Page 95 - Ray Dalio - Principles

Most of our exchanges were one-sided; I generally
answered their questions and didn’t ask any that would put
them in the awkward position of having to avoid answering for

fear of compromising confidential information. I met with
these leaders without making judgments and without regard
for their particular ideologies. I approached them like a doctor,
just wanting to make the most beneficial impact.

They wanted my help because my global macroeconomic
perspective as an investor was very different from theirs as
policymakers. We were both products of our environments.

Investors think independently, anticipate things that haven’t
happened yet, and put real money at stake with their bets.
Policymakers come from environments that nurture consensus,
not dissent, that train them to react to things that have already
occurred, and that prepare them for negotiations, not placing
bets. Because they don’t benefit from the constant feedback
about the quality of their decisions that investors get, it’s not

clear who the good and bad decision makers among them are.
They also have to be politicians. Even the most clear-sighted
and capable policymakers must constantly divert their
attention from the immediate problems they are dealing with
to fight the objections of other policymakers, and the political
systems they must navigate are often dysfunctional.

While the economic machine is more powerful than any

political system in the long run (ineffective politicians will be
replaced and incapable political systems will change), the
interaction between the two is what drives economic cycles in
the here and now—and it’s often not pretty to watch.

MAKING GREAT RETURNS

Our returns in 2010 were the best ever—nearly 45 and 28
percent in our two Pure Alpha funds and close to 18 percent in
All Weather—almost exclusively because the systems we had

programmed to take in information and process it were doing
it superbly. These systems worked far better than we could
with just our brains. Without them, we would have had to
manage money the old and painful way: by trying to weigh in