalio lost almost all his money and reputation in the 1980s. When you make mistakes, study them and take valuable lessons from them.

The ego gets in the way of seeing reality clearly. Whenever you feel that you (or your status) are in danger, you automatically become defensive and begin the “fight or flight” response. This prevents you from thinking reasonably, logically and creatively.

Close-minded people do their best to convince themselves, and everyone around them, that their reasons and beliefs are correct and beyond reproach. Successful people embrace “radical truthfulness,” going out of their way to avoid confirmation bias.

You raise your probability of making the right decisions, Dalio says, by “open-mindedly triangulating with believable people”. Assume very little yourself, and leverage what other people know.

Dalio never refers to himself as a “leader”. When creating Bridgewater, he avoided a culture in which the boss tells employees what to do. Instead he championed “idea meritocracy” as a vehicle for making the best decisions.

Bridgewater has a ‘believability-weighted idea meritocracy’. When ideas are discussed, those coming from more credible people have more weight. It doesn’t mean, however, that their power is absolute or cannot be questioned.

Bottom line: Dalio credits most of his success to understanding what he didn’t know, and profiting from that ignorance. You too can create a decision system that reduces ego and blindspots, and radically increases truth. Truth equals success.