Page 53 - Ray Dalio - Principles

in many ways, it didn’t have the imagination, understanding,
and logic that we did. That’s why our brains working with the
computer made such a great partnership.

These decision-making systems were much better than the

forecasting systems I’d been using before, mostly because they
incorporated our ongoing reactions to developments, allowing
us to deal with a wider range of possibilities. They could also
include timing rules. In a January 1987 piece called “Making
Money vs. Making Forecasts,” I explained that:

Truth be known, forecasts aren’t worth very much, and
most people who make them don’t make money in the

markets. . . . This is because nothing is certain and when
one overlays the probabilities of all of the various things
that affect the future in order to make a forecast, one gets a
wide array of possibilities with varying probabilities, not
one highly probable outcome. . . . We believe that market
movements reflect economic movements. Economic

movements are reflected in economic statistics. By
studying the relationships between economic statistics and
market movements, we’ve developed precise rules for
identifying important shifts in the economic/market
environment and in turn our positions. In other words,
rather than forecasting changes in the economic
environment and shifting positions in anticipation of them,

we pick up these changes as they’re occurring and move
our money around to keep in those markets which perform
best in that environment.

Over the last three decades of building these systems we
have incorporated many more types of rules that direct every
aspect of our trading. Now, as real-time data is released, our
computers parse information from over 100 million datasets

and give detailed instructions to other computers in ways that
make logical sense to me. If I didn’t have these systems, I’d
probably be broke or dead from the stress of trying so hard.
We certainly wouldn’t have done as well in the markets as we
have. As you will see later, I am now developing similar

systems to help us make management decisions. I believe one
of the most valuable things you can do to improve your
decision making is to think through your principles for making