Ray Dalio founded the hedge-fund colossus Bridgewater some four decades ago. He stands out among the leaders of investment firms for his unusual thoughts about how things work.
To wit: economies, organizations, and individuals are machines. They can be analyzed by how well they operate, by how well they produce outcomes to meet particular goals. In some instances, there are opportunities to design and improve a machine (for example, an asset management organization) while in other cases (think of the world economy) what you need most are the ability to understand and to adapt.
Dalio’s economic ideas and investment practices are worthy of study, but it is his organizational thinking that usually commands attention and divides those who have looked closely at Bridgewater into three categories: the believers, the confused/uncertain, and those that see a cult of sorts.
A 2011 New Yorker article by John CassidyNew Yorker | Titled, “Mastering the Machine.” is a ... continues
Investigative research, such as investment due diligence,the research puzzle | My last posting was about “defining due diligence.” requires an objective look at the evidence at hand. In addition, if your goal is original, independent work, it helps to have conceptual avenues to pursue that might yield differential information. In doing due diligence, you should always be looking for “a way in” that aids in understanding the organization under review.
Often, one presents itself when you least expect it. Some little thing that seems inconsequential at first doesn’t fit the pattern of the whole. The range of possibilities is endless, especially if you are doing an on-site visit and are open to clues in the environment. Thus, finding that gateway to understanding can be quite unexpected.
But you can’t count on that happening. Therefore, a list of prepared questions can help you control the agenda and avoid the standard topics that ... continues
What is “due diligence”?
The term is used constantly in the investment business. We are told that we should do our due diligence before investing in something, and often, when presenting an idea, someone will say, “I’ve done my due diligence.”
We hire advisors and consultants and gatekeepers of all kinds because we expect them to perform due diligence. Their pitch books have a page or two about what they say they do in that regard, usually showing a filtering process of some sort that is rooted in “rigorous due diligence,” or some similar phrase.
But what is due diligence, anyway?
One definition: “Reasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling something.”Oxford Dictionaries | The definition comes from the online cousin of the OED. Notice the legal aspect. Recently, someone said to me that much of the investment business is based “not on giving advice but ... continues
“How reliable is human memory?”
That was the opening sentence of a New York Times articleNew York Times | It is a tidy summary of some of the salient issues. that examined “the fallibility and the malleability” of memory in light of the Brian Williams controversy. It got me thinking.
To explore the questions further, I read The Seven Sins of Memory, published in 2001 by Daniel Schacter, professor and leader of a “memory lab” at Harvard.Harvard | This is the site for the lab. The book serves as a great guide to the flip side of our wondrous capability to remember. As noted on the first page: “Sometimes we forget the past and at other times we distort it; some disturbing memories haunt us for years.” What are the resulting implications for investment professionals and organizations?
But first, the sins: Transience is the degradation of our memory over time. Absent-mindedness is a vexing problem, whether regarding your lost ... continues
A recent Washington Post articleWashington Post | It was titled “The new scientific revolution: Reproducibility at last.” on academic research opens with the story of Diederik Stapel, a professor of social psychology. Despite his stardom, “there was often something odd about Stapel’s research.”
“When students asked to see the data behind his work, he couldn’t produce it readily. And colleagues would sometimes look at his data and think: It’s beautiful. Too beautiful. Most scientists have messy data, contradictory data, incomplete data, ambiguous data. This data was too good to be true.”
There’s been a groundswell of late for a new approach to research, one focused on addressing a key weak link — the inability to reproduce results. Brian Nosek of the Center for Open Science summed up the goal: “Show me the data, show me the process, show me the method, and then if I want to, I can reproduce ... continues