I can see why Ray Dalio sicced not one, not two, but three law firms on this book's author and publisher. The Fund piles up story after story after story about Dalio, and by the end he comes off as a world class jerk. I'd like to use a stronger word.
Note also that for many years the financial media has blatantly simped for Dalio to the point where any naive media consumer would consider him an affable, introspective man, freely offering insights at fireside chats at Davos.
The fact that the exact opposite is true somehow fits perfectly with modernity. Nowadays, everything is inverted and everything is fake.
Whenever you attempt to understand someone behind their media facade, you have to look for tells. See for example Dalio's painfully obvious revolving door problem at his firm, Bridgewater. Over many years Dalio brought in many, many accomplished and highly-regarded employees to work directly with him in senior positions, only to quietly fire them--all of them--soon after. With anyone who has a mile-long list of exes, work or otherwise, the problem, the real problem, is the one thing common to all of those failed relationships. The one thing common to every single failed professional relationship with Ray Dalio... is Ray Dalio. Yes, it's possible that "everybody else" is the problem, but it isn't likely. That's one tell.
Another tell, an even better one, is the level of legal molestation a book gets from its subject. In fact, I would go so far to argue that it's astonishing that Dalio failed to see the second-order consequences of instructing his lawyers to attack this author and his publisher. How could he not see how it would look when a powerful billionaire aggressively attempts to stifle a book written about him? A truly perceptive Dalio would have known to stay out of it, let the book come out, and ignore it. Or even make a charitable comment or two about it in the media! His reputation would have been the better for it.
A couple of criticisms, some minor, some not so minor. The book could be better organized as it jumps around, at times aimlessly. The sourcing of this book is... complicated: in the final pages, readers will learn that many of the author's sources recanted, presumably due to pressure from Dalio and his firm. Further, a striking number of the book's claims are footnoted with an explicit denial of that claim from "a lawyer for Dalio." A claim is either true or not true. To make a claim and then quote a denial of that claim in practically the same breath is rhetorically interesting: it actually makes the claim more believable rather than less.
Further, author Rob Copeland at times piles on too much mockery: see where he mocks Dalio's objectively useful How the Economic Machine Works video for having "a wacky Western-infused soundtrack," or how the author editorializes, unsourced, that Dalio met with the head of Singapore's famed sovereign wealth fund "with a piece of noodle hanging awkwardly from his tie." Overused rhetoric of this sort has an unintended effect: the reader develops a (tiny) bit of sympathy! The author could have left off these snotty remarks and Dalio would have come off looking even worse.
Those minor criticisms aside, the author builds a robust portrait, both of the brittle and rancorous Ray Dalio and the creepy Orwellian work environment at Bridgewater.
One final thought. You never, ever want to show up in a book like this, even as a bit player. A few possible takeaways here may be to avoid working for high-profile firms, never talk to the media, and in particular avoid working for a rockstar fund like Bridgewater--no matter how much they might pay you. Tell-all books like this are permanent; they can never be undone. Your reputation might get trashed in a book like this, possibly through no fault of your own, and you may never be able to escape it.
[Readers, you know what's coming: a friendly warning to read no further. The rest of this post contains my notes, thoughts and reactions to the book. Your life is way too important to waste reading any of it.]
Notes:
Introduction
1ff The book starts out with Paul McDowell receiving an offer from Ray Dalio to come and run Bridgewater, a shock out of the blue for him to be plucked from relative consultant obscurity.
6ff We get into Dalio's baseball card system, where each employee and their aptitudes (including the employee's "believability weighting") are summarized on a single sheet; "Believability cascades. You should have done this. I just did your job for you." Dalio says to McDowell. Later Dalio calls up McDowell, angry that certain employees have higher believability scores than Dalio himself, so McDowell rigs the system to make sure Dalio's rating is always the highest.
Part I
Chapter 1: One Goddamn Place
14 [The chapter title is the dark nickname for Bridgewater's address: One Glendinning Place]; on Katina Stefanova, the "ice queen," hired out of HBS by Dalio himself in 2005.
21ff: Dalio crushes Stefanova in a meeting in front of everyone for not hiring people at the aggressive pace he wanted; he blames her for not telling him earlier on that he was wrong, and as she becomes emotional he berates her for failing to control her emotions. The author cliffhangers the chapter here by saying Stefanova was pregnant at the time, further alleging that Dalio also knew this at the time. Also we learn about how Dalio videorecords all meetings at Bridgewater, keeping these recordings in the firm's "transparency library"; Dalio has this recording edited down to a short episode that they used for screening interview candidates, candidates who showed sympathy to Stefanova were quickly deemed "bad fits."
Chapter 2: Missy and the Viking
24ff Background on Dalio's youth: Ray Dalio's background caddying at a Long Island golf course; his contact with the Lieb family; his crappy academic record in high school; his decision to go to C.W. Post; how he begins joining the Lieb family for holidays and helped straighten out their grandson; on his father as a musician; on his mother who died of heart attack at age 19 right in front of Dalio himself, who tried to revive her.
28ff Dalio starts trading stocks based on ideas from his golf caddying clients; also trades gold, corn, soybeans, etc.; Dalio changes his name from Dallolio, de-Italianizes it, basically; thanks to his connection to Isabelle Lieb, in 1971 he gets a summer job as a clerk/runner at Benton, Corcoran, Lieb & Co. on the NYSE floor. [Interesting side blurb here about how Dalio strongly believed the stock market would go down as the US was taken off the gold standard but the opposite happened. "Dalio spent much of the rest of the summer enmeshed in deep thought about the difficulty of reconciling his intuition with reality."]
