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Billionaire investor Ray Dalio says most people aren’t as open-minded as they think, which leads to poor decision-making

November 18, 2022, 12:30 PM UTC
A photo of Ray Dalio speaking on stage
In his new book, Ray Dalio shares advice and excerises to help readers identify their bling spots.
Getty Images—Taylor Hill

People have blind spots, areas that prevent them from seeing things optimally, says Ray Dalio, founder of Bridgewater Associates. And while that may seem obvious, hearing it from the billionaire who started one of the world’s largest hedge funds, with $150 billion in assets under management, gives the truism some weight. 

In his new book Principles: Your Guided Journal, Dalio uses his experience as a leader to unpack the consequences of overconfidence and his learnings from past errors, including a failed investment in 1982 that forced him to lay off his entire staff and fall into debt. The book includes several prompts and exercises that leaders can use to reflect on their own thought patterns.

The essay below is an exclusive excerpt from Dalio’s book to be released Nov. 22. And in light of what we’ve learned about FTX’s catastrophic implosion this week, the subject is extra timely.

Your blind-spot barrier 

If you’re like most people, you have no clue how other people see things and aren’t good at seeking to understand what they are thinking because you’re too preoccupied with telling them what you think is correct. In other words, you are closed-minded; you presume too much. This closed-mindedness is terribly costly. It causes you to miss out on all sorts of wonderful possibilities and avoid dangerous threats that other people might be able to point out to you—and it blocks criticism that could be constructive and even lifesaving.

As a result of these two barriers, people in disagreements typically remain convinced that they’re right—and often end up angry at each other. This is illogical and leads to suboptimal decision-making.

This failure to benefit from others’ thinking doesn’t just occur when disagreements arise; it occurs when people encounter problems that they are trying to solve. When trying to figure things out, most people spin in their own heads instead of taking in all the wonderful thinking available to them. As a result, they continually run toward what they see and keep crashing into what they are blind to until the crashing leads them to adapt.

Would you like to learn how to get past the blind spot barriers? 

You can do it; everybody can. The following principles will help you understand how.

Practice radical open-mindedness

If you know that you are blind, you can figure out a way to see, whereas if you don’t know that you’re blind, you will continue to bump into your problems.

In other words, if you can recognize that you have blind spots and open-mindedly consider the possibility that others might see some things better than you—and that the threats and opportunities they are trying to point out really exist—you are more likely to make good decisions.

Understand your own and others’ mental maps and humility

Some people are good at knowing what to do on their own; they have good mental maps. Maybe they acquired them from being taught; maybe they were blessed with an especially large dose of common sense. Whatever the case, they have more answers inside themselves than others do.

Similarly, some people are more humble and open-minded than others. Humility can be even more valuable than having good mental maps if it leads you to seek out better answers than you could come up with on your own. Having both open-mindedness and good mental maps is most powerful of all.

Excerpted from Principles: Your Guided Journal and lightly edited for length. Reprinted with permission of Avid Reader Press, an imprint of Simon & Schuster, Inc.

Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan

A Word of Advice

"The ultimate test of your strategy is not how well you stack up against what your rivals are already doing, but whether or not you live up to what your customers believe you can and should be doing."

 —Bill Taylor, cofounder of Fast Company, in Harvard Business Review

On the Agenda

👓 Read: Investor Chamath Palihapitiya once advised Sam Bankman-Fried to form a board. FTX’s response? "Go f--k yourself." We asked experts what the FTX saga means for corporate governance.

🎧 Listen: Arcos Dorados, Golden Arches in English, is the world’s largest independent McDonald’s franchisee. Woods Staton, the billionaire who runs it, joined the Deep Purpose podcast to discuss his evolving perspective on the company’s ethics and values.

📖 Bookmark: Egon Zehnder published its comprehensive Global Board Diversity Tracker. The authors spotlight the marginal progress made in Germany, India, Japan, and Latin America but urge boards to prioritize inclusion.

Onboard/Offboard

Following a dispute, Motorsports Network asked its three independent board members to hit the road, while a fourth, president James Allen, will also step down. Sara Mathew, retired CEO of Dun & Bradstreet, will join the Carnival board; Sir John Parker will resign in 2023 after serving as a Carnival director for 22 years. Ozan Dokmecioglu stepped down as CEO and board member at Keurig Dr Pepper; Robert Gamgort, chairman and former CEO, was reinstated as the chief executive. Christopher Viehbacher was appointed CEO and board member of Biogen, replacing former company head Michel Vounatsos. John Cassaday will resign as Manulife's chair in February; Don Lindsay, a retired mining CEO and fellow board member, will take his place.  

In Brief

- The "homespun" spreadsheets FTX shared with prospective investors were murky and amateurish, but convincing enough to win over sophisticated investors.

- With the pandemic receding, companies are ready to test out first-time CEOs again, according to new data from Heidrick & Struggles

- Leaked documents reveal that Meta has fired more than two dozen employees and security guards over the past year for compromising customer accounts

- The founder of the Gagosian gallery revealed that he built a corporate board last year, recruiting entrepreneurs, movie stars, and high-flying executives.  

- Jesuit philosophy offers profound lessons on corporate governance, says an Alliance Manchester Business School professor.

- Hundreds of Twitter employees reportedly quit in response to Elon Musk's ultimatum about remote work, even after the CEO softened his in-office policy. 

Editor’s Pick 

The Atlantic's Derek Thompson steps back from the firehose of news about Twitter, Meta, Amazon, and FTX to share his theory about why so many tech giants are in turmoil at the same time. His big idea: The once youthful sector is having a midlife crisis, and now-mature companies are paying the price.

Here’s a snippet:

"It would be unfair to suggest that all of these moves are the emotional equivalent of a 52-year-old man dyeing his hair and trading the minivan for a Corvette. Companies going big and spending lots of money on important and difficult problems with uncertain solutions is cool, in a way. But at the moment, a lot of these bets look half-baked, catastrophically expensive, or outright fraudulent."

Read the rest here, and enjoy your weekend.

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