Ray Dalio on The Fine Art of Failure

A Hedge Fund Giant Found Lots of Value in Failure
The world’s biggest hedge fund springs from the wreckage of his monumental error.
Bloomberg, December 11, 2017




By any conceivable measure, Ray Dalio, head of Bridgewater Associates LP, is a wild success. The founder of the world’s largest hedge fund with $160 billion in assets under management is one of the world’s 100 wealthiest people; the firm he built has been called the fifth most important private company in America; his new book “Principles: Life and Work” is a New York Times best seller.

Given all of these accomplishments, it is surprising to learn what Dalio attributes the secret of his success: Failure.

In 1982, some eight years after he started Bridgewater, a new bull market was just getting underway. However, Dalio’s research was finding problems in the credit markets. Earlier in the year, he had warned about emerging-market bank debt as potentially a major risk for the economic recovery. Then, Mexico defaulted in August 1982. Dalio was hailed as an economic seer and market wizard.

His reputation grew, and that November he appeared on “Wall Street Week with Louis Rukeyser,” the most important financial news program at the time. There, Dalio “confidently declared we were headed for a Depression.” Only, that’s not what happened. Timely central bank interventions months earlier began to have their positive effects on emerging-market banking; Dalio’s disaster forecast never materialized.

It was, however, a disaster for Bridgewater Associates, and the firm almost went bankrupt…


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