Principles: Life and Work

by Ray Dalio

The way the investment decision-making process works is that a small group of investment managers who created these systems see the systems’ conclusions and the reasoning of the systems while we make our own conclusions and explore our reasoning on our own. . . . The machine does most of the work and we interact with it in a quality way. . . . [And] we are not dependent on much more faulty people. Think about how different management is. While we have principles, we don’t have decision-making systems. In other words, I believe that the investment decision-making process is effective because the investment principles have been put into decision rules that make decisions that people then follow while the management decision-making process is less effective because the management principles have not been put into decision rules that people can follow to make management decisions.