29ff Dalio gets accepted into Harvard Business School [another interesting blurb here: in the early 1970s only "one in four applicants made the cut" to get accepted: I didn't expect the acceptance rate to be that high.] He goes to work with a struggling commodities firm called Dominick & Dominick Commodities ("they were stupid to hire me but they did"), then to Shearson Hayden Stone, a much more significant brokerage firm, selling hedges to commodities-dependent businesses; Dalio was fired after certain unclear events that even Dalio hasn't been consistent on, but one event was that he punched his boss (!) and then later hired a stripper for a private client presentation, although these details are in dispute. Dalio now 26 years old and out of work for the second time in less than two years.
33ff Dalio then starts Bridgewater, a commodities import-export business; he hits up one of the Lieb family members and other investors for capital to get it off the ground; a year later runs out of money after having "executed a total of two transactions."
33 [It's worth noting here that there's a footnote for page 33 saying "a lawyer for Dalio says he never asked the Liebs for money" and likewise notable that the author gives no source for the claim that Dalio pitched a family member for an investment. "'I need one hundred thousand dollars to make it one year,' Dalio told Lieb and other potential investors. Dalio was looking for 10 percent of that from each." Why isn't there a source for this claim if the author is going to put in a footnote saying that a lawyer for Dalio disputes that very claim? We will find out later in the book that many of the sources the author had for this book came under pressure from Bridgewater, most recanted or demanded to be de-attributed/anonymized in the book, and the author agreed.]
34 Dalio starts dating a woman who is a descendant of the Vanderbilt Whitney families. "She would have no trouble helping out with Dalio's fledgling business."
Chapter 3: Absolute Certainty
34ff 1977: Dalio marries Barbara Gabaldoni, of the Vanderbilt Whitney family, giving him "entree into a new level of society." Per the author, Dalio learns that families with generational wealth have different priorities, that they're less consumed by the hunt for the next score, that they are more focused on staying rich and avoiding big losses.
36ff Advising McDonald's (as they were rolling out chicken McNuggets) to use futures for corn and soybeans: as important inputs/feedstocks for chicken, these futures would help stabilize their the company's costs; also Nabisco hedging with futures to fix their commodity input costs, as well as using currency futures to hedge international sales; Dalio moves Bridgewater to Connecticut begins calling himself an economist.
38ff Interesting to learn here that in 1981 Dalio was extremely bearish right at the all-time stock market bottom, Dalio claimed the US was "headed for a historic economic collapse" which couldn't be more wrong, an absolutely catastrophic missed call. [Note that in Dalio's own book Principles, he calls this period "my abyss."] Dalio has to let everybody on his (small) staff go; he starts writing a newsletter, which catches the attention of Paul Tudor Jones; Jones gives him a shot at producing a trading system, it fails. Finally, Dalio gets $5 million in assets to manage from the World Bank's pension fund (run by a fellow Harvard grad), but Dalio's fee is only 20bps.
Chapter 4: Pure Alpha
43ff Dalio makes another "depression call" but this time it's 1987; eight months later Black Monday happens, the author makes an interesting comparison here between Bridgewater's investment performance (up 27%, spectacular compared to the stock market, but with only 20 million dollars of client funds) and Paul Tudor Jones' performance (also really good, but Jones was running $250 million in assets and personally made an estimated $100 million that year. [Thus there's a gigantic difference between "being right" and "being right while having significant OPM on the line."]
43, 46 There are a couple of instances here where Dalio exaggerates the scale and status of his firm as well as the firm's assets under management; these are sourced well.
46ff Bridgewater lands some legit new clients: CITIC in China, Kodak's pension fund; also Dalio hires Bob Prince away from a Tulsa-based bank that had been a Bridgewater newsletter client.
49 More new clients: GE, Mobil, DuPont, state employee pension plans from Connecticut and Wisconsin, etc.
51 Bridgewater assets double to $1.2 billion in 1992 and then would nearly double again the year after; BW also adds an "overlay product" where the hedged portfolio could also have extra trades done on top in currencies or other assets.
53ff Dalio marketing what he called "alpha overlay" as well as a new fund called Pure Alpha based on his firm's investment system; it does spectacularly right away: up 32% in 1993 compared 7% for the stock market; it also almost never loses money (for example, it was down only 1% in 2000 when the stock market was down double digits; it was up 9% in 2001 after another down year for the stock market). This product had $3 billion in assets by 1999. [Note that a lot of the outperformance came from investing money into US Treasuries, kind of a Bill Gross-type portfolio: during this era Bill Gross also managed to earn equity-like returns with very little downside as well.]
56 [Worth noting also here that you can make tremendous leaps relative wealth-wise by being up a little or flat when everyone else is down big: this insight can also transfer to personal finance:] "Dalio became ever more wealthy just as many of the nouveau riches of the first internet era were losing their shirts."
57 Dalio launches the All-Weather Portfolio. [There's frequent refrain in the book's footnotes quoting "a lawyer for Dalio": see for example the footnote on page 57 ("All-Weather was not built with a goal of attracting client money.") which is a weird and pedantic Poindexter-like response that kind of hints at the acrimony towards this author from Dalio's camp. Duh, of course this product was built with the goal of attracting client money--what kind of firm would roll out a new investment product to repel client money?]
58 Interesting section here talking about how Dalio seem to eschew signals of wealth: he didn't like flashy cars and mansions, yet money also was "proof" that his logic and his investment rules were correct, thus the money was a signal of predictive decision making. [This is interesting: it's like the scoreboard is still there, it is always there, and our egos either apply it to wealth signals (mansions, yachts, etc.) or intelligence signals (e.g.: "I was right").]
