Should You Run Your Family Like a Hedge Fund?

Billionaire Harvard Business School graduate, Ray Dalio heads one of the most successful hedge funds in history. Hedge funds attempt success in markets good and bad, and over the last 20 years his fund, Bridgewater has returned nearly 15% annually for its investors – no easy feat. Dalio and friends have managed to accomplish that success by following a specific set of Principles.

Hyper-realist Ray Dalio

Essentially Dalio’s Principles invite family members to contemplate what it is we want, what’s true, and what do we want to do about what we want? Some of these Principles echo the spiritual maturity I wrote about several years ago in The Two Perilous Questions. They also hold the potential to be very useful when applied to parents and children, or to families (or graduate institutes).

Dalio’s not a fan of adopting pre-packaged principles offered wholesale by American business, religion or contemporary culture. Or parenting blog writers. He’s an advocate for developmental authenticity: what might be of value for others at any point in time could very well be inconsistent with my truest values. Taking on and trying to maintain incompatible principles often leads to conflicts between values and actions—like parents who act one way in public and then behave quite differently behind closed doors. My principles work best when they reflect values I truly believe in my heart of hearts…now.

Valued Principles

To be most effective, Ray argues, each principle must be consistent with our values, and this consistency demands that much like inquisitive children we continually ask,”Why?” Is the reason we won’t steal because we feel empathy for our potential victims? Is it because we fear getting caught? By asking this and other questions, we continually refine and deepen understanding of ourselves and others. The result: our principles becomes increasingly aligned with our core values. To be successful, we must make correct, tough choices. We must learn to “cut off a leg to save a life,” and to be an effective family, it is important to remember that we will have to make hard choices by understanding and “meta-caring” for family members, including ourselves. And what that means is paying rapt attention to mirate bien (taking a good look at yourself) by examining mistakes and weaknesses…

I learned that everyone makes mistakes and has weaknesses and that one of the most important things that differentiates people is their approach to handling them. I learned that there is an incredible beauty to mistakes, because embedded in each mistake is a puzzle, and a gem that I could get if I solved it, i.e., a principle that I could use to reduce my mistakes in the future. I learned that each mistake was probably a reflection of something that I was (or others were) doing wrong, so if I could figure out what that was, I could learn how to be more effective. I learned that wrestling with my problems, mistakes, and weaknesses was the training that strengthened me. Also, I learned that it was the pain of this wrestling that made me and those around me appreciate our successes.

Essentially, Ray is advocating for a way of operating in the world to help facilitate growth along the Nine Pathways of Neural Integration. “Refining our understanding” could be another way of saying that we grow more hippocampal neurons and make more general connections in the brain. Of prime importance are the connections along the fiber tracts in the ACC (Anterior Cingulate Cortex) “the heart of the brain” which bridges limbic (fear)structures and the PFC (pre-frontal cortex), the home of Mindsight and Executive Function. The more connections neurons make, as a general rule, the more energy and information we can process. The more energy and information we can process, the greater the chance we’ll be able to catch ourselves in the act when “Interpreter Brain” bullies us into behaving in ways that go against our principles, like screaming at our parents or moving from not stealing for fear of getting caught to the expanded heartful awareness of the pain that stealing causes others. Being able to process increasing amounts of information, especially often painful information emerging from the brain’s trauma storage centers, increases the probability of seeing the Big Picture as well as being able to anticipate Black Swans and unintended consequences.

Strength Through Weakness Investigation

So, why don’t we all simply get with Ray’s Principles program. He has some theories about why we don’t …

Twin Sentinels Safeguarding Our Somatic Security

Most people don’t like helping others explore their weaknesses, even though they are willing to talk about them behind their backs. For these reasons most people don’t do a good job of understanding themselves and adapting in order to get what they want most out of life. In my opinion, that is the biggest single problem of mankind because it, more than anything else, impedes people’s abilities to address all other problems, and it is probably the greatest source of pain for most people.

It’s interesting and encouraging to me that Ray recognizes both the complexity and the need for understanding how the brain works with respect to learning. As I’ve argued repeatedly: knowing how my brain works makes it work better.

Hyperrealists R Us

Finally, Ray describes himself as a hyperrealist. Hyperrealism has a lot going for it, as he outlines below:

In pursuing my goals I encountered realities, often in the form of problems, and I had to make decisions. I found that if I accepted the realities rather than wished that they didn’t exist and if I learned how to work with them rather than fight them, I could figure out how to get to my goals. It might take repeated tries, and seeking the input of others, but I could eventually get there. As a result, I have become someone who believes that we need to deeply understand, accept, and work with reality in order to get what we want out of life. Whether it is knowing how people really think and behave when dealing with them, or how things really work on a material level—so that if we do X then Y will happen—understanding reality gives us the power to get what we want out of life, or at least to dramatically improve our odds of success. In other words, I have become a “hyperrealist.”

When I say I’m a hyperrealist, people sometimes think I don’t believe in making dreams happen. This couldn’t be further from the truth. In fact, I believe that without pursuing dreams, life is mundane. I am just saying that I believe hyperrealism is the best way to choose and achieve one’s dreams. The people who really change the world are the ones who see what’s possible and figure out how to make that happen.

I can think of worse things than running a family like a hedge fund. Afterall, don’t most of us want to live in families rooted in hyperrealism with a strong sense of what’s possible in the world together with the drive and creativity and chutzpah to make it happen? And then for the icing on the cake, almost as an afterthought, we can all earn 15% on our money! 

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