Page 80 - Ray Dalio - Principles

large room with a table in the middle and a press gallery off to
the side. There was only one seat open at the table and it had
Dan’s nameplate in front of it—we’d agreed that he’d be our

one allowed representative since he’d done a lot of the prep
work. I had forgotten that, so I walked over to the press
gallery, grabbed a chair, and carried it next to Dan’s so I had a
seat at the table too. Dan describes that meeting as an analogy
for what it was like for us in the 1990s in general: We had to
barge our way into things. Larry Summers has since said that
the advice he got from us was the most important in shaping

this market. When the Treasury did create the bonds, they
followed the structure we recommended.

DISCOVERING RISK PARITY

By the mid-1990s, I had enough money to set up a trust for my
family, so I began to think about what the best asset allocation
mix for preserving wealth over generations would look like. In
my years as an investor, I had seen all sorts of economic and
market environments and all kinds of ways that wealth could

be created and destroyed. I knew what drove asset returns, but
I also knew that no matter what asset class one held, there
would come a time when it would lose most of its value. This
included cash, which is the worst investment over time
because it loses value after adjusting for inflation and taxes. I
also knew how difficult it was to anticipate the swings that

cause those losses. I’ve devoted my life to it and I’ve made my
share of bad calls; anticipating these swings wasn’t something
I’d bet on others doing well when I wasn’t around. Finding
investors who have done well in all economic environments—
when inflation rises and when it falls, when there are booms
and when there are busts—is like finding needles in a
haystack, and they don’t live forever so that’s not a viable

path. I didn’t want the wealth I had created to protect my
family to be wiped out after I was gone. That meant I had to
create a mix of assets that could be good in all economic
environments.