59 By 2005, Dalio starts talking about stepping out of management roles at Bridgewater.
Chapter 5: Root Cause
60ff Hiring new CEO Britt Harris [note the comments here on page 61 about control of the enterprise: Ray Dalio remained head of the powerful Management Committee of the firm and thus had "veto-proof control over major decisions at the hedge fund." It's worth thinking about how to hand over most of the administrative responsibilities--and thus most of the headaches and stress--of your firm while retaining tight control]; the so-called MC cycle where new "Management Committee" members were hired with fanfare, then assigned something outside their area of expertise and then run through the ringer on their shortcomings; often the person would soon depart: this was Dalio's method of weeding out the wrong people. Britt Harris quickly broke, had trouble sleeping and didn't last long, he quit after six months and went into intensive treatment for depression right afterward. "The hedge fund had ingested, and spat out, an unsuitable hire." Dalio took this to mean that the system was working properly!
63ff Bridgewater's "Issue Log" where all sorts of complaints could be publicly recorded; on Dalio's dictum "don't tolerate badness"; each complaint identified the complainant as well as the "RP," the responsible party; the next step was to investigate the root cause. [This is interesting here because the author seems to frame it as if these Issue Log entries are mostly about minor things ("wilted peas" in the cafeteria, someone not washing their hands after using the bathroom, the coffee pot being empty) but in reality these are things that probably should be fixed in a firm! Moreover, in each of the examples the author gives the problem completely went away once they were publicly aired in the Issue Log: in other words this system is highly functional.]
65 Dalio realizes one of the root problems is that he himself had not formulated proper office management and office culture principles. The author here sort of mocks the email where Dalio shares ideas with the firm on this problem; but again one could also just see this as yet another problem that starts out looking intractable and messy until the firm grapples with it and get its arms around it.
66ff The gestation and birth of The Principles, ca 2006-2007; the author editorializes: "It bothered few that an animating doctrine of The Principles was that conflict was the key to achievement."
69 "Although even some of his closest colleagues would privately say that individual Principles seemed a bit wacky, in total they seemed sensible when viewed as a part of an overall path to personal growth. And The Principles spored so slowly that no one could identify a singular moment when they turned extreme." The author frames this as a sort of gospel where many Bridgewater employees ("The Principalians") adopted it as canon.
Chapter 6: The Big One
70ff On Greg Jensen, Dalio's golden boy and one of the leading Principalions; [note here how the author frames and rhetoricizes things in a negative way: see for example "A drain in the [fraternity's basement] floor let out the dregs of Budweiser and Milwaukee's best, the fraternity's preferred brews." Sure, all basements have drains and all fraternities drink beer, but the tone and attempted flourish of this strange sentence make the author sound like an angry young man still smarting from the sting of rejection from his college's cool kid frat]; the author speculates that Greg Jensen was Dalio's "fifth son" after a multi-paragraph digression into Dalio's four actual sons, none of whom wanted to do investing.
74 Unsourced anecdote here where Ray Dalio is talking to a New York times reporter, but misidentifies himself as Parag Shah, the firm's head of marketing. Then the author writes: "After not speaking to the New York Times, Shah found himself under fire for speaking to The New York Times. Almost immediately after the article went live, Shah noticed that a colleague had added a new entry to the Bridgewater Issue Log, flagging Shah for breaking company policy on not speaking to the media. Shah didn't know whether to tell the truth. If he admitted it was Dalio who gave a false name to the reporter, Shah would implicitly be accusing the Bridgewater founder of violating The Principles' rules on lying. Shah reasoned it was better to take his lumps."
75 The author refers to another interview where Dalio said in 2007 that the subprime problem would not spread and sink the economy, and that a recession was not coming--obviously a totally wrong call. [Note that anyone can go and do a lookback on anyone's predictions--especially if they make a lot of them--and pick out only the bad ones. That said, this is a bad one! Note however that Bridgewater put up amazing numbers during the great financial crisis, up 9% in 2008 for example. The scoreboard tells the real truth.]
Part II
Chapter 7: Look Out
81 Now the narrative returns to Paul McDowell (who we first met in the book's introduction, dry-heaving). It's now March 2009 and Bridgewater has nearly a thousand employees, and McDowell has been brought in to advise the management committee.
82 Bridgewater builds a new headquarters, The Mansion, in Connecticut, with bedrooms, a jacuzzi and places where employees can sleep the night instead of commuting home.
83 Back now to Katina Stefanova, who didn't return to work for weeks after her grilling and interrogation by Dalio; but then recognize that she might have some power as Dalio begins formulating his plans to step away, so she returns to her old job acting like nothing had happened, also cultivating an ally in Eileen Murray, another new Bridgewater senior hire.
86 The chapter ends with a creepy after-work scene where Dalio asks his (in this particular case largely female) employees to "croon for me", and then he sings a bawdy and incredibly inappropriate song featuring lots and lots of c-words, while Stefanova hides in the bathroom.
Chapter 8: A Different Kind of Company
88ff Dalio's mood darkens, the firm's performance in 2009 was disappointing, but something else is wrong, his temper seems to flare.
90ff Dalio commenting on "that damned amygdala"; on meditation, which helps free him from the influence of his amygdala; Dalio offers to subsidize employees who wanted to take meditation classes; also the Management Principles Training Test and some sample questions from it; then on the "baseball card" project which was assigned to McDowell, where Bridgewater wanted to create summaries of each of the employees with profile information and scores/measures of competencies all on one page.
