Ray Dalio’s decision to step away from Bridgewater Associates has headlined financial coverage in recent days.
For the world’s largest hedge fund, it marks the closing chapter of a leadership transition more than a decade in the making. For global markets, the question now is beyond Bridgewater — what enduring investment lessons has Dalio left behind?
Dalio’s career spans over half a century. He built Bridgewater from a two-bedroom apartment into one of the most influential investment powerhouse, but his impact extends far beyond returns. Over the past several years, he has sat down with Patrick Zhong, Founding Managing Partner of M31 Capital, for a series of conversations exploring how patterns in structure, cycles, and behavior continue to drive markets.
In 2022, M31 Capital gathered a selected group of Chinese entrepreneurs for a private, 90-minute meeting with Ray Dalio. The conversation roamed across the global financial landscape, the principles of investment strategy, and the realities of running a business in uncertain times.
A year later, at a CEO breakfast co-hosted by M31 Capital and the Future Investment Initiative (FII), Dalio joined Patrick Zhong on stage, alongside Carlyle Group CEO Harvey Schwartz. The conversation turned to where the next investment openings might emerge in a world.
During the conversation, Patrick Zhong steered the discussion toward a practical question:“In the complex environment after the pandemic, with entrepreneurs—not investors—in the room, what advice would you give them?”
Dalio put it plainly: “Smart rabbits dig three holes.” In his view, today’s environment—and tomorrow’s, which he warned will be even more complex—demands that entrepreneurs, whether in China or the United States, secure a foothold in at least three distinct markets.
It is an idea Dalio has returned to in multiple conversations with M31 Capital——one that continues to offer lasting, practical insight.
At Bridgewater’s 50th anniversary last week, Dalio reflected on what he believes are the most important investment principles behind the firm’s success:
  • Reality works like a machine, so you need to understand how the machine works and have tried-and-true good principles for dealing with it well.
  • Understand the cause: effect relationships that drive changes because the causes come before the effects so that understanding will help you anticipate what will happen.
  • Specify your decision-making criteria, back-test them, systemize them, and computerize them so that you are executing a well-thought-out and well-tested game plan.
  • Recognize that what you don’t know is much greater than anything you know.
  • Know how to diversify well because if you do, you can reduce your risks by about 80 percent without reducing your expected returns.
  • Find the smartest people who disagree with you and have them stress test your thinking through thoughtful disagreement because that will raise your odds of being right and will teach you a lot.
  • Make sure the probability of unacceptable losses is nil.