Ray Dalio is an immensely successful investor who, for many years, assembled his principles for life in written form and distributed those within the organisation he built — Bridgewater Associates.
I’d like to just highlight one of these principles which I have come to find particularly useful of late: Believability.
Let me explain.
I have been in a few situations recently where people I respect and love have given me their opinion on certain matters. I have also had the dubious pleasure of listening to less-than-credible ”specialists” mouth-fart about subjects they in actually did not know a lot about.
And this idea of believability came up again and again in my mind, so I thought I’d share it.
It is important for us, social beings that we are, to ask those close to us for their opinion and views on issues we may be grappling with. These help us evaluate the problem and balance and complement knowledge or perspective we may lack.
However, these viewpoints must then be looked at though a very important filter which is ”how believable is this person giving their opinion?”
All opinions are not equal. And it is not the person we love or respect who necessarily has an opinion which really counts, at least not if they lack believability.
Ray Dalio defines believability as follows: ”Believable people as those who have repeatedly and successfully accomplished the thing in question — who have a strong track record with at least three successes — and have great explanations of their approach when probed”.
From this he extracts another very valuable thought which many people who argue for the sake of arguing would do better to consider: ”If both parties are peers, it’s appropriate to argue. But if one person is clearly more knowledgable than the other, it is preferable for the less knowledgeable person to approach the more knowledgable one as a student and for the more knowledgable one to act as a teacher”.
Now, in Bridgewater’s organization they have figured this out to the most granular level, because they actually assign a believability score to each participant in a discussion, in real time. This means that when the organisation needs to make important investment decisions, they will take each person’s input and put that through the filter. This may lead to a decision being voted for by a majority, but actually rejected, because the believability score of that majority was lower than the assigned knowledge, experience or background of the minority.
That’s pretty powerful stuff.
What we tend to do most of the time though, is listen to:
- the loudest person in the room
- the most convincing orators, some of whom very convincingly spew forth horseturds
- People using precise language and unverified (or unverifiable) data
- Hierarchical superiors
- People with power over us (real or perceived)
Or those who, due to lack of energy, we give up fighting with…
But that does not mean their opinion actually carries truth.
So here’s my solution to this; what I do now, more and more, is
- listen with intent to what is being said, without filtering it through my own opinion-lens.
- Stand back and synthesize it into it’s most basic components (”so this means 1), 2), 3)…”)
- Ask the question ”so how believable is this person, really? What is their knowledge, skill, experience and proof of success in this area?
I will then ”file” their feedback appropriately in my decision making hierarchy for use when the time is right.
I have been playing with the idea of actually scoring the results, but have not found the right way to do this yet. Maybe that would actually be too much of a cerebral exercise, taking up time with little real applicability. So I’m still working on that and may get there. That would be the subject of another story.
Next time you’re listening to someone’s opinion or advice, try this yourself.
Actually, you can apply this immediately by asking yourself how believable I am as the author of this piece.
Then again, I am just recounting the methodology used inside the biggest hedge fund in the world, led by an immensely successful billionaire financier who thought this up. If I am not believable, well, Ray Dalio most certainly is.