94 The baseball card project gets kind of wrongfooted repeatedly as Dalio makes arbitrary changes, then just says "redo it." One of the anchor members of the team Eichinger, quits or was fired, it isn't clear.
97 "Near year-end 2009, [Dalio] asked Stefanova and others for a report summarizing the reasons behind the elevated level of terminations and resignations over the preceeding eighteen months."
99ff On also the career of Bob Prince; how he was an owner of Bridgewater, although he borrowed money to acquire a share of the company; once he earned out the debt he began to live it up a little bit, with helicopter lessons, buying land, etc., but professionally he would play down his role and talk up his limitations, including saying "I can't manage" which was an echo of Dalio's criticisms of him; Prince had the title of co-chief investment officer, which let Dalio boast of their long-term stable partnership, but he mostly stayed out of the way and stayed out of the management committee dramas, never really challenging Dalio or sticking up for anyone who did; [Honestly this is probably a politically savvy way to manage working with a difficult person like Dalio.]
Chapter 9: Comey and the Cases
101ff Hiring attorney James B. Comey, former attorney for the New York's Southern District where he prosecuted Martha Stewart for insider trading [not to be pedantic here but technically NYSD got her for lying to prosecutors], later he was deputy attorney general under the Bush administration, then hired at Bridgewater as general counsel in 2010. Assigned a 31-year-old "ski partner" to help him adjust and assess his strengths and weaknesses. Gets called a "chirper", someone who repeats stale ideas rather than coming up with his own.
102ff Controversy over the firing of a junior attorney on staff, Leah Guggenheimer; this scene makes everyone look bad including Guggenheimer herself, who complains/writes up a colleague for failing to bring in bagels on the agreed-upon day. [This kind of stuff (as well as much more to come) really makes you think about how never to show up in any kind of tell-all book like this. You just want to avoid doing time at a firm that's dragged through the media. Books like this are permanent and they can never be undone; likewise, the internet never forgets! You can easily Google Leah Guggenheimer (or any other person profiled in this book) and see what she's up to, find pictures of her, etc. Your reputation might get trashed in a book like this, possibly through no (or little) fault of your own, and you'll never be able to escape it.]
104ff On surveillance at the firm: Bridgewater had cameras all over the office, it tracked keystrokes on computers, retained copies of anything photocopied, etc.; Many of these things are commonplace now but the degree of surveillance and recording at Bridgewater at that time was unheard of; note that videos of meetings were often rewatched to rehash situations, grade peoples' performance, etc.
107ff The Issue Log about "urine on the floor in the men's room," other examples of Dalio becoming increasingly agitated about minor things. He earns the nickname "Ray-man" after the Dustin Hoffman character in the movie Rain Man.
Chapter 10: The Offensive
113 Dealbreaker gets a copy of The Principles, mocks them in a 2010 article.
114ff A minor insurgency happens at Bridgewater, with Julian Mack brought in from McKinsey around the same time as Comey; Mack tells Dalio: "When questions are asked about the system, you get them answered through the system. Preserving a theology through its theology ends up with theology squared." Many employees came to Julian Mack to bitch about Dalio privately, and Mack wanted Dalio to understand that he was basically surrounded by sycophants, but then when a meeting was called and Dalio asked people to state their complaints publicly no one raised their hand. Dalio saw this as "proof" that Mack was the problem: Mack was let go and never spoke publicly about his experience at the firm.
118 Dalio hires public relations firm, "his goal was to establish a public persona on the level of that of Berkshire Hathaway founder Warren Buffett." Also on Dalio's admiration of Steve jobs, his desire to have Jobs' biographer Walter Isaacson do a bio of him, Isaacson passes on the job, insulting Dalio; See also the talk that Dalio hosted with Isaacson on Long Island, where Dalio self-aggrandizingly claimed that both Dalio and Jobs were both "shapers" (Dalio's term for visionary leaders and the opposite of a "chirper"), Isaacson dodges the question.
122ff Discussion of other fawning coverage Dalio manages to get in the media, including a seating at Charlie Rose's TV interview show, coverage in books and magazines etc., even an article in The New Yorker. [The author is correct that most of the media coverage on Dalio is very fawning, and in this modern era of 1) everything being inverted, 2) the idea that all media narratives are wrong in some fundamental way, and 3) many media personae are often the literal opposite of how they are presented (let's call it the Ellen DeGeneres effect), one becomes less and less surprised at the idea that Dalio may very well be a total jerk.] Note one nuance: The New Yorker piece actually wasn't entirely fawning--the author quotes the reporter John Cassidy saying, "In the time I spent at the firm I saw senior people criticizing subordinates--but not the reverse."
Chapter 11: Truth Factory
126 "This place is like a kibbutz with a hedge fund attached." Matt Granade who had been promoted to co-head of research, explaining to his boss Greg Jensen why he was quitting.
129ff Karen Karniol-Tambour and her interaction with her mentee Jesse Horwitz, when he wrote to explain why he was resigning from Bridgewater: "You are wrong." and then replying to his reply, "You are wrong." Later when he tried to start his own investment fund (a glorified personal brokerage account per the author) Bridgewater's legal department accused him of stealing the hedge funds secrets, when "the closest he had gotten to Dalio was being asked to leave the room."
Chapter 12: Sex and Lies, Videotaped
132ff A team from the Harvard Business School case studies department got pitched by Dalio to do a case study on Bridgewater; they actually were later convinced to follow Jim Comey's experience as Bridgewater hired him. It would be a multimedia Harvard Business School case study, and they were sent hundreds of hours of footage from Bridgewater's recorded meetings. The author writes: "Lordy there was plenty to watch."
