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THE FUND: Ray Dalio, Bridgewater Associates, and the Unraveling of a Wall Street Legend, by Rob Copeland
Ray Dalio is the titan behind the world’s biggest hedge fund — a deep thinker and confidant of some of Earth’s most powerful people. Now 74, he has worked diligently over the past few years to publicize his “Principles,” perhaps in the hope that his name will live on.
In “The Fund,” Rob Copeland has done him the favor of assuring that it will — attached to one of the pettiest bullies you’ll ever meet on the page. This is a terrific dagger of a book packed with cringey detail, just long enough to efficiently disembowel its subject.
Most of “The Fund” doesn’t feel like a book about finance. Instead, it is about how a man of surpassing mediocrity used money to control and humiliate, and how much people abased themselves for it. Which, come to think of it, makes it one of the better books ever written about Wall Street.
The early chapters cover Dalio’s rise from middle-class striver to captain of finance, a journey begun, in time-honored fashion, by caddying at the local golf club. The links proved an excellent place to cultivate a talent for sycophancy, and Dalio was taken under the wing of a well-connected family. After business school and gaining visibility by boldly predicting an impending depression, Dalio eventually got off the ground a fund — Bridgewater — that promised to invest clients’ money safely.
This looming depression, always imminent, has never come — but by regularly forecasting economic downturns, he has gotten credit for anticipating a few. He had a successful stretch of investing through the 1990s and into the 2000s, and in the wake of the 2008 crash, his hedge fund became the single largest in the world. Thus Dalio was able to turn to his true life’s work: subjecting the 1,600-odd people who worked for him to ever more baroque and dystopic psychological manipulations.
This is roughly where Copeland, now a reporter at The New York Times, jumps in. Some of the Bridgewater panopticon story has been told before, notably by Copeland himself. But even if you think you’ve already heard everything about this crazy hedge fund that videotapes employee interactions so they can critique one another under the flag of “radical transparency,” know this: There is so much more.
To appreciate the full impact of the Connecticut struggle sessions, you’ll need a little bit of jargon: For much of Bridgewater’s history, every employee has received a “baseball card” with ratings of their abilities or character, to which their colleagues contribute. And contributing ratings — or “dots” — is itself a key metric; there are rewards handed out to bullies and informants.
You might think that the result of this system would be a wholesome cycle of self-improvement through honesty and informed introspection. But oddly the outcome is a climate of paranoia and punishment that comes down hardest on the weakest.
There was, for instance, the incident of the wrinkled peas in the cafeteria, in which a written complaint whipped the vegetables into “pristine” shape. There was the time when the parking staff was fired for designing parking passes deemed too big. When Dalio noticed a spill on the floor by his urinal, Copeland writes, he summoned a deputy to investigate.
But for the most part, it has always been safer to be a lower-level drone than in Dalio’s direct orbit. Seemingly, the higher employees rise, the more compromised they become. James Comey, who served as Dalio’s security chief before his stint as F.B.I. director, received around $7 million a year. Among other things, Copeland relates, he was given the task of investigating a young woman’s risqué messages; once, he allegedly left a private binder out to catch low-level employees reading it.
Yet no degree of servility has been quite enough to save anyone from ritual humiliation. If an employee fails at an impossible mission, or is found to have lied about some small point of personal behavior, Dalio’s strategy has been to call for a “probe” in front of their co-workers. In the case of the most serious perceived transgressions, these have turned into full-on trials. As Copeland reports, in several of these instances, the employee subjected to Dalio’s browbeating started sobbing. Naturally, the sessions are recorded so that people in the company might learn from them.
Dalio asks his minions for honest feedback, including on his own performance. He does not often get it, of course. Paul McDowell, tasked with designing the “Principles Operating System,” Copeland writes, “assigned an underling to go into the software and program a new rule. Dalio himself would be the new baseline for believability in virtually all important categories. As the original, topmost believable person at Bridgewater, Dalio’s rating was now numerically bulletproof to negative feedback. Regardless of how everyone else in the firm rated him, the system would work to keep him on top.”
The careful reader might wonder how a place that seems to devote almost all its energies to competitive flagellation still makes money.
Traditionally, hedge fund managers make money with a formula of “2 and 20” — 2 percent of the money under management, plus 20 percent of the profits over some kind of benchmark.
Think of Dalio as the king of the two-percenters. For the past decade, the actual returns of Bridgewater have been mediocre at best. It is still the biggest hedge fund in the world, with investors continuing to put their money into a known name. And with some $125 billion under management, the fees it takes in keep Dalio on the leader boards of the world’s billionaires.
There is one point in the book in which Dalio is publicly questioned by an employee at a Bridgewater town hall, and reverts to the wealthy guy’s ultimate retort: “If you’re so smart, why aren’t you rich?”
One of the peculiarities of Dalio’s story is that he just doesn’t come off as very smart at all. His predictions have been wrong as often as right. And as the years passed, Dalio’s advantage “softened, then seemingly ceased. The rise of powerful computers made it easy for any trader to program rules and to trade by them.” Confronted with differing views, he has resisted change.
But Dalio is the boss, and he is rich. And if there is any question, Dalio could win every argument by having his assistants send out an instant poll to employees’ iPads, which overwhelmingly revealed him to be right.
Wall Street makes an excellent background for portraits of ordinary human failing. The numbers mean a vast canvas; the stakes high enough that people will accept an astonishing level of humiliation. But Dalio’s basic type is familiar in any enterprise: The manager who made the most of good luck by judiciously kissing up thinks his job is mainly kicking down, and sits on top of a machine that hums along on its own. For anyone who has had an awful boss, “The Fund” is the perfect rage-read.
One especially telling scene recounts how, on leaving the firm, a sub-chieftain was presented, by Dalio, with a special gift: a Lucite-encased copy of his “baseball card,” memorializing all his poor ratings. “The best gift anyone can receive,” Dalio told his honoree, “is knowledge of their own weaknesses.”
If so, Dalio will appreciate the chance to read Copeland’s book with care. Somehow, it doesn’t seem likely that he’ll be sending a thank-you.
THE FUND: Ray Dalio, Bridgewater Associates, and the Unraveling of a Wall Street Legend | By Rob Copeland | St. Martin’s Press | 340 pp. | $32
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