Founder of Bridgewater Associates Ray Galio recently recalled a moment that he says nearly wiped him out financially, but ultimately made him a better investor and boss.
Blaming is counterproductive and forces a painful lifelong lesson
Dalio went to He said he “calculated that American banks had lent far more money abroad than they could repay, and anticipated a looming debt crisis,” only to discover, “I couldn’t have been more wrong.”
“I didn’t fully understand the impact of quantitative easing, so I lost money for myself and I lost money for my clients,” Dalio added, calling the episode “the most painful experience I could imagine – but it was also the best thing that ever happened to me because it taught me humility.”
In the video clip attached to the message, Dalio tells Bloomberg Francine Lacqua that his big call for a looming debt crisis in the late 1970s took him to “Wall Street Week” and Congress, where he warned lawmakers that the economy was “on the brink of failure” and said with “absolute certainty” that markets could not return to stagflation. However, to his shock, the market bottomed out and rose.
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A humiliating collapse changes Dalio’s investing mindset forever
Dalio has previously described the consequences as devastating. In a 2019 CNBC op-edHe wrote, “Losing this bet was like hitting me on the head with a baseball bat,” saying he had to fire almost everyone at Bridgewater and was left as the company’s sole employee. He called being “so publicly wrong…incredibly humiliating” and said it “cost me just about everything I built at Bridgewater.”
Looking back, Dalio says that failure brought about a change in mindset from “I’m right” to “How do I know if I’m right?” and forced him to find smart people who disagreed with him to “stress test” his thinking.
In the same CNBC essay, he told readers that similar brutal setbacks are inevitable. “You will experience this at some point in your life… You may think that your life is ruined and there is no way to move on. But it will pass,” urging people to calm down, reflect and look for “the best way forward” even if it is not immediately apparent.
Comeback story mirrors other Wall Street titans
Dalio has since built Bridgewater into one of the largest hedge funds in the world and continues to warn about debt cycles, recently warning that Britain risks a “debt death spiral” without austerity.
His recovery from near-ruin echoes other Wall Street legends Carl Icahnwhose fortunes were hammered after an onslaught of short sellers Icahn Companies but which continues to rebuild and double down on core interests.
Image via Shutterstock/Digihelion
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