133ff Sidebar here on Eileen Murray, who was co-CEO, in a position of great power within just a year after starting, who rubbed Jim Comey and Greg Jensen the wrong way, she comes across as a sort of spunky girl-boss type; she brings over a bunch of operations people from Morgan Stanley and creates her own fiefdom inside Bridgewater [for anyone out there reading this who are thinking about working in corporate America, this is how it's done: you need to bring loyal lieutenants over with you wherever you go so you can maintain a power base]. The one problem was that she bragged to her crew that she never bothered reading The Principles. Also Comey and Jensen managed to get at Murray by using a job candidate from Morgan Stanley who had been fired for padding his expense account.
136ff The "get" was catching Murray over a minor lie [over whether she had written a specific email on her own or not, basically]. Murray saw what was happening and fled to confess to Dalio; Dalio decides there would be a "trial"; the investigation ended up going on for nine months with cameras rolling all the while. This became a huge power struggle at the firm. Ultimately the Harvard Business School case study professors, who received this footage, couldn't believe they were watching this absurd theater, in particular Jim Comey--a former US Attorney General--"employing enhanced interrogation techniques on a middle-aged woman."
137 Dalio ends up not firing Eileen Murray, and also writes two new scriptural elements to The Principles: one dealt with white lies and the other was "everything looks bigger up close"; Dalio bounces Murray down to President; it appears that The Principles would be modified for favorite employees. Bridgewater then yanks the Harvard professors' access to company videos, only allowing them limited and edited clips.
141ff The "take your top off" campfire event with Greg Jensen; Dalio later protected Jensen after investigating this; the firm treated it as if it had never happened.
142ff Jim Comey resigns in October 2012 without a clear explanation.
Part III
Chapter 13: The Machine
147ff Off-topic sidebar here on Dalio's yacht and its underwater submarines that he lent out to researchers; they discover a giant squid, and Dalio tries to travel nearly around the world to go see, but was thwarted by a bad storm; then we get to a discussion of Dalio's "How the Economic Machine Works" video.
149ff Dalio invites historian Niall Ferguson to look at his economic machine [this is the Scottish historian that wrote the excellent history of Henry Kissinger as well as the not-as-good The Ascent of Money]; Ferguson was not impressed by Bridgewater's economic thinking; "Where's your fucking model, Niall?" Dalio shouts at him, twice, during an open meeting with Bridgewater employees.
152 "There, with a piece of noodle hanging awkwardly from his tie..." Delia was here meeting with the head of Singapore's sovereign wealth fund, trying to interest them in buying a stake in Bridgewater (the firm itself); [note that the condescending "piece of noodle" phrase the author uses here is neither sourced nor relevant, but it sure does make Dalio look extra clownish; thus it's effective if somewhat unethical rhetoric.]
153 On Dalio's metric for "believability."
154 Dalio manages to sell 2.5% of his firm to the Texas Teacher Retirement System; Singapore's sovereign wealth fund bought part of the firm as well; the valuation marked Bridgewater at about $10 billion. Then Dalio purchases the most expensive single family home ever sold in America, the Copper Beech Farm in Greenwich, Connecticut, for $120 million.
154 Another example here where the author (unnecessarily) mocks Dalio: there's a paragraph describing Dalio's 30 minute YouTube video How the Economic Machine Works, but mocking it for having cartoon figures and "a wacky Western-infused soundtrack."
Chapter 14: Prince
159ff On Greg Jensen, building his own base of power inside Bridgewater; his ambush, again, of Eileen Murray via one of her subordinates in a major meeting.
161ff In 2013: Dalio gets a diagnosis of "Barrett's esophagus" a condition that supposedly can lead to a deadly cancer, Dalio given as few as three years left to live; then a second diagnosis indicates that the first diagnosis was wrong, after which Dalio's desire to leave Bridgewater in his lieutenants' hands seemed to evaporate all over again. [Note: doesn't this medical situation sound a lot like what happened to Tony Robbins and his misdiagnosis of a brain tumor? See Chapter 7 of his book Unshakeable, reviewed here.]
162ff A quiet arrangement between Ray Dalio and Greg Jensen, where Jensen contracted to slowly buy out Dalio's Bridgewater ownership, which placed him in growing debt to Dalio. [The author has an interesting analysis of the political drama behind the scenes too, where Jensen gets back together with Samantha Holland (she was involved in the "take off your top" scene, see Chapter 14, pp 162ff); Holland gives Jensen the perspective that Jensen was Bridgewater's best hope for the future as most lower level employees were terrified of Dalio.
164ff Dalio and Bridgewater work on The Book of the Future project: this is supposed to be like Siri crossed with The Principles, and used to solve problems and disputes. Jensen then develops a plan to split the two companies apart: one running investments in the other running this Book of the Future project (as well as a place to put Dalio); finally, then "Jensen would have his throne" running the investment side of the business; this plan collapsed totally.
167ff Bridgewater's investment performance was middling during this period: only low single digit gains, putting Jensen under more pressure. Dalio tries to cut costs, switching to a cheaper catering company [which is is a classic sign of a firm fixing the wrong things: this reminds me of Worldcom's CEO Bernie Ebbers eliminating free coffee across the company right before the company flipped into bankruptcy.]
170n p325 [There's a weird mistake in the footnotes here: the footnote for page 170 9involving John Healy) is out of order with the other footnotes; also there's a repeated sentence in a footnote on page 99n p321.]
