Page 242 - Ray Dalio - Principles

Remember that computers have no common sense. For
example, a computer could easily misconstrue the fact that
people wake up in the morning and then eat breakfast to

indicate that waking up makes people hungry. I’d rather have
fewer bets (ideally uncorrelated ones) in which I am highly
confident than more bets I’m less confident in, and would
consider it intolerable if I couldn’t argue the logic behind any
of my decisions. A lot of people vest their blind faith in
machine learning because they find it much easier than
developing deep understanding. For me, that deep

understanding is essential, especially for what I do.

I don’t mean to imply that these mimicking or data-mining
systems, as I call them, are useless. In fact, I believe that they
can be extremely useful in making decisions in which the
future range and configuration of events are the same as
they’ve been in the past. Given enough computing power, all
possible variables can be taken into consideration. For

example, by analyzing data about the moves that great chess
players have made under certain circumstances, or the
procedures great surgeons have used during certain types of
operations, valuable programs can be created for chess playing
or surgery. Back in 1997, the computer program Deep Blue
beat Garry Kasparov, the world’s highest-ranked chess player,

using just this approach. But this approach fails in cases where
the future is different from the past and you don’t know the
cause-effect relationships well enough to recognize them all.
Understanding these relationships as I do has saved me from
making mistakes when others did, most obviously in the 2008
financial crisis. Nearly everyone else assumed that the future
would be similar to the past. Focusing strictly on the logical

cause-effect relationships was what allowed us to see what
was really going on.

When you get down to it, our brains are essentially
computers that are programmed in certain ways, take in data,
and spit out instructions. We can program the logic in both the
computer that is our mind and the computer that is our tool so
that they can work together and even double-check each other.

Doing that is fabulous.