Page 35 - Ray Dalio - Principles

different from the one I had learned in my economics classes
where supply and demand were both measured in terms of
quantities sold. I found it much more practical to measure

demand as the amount spent (instead of as the quantity
bought) and to look at who the buyers and sellers were and
why they bought and sold. I will explain this approach in
Economic and Investment Principles.

This different approach was one of the key reasons I caught
economic and market moves others missed. From that point
on, whenever I looked at any market—commodities, stocks,

bonds, currencies, whatever—I could see and understand
imbalances that others who defined supply and demand in the
traditional way (as units that equaled each other) missed.

Visualizing complex systems as machines, figuring out the
cause-effect relationships within them, writing down the
principles for dealing with them, and feeding them into a
computer so the computer could “make decisions” for me all

became standard practices.

Don’t get me wrong. My approach was far from perfect. I
vividly remember one “can’t lose” bet that personally cost me
about $100,000. That was most of my net worth at the time.
More painful still, it hurt my clients too. The most painful
lesson that was repeatedly hammered home is that you can

never be sure of anything: There are always risks out there that
can hurt you badly, even in the seemingly safest bets, so it’s
always best to assume you’re missing something. This lesson
changed my approach to decision making in ways that will
reverberate throughout this book—and to which I attribute
much of my success. But I would make many other mistakes
before I fully changed my behavior.

BUILDING THE BUSINESS

While making money was good, having meaningful work and
meaningful relationships was far better. To me, meaningful
work is being on a mission I become engrossed in, and