How did Ray Dalio become the world's largest hedge fund manager?

It started in 1960. He had just lost a large sum of money in the stock market. But he still loved investing and trading. He decided to start over with a specific plan to beat the market. To do this, he zoomed out and defined the objectives in front of him. This meant he had learn why he lost money in the first place and how it would never happen again. He writes:

1. It isn’t easy for me to be confident that my opinions are right: In the markets, you can do a huge amount of work and still be wrong.

2. Bad opinions can be very costly: Most people come up with opinions and there’s no cost to them. Not so in the market. This is why I have learned to be cautious. No matter how hard I work, I really can’t be sure.

3. The consensus is often wrong, so I have to be an independent thinker: To make any money, you have to be right when they’re wrong.

These 3 realizations laid the foundation for his new goals and next steps. Now it was in his hands to act on them. But to act on anything successfully, you need a plan. After writing the 3 principles above, he wrote the 5 rules below. The methodology here is simple but still rare to see in today's world. He effectively defined his principles (above) and then created a roadmap for how to get there (what you see below):

1. I worked for what I wanted, not for what others wanted me to do: For that reason, I never felt that I had to do anything. All the work I ever did was just what I needed to do to get what I wanted. Since I always had the prerogative to strive for what I wanted, I never felt forced to do anything.

2. I came up with the best independent opinions I could muster to get what I wanted: For example, when I wanted to make money in the markets, I knew that I had to learn about companies to assess the attractiveness of their stocks. At the time, Fortune magazine had a little tear-out-coupon that you could mail in to get the annual reports of any companies on the Fortune 500, for free. So I ordered all the annual reports and worked my way through the most interesting ones and formed opinions about which companies were exciting.

3. I stress-tested my opinions by having the smartest people I could find challenge them so I could find out where I was wrong: I never cared much about others’ conclusions—only for the reasoning that led to these conclusions. That reasoning had to make sense to me. Through this process, I improved my chances of being right, and I learned a lot from a lot of great people.

4. I remained wary about being overconfident, and I figured out how to effectively deal with my not knowing: I dealt with my not knowing by either continuing to gather information until I reached the point that I could be confident or by eliminating my exposure to the risks of not knowing.

5. I wrestled with my realities, reflected on the consequences of my decisions, and learned and improved from this process:By doing these things, I learned how important and how liberating it is to think for myself. (This story and the quotes come from Ray Dalio's brilliant online book titled Principles)
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