The following is an exceprt from an interview with Ray Dalio of Bridgewater Investments:
"When two intelligent parties disagree, that's when the potential for learning and moving ahead begins. The most powerful thing that an investor can do to be effective is to find people you respect who have opposite, different points of view and have an open-minded exchange with them about what's true and what to do about it."
"This principle is more important than ever. Few sayings on Wall Street are more true, or more universally ignored, than "Don't confuse brains with abull market" When markets are around record highs, as stocks and bonds alike are today, those rising prices inevitably lead to overconfidence and complacency. When you think you're right, you don't go looking. When you think you're right, your mind isn't open to learning. The more you think you know, the more closed-minded you'll be. The most common mistake of investing is the failure to distinguish something that's become more expensive from something that's still a good investment. Too many people [make] the mistake of looking to the price to gain confidence, without recognizing that that doesn't make any sense."
"Only by deliberately seeking out thoughtful disagreement, can you counteract the false confidence conferred by a rising market. Investors could really improve their probabilities of being right by 30% or 40% simply by saying, openmindedly, 'Who disagrees with me in an intelligent way? And let me understand that disagreement. I think everybody can do that. They just have to make a deal with the people around them to be that way."
"You have to pretend to be somebody completely different. Ask yourself: If I'm the most brilliant short-seller in the world, what is the investment case I'd be looking for? If I'm a momentum guy [who buys rapidly rising stocks], is there anything here for me?" This way, you force yourself to take radically different perspectives on the same idea. Throw yourself wide open to criticism."
