LIVE: Hedge fund god Ray Dalio is being interviewed by Bill Ackman

Billionaire Ray Dalio, the founder of $160 billion hedge fund behemoth Bridgewater Associates, is doing a Q&A with Pershing Square's Bill Ackman at the Harbor Investment Conference.

The conversation began with a macro focus.

Ackman asked Dalio how does he manage $160 billion in this environment (low interest rates, etc).

"First of I think it's because I could be long and short anything in the world," he said. "I'm long and short practically everything."

Dalio says he uses a lot of "artificial intelligence" when approaching his portfolio.

"I think about the macro environment in 2008. I think about how asset prices are so much higher now than they were. And how returns are so much lower. And I wonder about how you [Bill Ackman] do it?"

Ackman called that an "interesting interviewee approach."

Ackman said that they look for quality businesses so commodity prices and interest rates can move up and down and that doesn't have an impact. He also looks for businesses that haven't been run well, so he can intervene and make changes from a management level and unlock value.

Dalio asked him about price.

"I thought I was interviewing him?" Ackman said.

"When we think about a 2008, a 2008 could happen again...When I think about my job, you're finding good value...I try to find value. When I'm thinking about those macro influences, they can change. I just was curious when we exchanged thoughts. I'm not trying to say one approach is better. As we wrestle with the question, I would be worried over the next three years...How does it feel to be long only?"

"We're not long only," Ackman said.

The conversation shifted to how Dalio invests and makes money. Dalio said that he invests in 120 different markets.

"You're asking me how I make money. I take the bets that are logical...the only thing I would do different is I take that I write that rule down. I test that rule over all different environments... I stress test it."

"I invest exactly the opposite of that," Ackman said.

"So you have your criteria, my criteria is very similar to yours," Dalio said. "It was beautiful to hear how you chose the management--that whole description. You could write that rule down--what makes you buy or sell a company? Here are my criteria, those screens and I imagine that I apply those screens through history...So you can go back in history and you doing it your way, you would know the track record of each decision rule. Now you have a framework."

Dalio said he picks uncorrelated bets.

Ackman asked him how he knows they're not correlated.

"Fundamentally.... Correlation is an outcome, not a thing in and of itself."

Ackman then asked Dalio about how he looks at risk.

Dalio said they look at "risk of ruin," which is the most important thing. "I'm a very risk averse investor."

Dalio employees 1500 people. Of that number, 300 are involved in the investment process in some way, Dalio said. He said they have teams that look at history and put together criteria (decision rules).

"The same things happen over and over again in history. The problem that I've learned about that is we are very much biased by our own experiences," Dalio said. "I learned over the years was that everything that surprised me and lost me money hadn't happened in my lifetime, but happened in others' lifetimes."

The Harbor Investment Conference is an annual event brings together investors to share trade ideas, while raising money for the Boys & Girls' Harbor.