170ff Now back to Samantha Holland and Greg Jensen, who had been having a sexual relationship which became obvious to Bridgewater colleagues; they are both called to account for it and their stories about it differed; Jensen says "they had never had sex or come close to it" while Samantha Holland says they "would have had sex but Jensen had been too drunk to perform." Dalio was bothered by the difference between the two versions of events and put the Bridgewater ethics committee on the case; when questioned together, Jensen described himself and Holland only as friends, devastating Holland; Holland then hired Gloria Allred, Allred's firm told Ray Dalio directly that their process for investigating workplace misconduct was completely not legal, not even close, and that her firm would not hesitate to go public with a lawsuit; Bridgewater offers Samantha Holland three years' salary to leave quietly and drop any potential claims and never speak publicly about it; she takes the deal, the settlement worth a little over a million dollars. She and Greg Jensen never speak again. Per the author: "Dalio had helped bury a problem that Jensen would be desperate to keep secret--and Jensen had to know there would be a price to pay." [A quick comment on rhetoric and structure here, as the author does quite a good job tying chapters together while foreshadowing what's to come. This creates tension in a story that might otherwise seem much less interesting without these devices.] [Also, another comment on having your name publicized in a book like this: imagine what it would be like to be Samantha Holland after an experience like this, even if she herself stays completely silent about everything! This is again one of the dangers of working at a high-profile firm and having your name (through perhaps little fault of your own!) dragged through the mud for all to see. Call it a sort of Monica Lewinsky effect: you can never, ever escape it.]
Chapter 15: Shoot the Ones You Love
175 Katina Stefanova alleges Greg Jensen grabs her ass at a company party; she reports it, Dalio pulls all the footage from the party and then claims there was no evidence; also Stefanova had a weird feeling about what might have happened with Samantha Holland because they were friends, she surmised that something happened between her and Jensen.
176ff Stefanova tries her hand buying stock in Fannie Mae post the crisis in her personal investment account [heh, I tried that trade too, sadly]. She violates the firm's trading policy by selling before getting compliance permission. Since she had repeated violations she was fired, but not before bluffing that she knew about Holland and Jensen. [It's striking here to see that Stefanova then vastly exaggerated her trading and investing experience in setting up her next venture, Marto Capital, which somehow managed to attract $260m in assets, but then AUM to $20m after clients pulled their funds. Afterwards, supposedly, she ran a billion dollars of assets, thanks to a single ultra-rich individual. I wonder who that "individual" might be?? It bears repeating for the third time: you just don't want to show up in a book like this, your whole life is now permanently out there for everyone to see, and you can never escape it.]
179 Dalio returns to micromanaging the firm, doing "probes" in front of cameras on minor issues for all to see. "Two-thirds of you should be fired."
Hmmm, exactly the kind of douchebag I've always dreamed of working for!
Chapter 16: Artificial Intelligence
181 The first round of firings happened when managers sort of their employees by "dot collector" ratings, firing anybody below average. "Paul McDowell watched with a mix of amazement and fear." [The author makes statements like this and others ("A pit formed in McDowell's stomach...") as if he had direct access to Paul McDowell's brain, and yet these quotes are almost always uncited. The reader can't help but wonder how direct this quote is, or how the author "knows" McDowell's mind--except by speaking specifically to him about this.]
182ff Various structural problems with the dot collector system: down-dotting, rating clustering, etc.
183ff Another hanging/firing, as Kevin Campbell gets hauled into a meeting and cries, then Dalio's voice crackles in over a speakerphone. "Is Kevin having an emotional reaction?" "'Very" Jensen deadpanned.' Video of the meeting is broadcasted across the firm; Campbell quits, unwilling to wait around to be fired.
185 Dalio gives another senior candidate, Niko Canner, a tone-deaf public going-away gift: his "baseball card" filled with low ratings, encased in lucite. (!!) Dalio said, "As I always say, the best gift anyone can receive is knowledge of their own weaknesses."
185ff On David Ferrucci, an important technology hire for Bridgewater, also the inventor of IBM's Watson artificial intelligence; Ferrucci nearly quits, but Dalio convinces him to stay by offering to fund a separate company with tens of millions of dollars for him on the condition that he would spend half of his time on it and half of his time at Bridgewater doing what Dalio wanted him to do. He agrees.
Chapter 17: Unprincipled
191ff Bridgewater hits its 40th anniversary; Dalio hires another senior outsider, Craig Mundie, on Bill Gates's recommendation; also Keith Alexander, former NSA director, is hired in to take charge of security, and also Danaher's former CEO Larry Culp is hired as advisor for the management committee as a tryout for a long-term role.
192ff On Dalio's fascination with Singapore's Lee Kuan Yew, his fervent wish, unfulfilled, to meet Putin, and his fascination and long-term contact with various officials in China over the decades. Dalio creates his own internal team he calls his "Politburo," representing a "weaponization of The Principles" that only Dalio could wield.
197ff Dalio makes negative comments on the Chinese economy, then gets frozen out by all of his contacts over in China; he then backtracks on his comments.
198ff Dalio fires Culp after Culp gives him advice he doesn't like: Culp says too many people at the firm have nebulous responsibilities and spend too much time looking at tapes of each other looking to spring traps. Dalio replies, "You're not conceptual enough." and fires him. Note that Culp later went on to run GE and there's absolutely no mention of Bridgewater anywhere in his professional bio.
