I read The Fund by Rob Copeland on Dec 27th, 2024

This book exposed the ugly reality beneath the glory Bridgewater, one of the world’s largest hedge fund. Ray Dalio was painted as a cult leader with severe NPD. He enforced the principles to the corporation, and crushed challengers ruthlessly. The totalitarianism fostered a toxic working environment where sycophants flourished; they bully, backstabbed to fight for the favoritism.

Principles

The principles is the corner stone of Bridgewater’s corporate culture. It started as score cards to assess employees’ capabilities and potential. Over time, it sprawled into 200 plus so-called golden standards. Paul McDowell, tasked with implementing Dalio’s concept of believability — a metric designed to assess an employee’s trustworthiness, soon found out the only approach to make his boss happy is to align with Dalio’s vision, cascading his absolute authority through the organization.

Dalio was fascinated of the omnipresence of the principles. When iPad was launched, he directed highly-paid contractors to drive to the Apple stores, wait in the line and purchase as many as possible, so he could equip each meeting room with a fully-loaded device for quick lookup.

One goddamn place

Katina Stefanova, a resilient immigrant from Romania was recruited by Dalio, and rose like a meteor, even being considered as a potential successor to Ray Dalio. However, she was berated in front of the management committee(MC) with public humiliation. Her meltdown was recorded, edited, and archived in the Bridgewater’s Transparency Library completed with a cheesy title Pain + Reflection = Progress. The video became as a case study for leadership debates and training material for new hires.

Dalio seemed to be easily agitated by the minutiae of daily operations. A single incident of urine on the floor of a men’s restroom triggered a probing involving the head of facility. Similarly, when a whiteboard eraser failed to fully erase marks, Dalio launched a six-week inquiry, during which the facilities team tested every whiteboard on the market in search of a solution.

Smoke and mirror

Why did people remain to stay in such a toxic working environment? The answer lay partly in the lavish compensation, — secretaries reportedly earned over $200,000 annually. More importantly, the prestige of working at one of the world’s most profitable hedge funds often provided a significant career boost upon departure. Stefanova founded her own fund, Marto Captial in 2015, and the investors were wooed by her direct lineage to Ray Dalio.

In truth, she was an outsider of the firm’s investment strategy, only 10 – 15% staff actually contributed to investment decisions. Every Monday, Dalio held a What’s Going On in the World meeting along with Jensen, and Prince to debate grand topics for hours. But they were smoke and mirrors, — ALL the decisions were solely made by Dalio. The illusion of collective intelligence was designed to obscure the reality of a single point of failure.

Accidental success

In the author’s view, Dalio’s approach relied heavily on correlating economic signals, such as interest rate and currency appreciation. These intuition helped Bridgewater to grown in its early age, leveraging Dalio’s knack for identifying patterns in complex markets. However, as financial data became more readily accessible and technological advancements enabled powerful computers to run sophisticated market simulations, this approach began to lose its edge.

Bridgewater’s true secret weapon was its information advantage. By managing sovereign wealth funds, the firm gained privileged access to sensitive information that had the potential to influence global commodity markets.

Closing thoughts

What a surprise! I am a big fan of Dalio’s Principles for Dealing with the Changing World Order, captivated by its meticulous exploration of the Big Cycle, which seeks to explain empires’ rise, stagnation, and eventual decline or defeat by emerging powers. Without a proven track record, the principles risk being dismissed as another speculation, — no different from countless theories circulating in academic or industry circles.