To invest successfully, you have to sincerely consider the possibility that you might be wrong, and continually challenge your own assumptions and opinions, hedge fund guru Ray Dalio says in a recent column for Institutional Investor.
Dalio says that to make money in markets, you have to go against the crowd, which involves a significant chance that you’ll be wrong. He talks about how he learned that that means you should openly and honestly consider opposing views. “There’s an art to this process of seeking out thoughtful disagreement,” he writes. “People who are successful at it realize that there is always some probability they might be wrong and that it’s worth the effort to consider what others are saying — not simply the others’ conclusions, but the reasoning behind them — to be assured that they aren’t making a mistake themselves. They approach disagreement with curiosity, not antagonism, and are what I call ‘open-minded and assertive at the same time.’ This means that they possess the ability to calmly take in what other people are thinking rather than block it out, and to clearly lay out the reasons why they haven’t reached the same conclusion. They are able to listen carefully and objectively to the reasoning behind differing opinions.”
Dalio says many people are “open to being wrong.” But “true open-mindedness” is “a process of being intensely worried about being wrong and asking questions instead of defending a position. It demands that you get over your ego-driven desire to have whatever answer you happen to have in your head be right. Instead, you need to actively question all of your opinions and seek out the reasoning behind alternative points of view.”
Dalio says all of this doesn’t mean that you make decisions by referendum. The point is that thoughtful disagreement forces you to ask probing questions and dig deeper to see if your opinion really holds water. “Operating this way just seems like common sense to me,” he says. “After all, when two people disagree, logic demands that one of them must be wrong. Why wouldn’t you want to make sure that that person isn’t you?”