3 Pieces of Advice to Avoid Crisis from Ray Dalio

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Ray Dalio has worked his way into infamy as one of the best investors on the planet. He’s the founder of Bridgewater Associates, the world’s largest hedge fund with about $150 billion under management, and has a personal net worth of approximately $13 billion.

Over the years, Dalio has also become famous for his insight not just into the financial markets but into the economy as a whole. Bridgewater maintains a menagerie of educational material on its website, including a paper by Dalio first uploaded in 2008 called “How the Economic Machine Works.”

The paper explains, in detail, how Dalio perceives the economy as a mechanism with really only a few critical moving parts. He says that if the nature and function of these parts can be understood, then the entire machine can be grasped. Through his understanding of the economic machine, Dalio has been able to create one of the most successful hedge funds in history, and he has been able to avoid disaster during the financial crisis.

But the paper is not necessarily the most accessible document on the planet, so abiding by his “deep sense of responsibility to share” his “simple but practical economic template,” Dalio created a 30-minute video that covers the basics. Here are three rules of thumb from the presentation (you can find the full video at the end).

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