Bridgewater Associates Founder, Co-Chief Investment Officer & Co-Chairman Ray Dalio speaks ... [+]
Simple writing is hard work. Explaining complex subjects in a way that's simple but not simplistic is tough to do. That’s why I follow business leaders who think about communication as much as I do. Those leaders include Warren Buffett, Bill Gates and billionaire hedge-fund manager Ray Dalio.
Dalio made waves this week with a 7,500-word LinkedIn article titled, Why and How Capitalism Needs to be Reformed. Dalio is a voracious learner who studies narrative and communication. It’s worth noting how Dalio turns an enormously complex subject into a simple, compelling narrative.
1. Start with a story
Most business leaders and economists are really good at creating pie charts and really bad at telling stories.
Dalio knows better than to start with the dry stuff. In fact, his first chart doesn’t appear for fourteen paragraphs. Instead Dalio draws in the reader with a story.
I was fortunate enough to be raised in a middle-class family by parents who took good care of me, to go to good public schools, and to come into a job market that offered me equal opportunity, Dalio begins.
At age 12 one might say that I became a capitalist because that’s when I took the money I earned doing various jobs, like delivering newspapers, mowing lawns, and caddying and put it in the stock market when the stock market was hot. That got me hooked on the economic investing game which I’ve played for most of the last 50 years.
By giving readers a story of where he came from and how he gained his knowledge, Dalio strives to make a deeper connection with his readers.
Dalio is a student of narrative. In 2014, he became immersed in Joseph Campbell’s book, The Hero with a Thousand Faces. Dalio explains his fascination with Campbell’s ‘Hero’s Journey’ in his bestselling book, Principles, and in a short video he posted on Facebook. “Learning about the Hero's Journey helped me crystalize my own understanding of where I was in my own journey and what I wanted to do next,” Dalio says.
Campbell was the first to identify a structure that most epic stories of heroes tend to follow—a hero is called to an adventure, encounters tests and ordeals, and is transformed by the experience.
Narrative and storytelling pervade Dalio’s work. Sunday night's 60 Minutes profile on Dalio includes a look at an ambitious initiative—OceanX—that combines ocean research and visual storytelling. According to Barron’s, Dalio’s Ocean X partner and son, Mark, says storytelling can spark genuine interest in a subject. People can’t be “forced” into becoming conservationists, he says. They have to be led there.
2. Summarize your argument
In the third paragraph of Dalio's LinkedIn article, he delivers the most quoted line from the post, a one-sentence summary that stakes out Dalio’s position. Dalio writes:
I think that most capitalists don’t know how to divide the economic pie well and most socialists don’t know how to grow it well.
That line signals that Dalio is about to embark on the difficult challenge of taking on the messy middle—the gray area that’s far too complex to fit in a tweet. In the next paragraph, Dalio summarizes the journey he’s about to take his readers on. “I believe that all good things taken to an extreme can be self-destructive and that everything must evolve or die. This is now true for capitalism."
3). Stick to three key messages
Regular readers of my column know that I'm a big proponent of the 'rule of three.' Simply put, humans have a capacity for about three ideas in short term memory. It’s one of the great writing rules of all-time. Don’t give your readers twenty takeaways—give them three. Dalio does just that.
In this report I show why I believe that capitalism is now not working for the majority of Americans, I diagnose why it is producing these inadequate results, and I offer some suggestions for what can be done to reform it.
The structure is simple. First, we’ll learn why capitalism is not working for everyone. Second, we’ll learn about the factors that got him here and, third, we’ll get Dalio’s suggestions on best to reform it. Although Dalio’s report is 7,500 words, you get the gist of it in the first four paragraphs.
Dalio knows the rest of the report gets dense and might intimidate some readers. He has something to offer them, too.
4. Highlight the important stuff
Dalio knows that most people don’t have the time or the desire to read a 7,500-word article. Once again, he makes it easy on them. First, he warns us that big numbers are coming. He offers a suggestion.
In this section, I will show you a large batch of stats and charts that paint the picture. Perhaps there are too many for your taste. If you feel that you’re getting past the point of diminishing returns, I suggest that you either quickly scan the rest by just reading the sentences in bold or skip ahead to the next section...
5. Keep charts simple and uncluttered
Dalio’s first chart doesn’t appear until after the fourteenth paragraph. Once it does appear, it’s remarkably simple yet tells a complex story. “I’d like to show you the differences that exist between the haves and the have-nots,” Dalio writes to set up the chart.
He breaks up the economy into the top 40% and the bottom 60% (where most Americans live). The reader sees two charts. Both are free of clutter and simple enough to understand within seconds.
The first chart has two black arrows: one represents the income growth of the top 40% since 1980 and the bottom area shows the income growth of the bottom 60% of the American population. The top arrow is going up rapidly while the bottom arrow sits in a straight line—stagnant. Dalio explains the chart in one sentence which he writes in bold letters:
There has been little or no real income growth for most people for decades.
The second chart is even simpler. It shows one blue line plummeting year after year from 1970 to today. Once again, Dalio explains it in one sentence: “The percentage of children who grow up to earn more than their parents has fallen from 90% in 1970 to 50% today.
Dalio follows this template for the rest of the article—using the tools of narrative and simple, clear communication to explain the factors behind the trouble capitalism finds itself in. Dalio’s charts and explanations of poverty and educational inequities should be carefully studied by anyone who uses charts and graphs to articulate their ideas.
In 2011 CIO Magazine called Dalio the ‘Steve Jobs of investing.’ The article traces “profound similarities” in the journey both entrepreneurs took to grow their companies. I’d add that Steve Jobs was also one of the most effective communicators in the technology space. Dalio is one of the most effective communicators in the financial space.
Dalio’s LinkedIn post is a great example of how he educates his audience about a difficult subject.