199ff Greg Jensen says "Ray is crazy" in a meeting with Eileen Murray (at this point the firm had staffers dedicated to catching and squealing on heretics) and a tape recording of the comment was exposed and brought to Dalio; this led to a schism that "consumed Bridgewater" as "Dalio put Jensen through a trial unlike any of the firm had seen." It also resulted in Jensen crying in front of Dalio and begging forgiveness. [This is where this whole radical transparency/radical truth-seeking stuff really gets gross; it becomes Stalin-era show trial like, like a Maoist struggle session]. It's also odd how, if the firm was truly radically transparent, then why did only certain people know what happened between Jensen and Dalio? This is where when an institution takes principles and weaponizes them, you can get really gross. I think also there's a heuristic we can infer here: all principles, all rules, all policies, all codes of conduct will always end up getting weaponized by the power structure using them.] Dalio kept Jensen on but stripped him of his title, Dalio also sent videos of him crying to the Investment Group and members of the Politburo, and then decided that the radical transparency wouldn't be made available to everyone at the firm anymore. Also Dalio had it written into a new charter for the company where Jensen would never be CEO again. [Note in the footnotes there's a comment from a lawyer for Dalio saying this was not actually done and the Jensen was not formally barred from becoming CEO again, a weird denial of certain details of the story here, but in reality a "non-denial denial" of the overall story itself.]
Chapter 18: The Way of Being
203ff Dalio sends Jensen to Mexico to find a new senior hire, Jon Rubinstein, a former Apple exec; "It was like asking your ex-girlfriend for help finding your next one" per the author. Rubenstein is completely rubbed the wrong way when he's exposed to The Principles and the firm's culture, he flunks his Principles test and then tells Dalio exactly what's on his mind: "You've got three hundred and seventy-five Principles. Those aren't principles. Toyota has fourteen principles. Amazon has fourteen principles. The Bible has ten. Three hundred and seventy-five can't possibly be principles. They are an instruction manual."
207 Rubenstein goes to David Ferrucci to understand how "believability" is caculated, Ferrucci says, "I'm embarrassed" and won't tell him. Also, back to Paul McDowell, who has been trying to build the Principles app with very little progress; there was a demo of a prototype for Dalio it did not go well. "I welcome your probing, Ray. I imagine you'll find all kinds of flaws and all kinds of things that I should have been doing better. It'll be painful, but I'll be better as a result." This is allegedly what McDowell said to Ray Dalio after getting a drubbing in a meeting and being told "You're a bad manager."
Chapter 19: Feedback Loop
211ff This is a chapter about a minor employee named Joe Sweet who has psychiatric problems and actually enters outpatient intensive therapy because of all the criticism he received working at Bridgewater. He quits before his one-year mark.
Chapter 20: One of Us
215ff Katina Stefanova and Ray Dalio in a diner in Westport. Stefanova starts Marto Capital, but massively exaggerates her investing credentials in her bio, raises "hundreds of millions"; Dalio wants her to come in and talk.
218ff Paul McDowell, now at the beginning of the end of his career at Bridgewater; he starts getting negative dots, he starts being assigned a Politburo minder, there's a video made of his last interaction with Dalio in the prototype meeting and circulated around the firm, the video is edited in Dalio's favor and removes all of Dalio's profanity.
220 Back to Katina Stefanova and her meeting with Dalio and McCormick at the diner; it isn't really clear what happens in this meeting, although the author suggests that Dalio had the power to destroy her business if she didn't tow the line; they wanted Stefanova to not speak to any media about Bridgewater and especially to not speak about Greg Jensen.
Chapter 21: Ray, This Is a Religion
222ff The Pure Alpha fund is in a slump for five years running; Dalio and the fund are too bearish; Also on Bridgewater's "renovation" as staffers are encouraged to put together a list of bad management and bad managers, leading to everyone in the firm throwing their colleagues under the bus; the plan was like the plot of the book The Hunger Games.
225 [Interesting note here on how Dalio had little idea how poorly the Principles program was working, the big reason for this was that nobody had the guts to tell him! With so much power and the ability to publicly destroy anyone in the firm easily, it's inevitable that you'd see this with any powerful leader at any type of institution--even in a nation state! Also note that in any forum people are going to "agree" with such a leader, thus there's no chance for safe, constructive debate if it's not in the interest of the leader to hear it.]
226ff Paul McDowell keeps his job but his comp gets cut in half; Craig Mundie, the Microsoft exec recommended by Bill Gates, gets fired for complaining to Jensen about another employee, a big no-no at Bridgewater; Rubenstein gets hauled in for his own struggle session; "Ray, this is a religion." [Again, here's yet another instance of how a founder can take the claims of a lieutenant and subject them to "trusted third parties"--which always around Dalio will refer those who are understandably allied with him at his own firm. Dalio may actually believe these people are saying what they think, but what they're actually saying is whatever would be in agreement with what Dalio thinks, which is a totally different thing, obviously. Dalio uses this method, either knowingly or not, to rebut all of Rubenstein's extremely robust criticisms.] "Everyone saw clearly that Rubenstein was not long for Bridgewater." And then a very odd and ironic scene where Rubenstein's Chief of Staff rolled in a birthday cake after this brutal meeting happened, pouring warm champagne for everyone.
Part IV
Chapter 22: The Circle of Trust
233ff On understanding what Bridgewater's actual positions were, where did they trade, who did they trade with, etc. Bill Ackman shaking his head ("What was he even talking about?") after interviewing him on his investment approach; also Jim Grant as a long-time Bridgewater skeptic, trying to dig into what they were doing by plumbing the firm's various filings; see also Harry Markopolos, who uncovered Bernie Madoff's fraud, he also started looking into Bridgewater; Markopolis sent his information to the SEC but the SEC had already looked into Bridgewater in the wake of Madoff and didn't find anything.
