The Best Way to Make Decisions
Ray Dalio, the founder of the worlds largest hedge fund, explains the decision making process at his firm. It's something we can all incorporate this into our lives, to help us make better decisions.
Happy Sunday!
Ray Dalio is the billionaire founder of Bridgewater Associates, the largest Hedge Fund in the world. He's also one of the wisest men on the planet and an all-round good guy. I was listening to his interview on The Knowledge Project podcast, where his decision-making process resonated with me.
Towards the end of the episode, the interviewer asked Ray to expand on his decision-making process – the process he's built into the fabric of his firm. Ray's response was brilliant. It's a process that I will use when making big decisions.
"Well, it’s pretty much, we have a decision-making..., we’d get in the room to do it, but what starts to be different from that is that rather than thinking about what our decision is, we spend more time thinking about what our criteria for making the decision are."
– Ray Dalio
Ray gave an example where there may be a currency crisis with a balance of payments problem. Rather than deciding on whether or not the team should sell the currency, the team identifies its criteria for keeping or selling the currency. To do this, they consider all the times in history, where there has been a currency crisis to help them define the criteria for making the decision.
If there is disagreement on the criteria, it can be tested – almost like an experiment. Eventually, they will reach a point where the criteria are accurate.
Once an accurate set of criteria are in place, the decision effectively makes itself.
When making decisions, we tend to jump to solution seeking, but this is rarely the wisest approach. Having a set of criteria (or principles) in place, which can be tested to ensure they're correct will help us all make better decisions.
Have an awesome week ahead,
Samuel
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