Page 52 - Ray Dalio - Principles

combined into one system for managing our portfolio of bets.
Our system was like an EKG on the economy’s vital signs; as
they changed, we changed our positions. However, rather than

blindly following the computer’s recommendations, I would
have the computer work in parallel with my own analysis and
then compare the two. When the computer’s decision was
different from mine, I would examine why. Most of the time, it
was because I had overlooked something. In those cases, the
computer taught me. But sometimes I would think about some
new criteria my system would’ve missed, so I would then

teach the computer. We helped each other. It didn’t take long
before the computer, with its tremendous processing power,
was much more effective than me. This was great, because it
was like having a chess grandmaster helping me plot my
moves, except this player operated according to a set of
criteria that I understood and believed were logical, so there

was no reason for us to ever fundamentally disagree.

The computer was much better than my brain in “thinking”
about many things at once, and it could do it more precisely,
more rapidly, and less emotionally. And, because it had such a
great memory, it could do a better job of compounding my
knowledge and the knowledge of the people I worked with as
Bridgewater grew. Rather than argue about our conclusions,

my partners and I would argue about our different decision-
making criteria. Then we resolved our disagreements by
testing the criteria objectively. The rapidly expanding power of
computers during that era was like a constant stream of gifts
from the gods to us. I remember when RadioShack came out
with an inexpensive handheld chess computer; we sent one to
each of our clients with the message, “A Systemized Approach

from Bridgewater.” That little computer chess game could kick
my ass on level two out of its nine levels. It was fun to put it
up against each of my clients so they could see how hard it
was to beat computerized decision making.

Of course, we always had the freedom to override the
system, which we did less than 2 percent of the time—mostly
to take money off the table during extraordinary events that

weren’t programmed, like the World Trade Center going down
on 9/11. While the computer was much better than our brains