The Fund by Rob Copeland is subtitled, Ray Dalio, Bridgewater Associates, and the unraveling of a Wall Street Legend. It is basically an expose’ of Ray Dalio and the firm he founded, Bridgewater Associates, which was the world’s largest hedge fund.
Dalio is a larger-than-life figure and has a couple of bestselling books. Principles: Life and Work is Dalio’s best known book. It comprises the principles that Dalio is best known for. These are rules and platitudes developed within Bridgewater and used within the firm as the guiding rules for all actions. He’s also well known for The Changing World Order, his explanation of how world economics works and how to take advantage of macroeconomic trends.
Bridgewater, and Dalio’s overarching principle was ‘radical transparency.’ Through radical transparency, groups of people in general, and the Bridgewater staff in particular, were to achieve meaningful work and meaningful relationships.
Rob Copeland’s story, based on hundreds of insiders, tells a different tale.
Radical transparency was used to have everyone at Bridgewater constantly judging one another. There were multiple systems and groups to spy on and report on other staff. One group was The Principles Captains, who were to report on how closely the employees followed the Principles. Most meetings were open to all, so that dozens of extra people might attend, solely for the purpose of rating those participating in the meeting. All meetings were videotaped and put into a library, so they could be reviewed later.
Those found to have violated the Principles of Bridgewater were subjected to a ‘Trial.’ This was an inquisition of the person, often reducing the ‘offending party’ to tears and humiliation. The videotapes of these trials were then assigned to many of the staff as mandatory viewing, so they could see how another employee was publicly humiliated.
If the Principle Captains weren’t enough, Dalio formed a new group called the Politburo. His inspiration was a trip to China and what he observed about how the Communist Party operated. The Politburo was made up of new hires who reported directly to Dalio on adherence to the Principles, so another layer of spies within the firm.
A huge effort was put into writing software that would mimic Dalio’s decision process. The goal was to make Dalio’s thinking immortal, so he could run the firm forever. The best computer scientists were brought in, but they never could make sense of his thought process.
Much of the book seems like a real-life Squid Games. You’ve seen the lists of the best places to work? Bridgewater would certainly be the worst place to work I’ve ever heard of.
But how about their investment returns? In the early years of the firm, the returns were strong, allowing Bridgewater to become the largest hedge fund in the world, and for Dalio to become was of the world’s wealthiest men. But since 2012, the firm has averaged only 3.5% returns and investors have been pulling their money out of Bridgewater. This time period coincides with the 12 years that top management has been trying to get Dalio to retire, which he finally did.
What is interesting about the investing model, which was secret except to the 20 or so people involved, out of over 2,000 employees, was that there wasn’t a model. Despite Dalio’s claims of particular insight into the macrotrends in the world economy, there was no model. Instead, the investments were based on what Dalio wanted to do. And how did he decide? The book implies that Dalio curried favor with large institutions and governments, and then used legally obtained inside information to make his calls. For example, Dalio became close with some of the leaders of China. He socialized with them and used what he learned to make his investment calls. That worked up until about the last 15 years.
It’s an interesting book and an expose of a titan of Wall Street. I enjoyed it but, be forewarned, there are no heroes here.
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