238ff On Bridgewater's "Circle of Trust," the small group of investment workers who were offered a lifetime contract and would never work at another trading firm.
239ff The firm's Monday morning "what's going on in the world" meetings which allegedly were a total facade, sometimes journalists would be allowed to sit in to see all of the intellectual rigor, but this was irrelevant to what Bridgewater did with its actual investment money. On Greg Jensen claiming "I could run this firm on a single spreadsheet." Basically Dalio made the decisions on what the firm invested in. "There was essentially no grand system."
243 Pure Alpha had low single digit returns between 2011 and 2016, well below the stock market and well below its prior results.
244ff Wooing Kazakhstan's sovereign wealth fund, which was huge thanks to its giant oil field in the Caspian.
246ff Dalio losing his access to the Fed after having close access to Ben Bernanke; Janet Yellen wouldn't return his phone calls, this enraged him. Dalio has much better access with Mario Draghi at the ECB; also Dalio advising Thomas Jordan, head of the Swiss National Bank: Bridgewater supposedly made a fortune when the Swiss National Bank decoupled the franc's peg to the Euro, letting it rise. [Note that this is the second reference to this event in the book, a bit of an editorial oversight here.]
246-7 Fluffing China and its government as very capable, but also setting up an offshore way that Bridgewater could bet against Chinese assets without anyone knowing.
247 Pure Alpha is up only 2% in 2017 with the stock market up double digits; members of the Circle of Trust doing analysis on Dalio's individual trades and finding that Dalio was wrong as much as he was right. They provide him a report, "Dalio picked up the piece of paper, crumpled it into a ball, and tossed it."
Chapter 23: The Gift
249 Dalio nervous before going to speak at a TED meeting, also there was unwanted attention because on Bridgewater of management turmoil at the firm. [This book is now bouncing around in time periods: now we're back talking about 2016's disappointing up 2% year, after having already spoken about full year 2017's results in the last chapter.]
250ff Dalio writes a thinkpiece on LinkedIn complaining that the media wants "to paint a picture of Bridgewater being a crazy, oppressive place run by a Dr. Frankenstein type character--even though the evidence shows it to be an idea meritocracy which has, for several decades, succeeded in producing meaningful work, meaningful relationships, and unparalleled results through its radical truthfulness and radical transparency."
251ff Dalio does another TED talk in 2017; he also releases his autobiography Principles, which he wrote with a ghostwriter, it is released to fluffs and blurbs from everyone from Bill Gates to Tony Robbins and Mark Cuban; Dalio goes on Tim Ferriss' podcast, etc. The author claims people inside Bridgewater privately chuckled at the reception to Dalio's book and that "it was only a faint likeness of the full story." Also noting that the collection of principles listed in the book weren't The Principles but "were more like Some Principles."
255ff Returning now to Jen Healy (we first met her on pages 88-89 when Dalio refer to her as my daughter, then again on page 170 when allegedly then-vice chairman Michael Cline placed his hand "on her bare knee"), who had grown up professionally and become much more senior at Bridgewater, having "dropped her complaint about being an inappropriately touched by a top executive." Healy had divorced her husband and married a fellow Bridgewater employee. She writes a heartfelt and direct email criticizing Dalio as "an emperor with no clothes situation." Dalio replies with a bit of a tepid response; Healy ends up leaving Bridgewater shortly thereafter.
Chapter 24: The Partnership
259ff The popularity of Dalio's book solidified his belief in himself and his ideas; but the performance of Pure Alpha was up just 1% in 2017 and clients were pulling their money. Dalio becomes the only US fund to be awarded a license from China to raise money from wealthy Chinese; and he also allegedly had a meeting with Putin and cultivated a relationship with the Russian Bank Sperbank; See here where Bridgewater employee Karen Karniol-Tambour speaks up against Dalio's interactions with Putin ("how do you deal with this war criminal?") in a public meeting at Bridgewater, Dalio responds "if you're so smart, why aren't you rich?" a put-down he used frequently, apparently. This time Dalio didn't do a sudden public trial and hanging, but instead handled this situation quietly; later Karniol-Tambour was promoted to co-chief investment officer for sustainability, a new title.
262ff On Bob Elliott who has been working at Bridgewater for his entire career, and on Dalio's decision to sell off another tranche of Bridgewater to his employees, while also allowing them to borrow money up to 10 times their net worth in loans from JP Morgan at 5%. Elliot, who Dalio called a fat ass [by the way, once again, we have a footnote here saying "A lawyer for Dalio said he 'never called Elliott a "fat ass" in any meeting.'" which makes Dalio look even more like he actually did it, not the reverse; again, this is interesting rhetoric from the author to do this.]; Elliott decides not to take the deal, Dalio is appalled, and began snubbing and insulting Elliott constantly. Dalio soon fires him for having a relationship with someone in the office. Note that the scene that follows here is deeply prurient and gross, as Dalio asks "How was the sex?" among other things.
Chapter 25: Anything He Wants
268ff On the last days of the Transparency Library, after former Deputy Attorney General of the US Jamie Gorelick, hired as a consultant, recommends shutting it down. Interesting comment here from the author: "In a way, it didn't even matter if the Transparency Library existed anymore because it was alive in the popular imagination."
270 Dalio hosts a party for David McCormick and his new wife Dina Powell, but Dalio then makes an obnoxious comment about McCormick's wife in his speech, calling her a "party girl." McCormick called it a turning point in his relationship with Dalio.
272-3 Interesting and telling anecdote here about Ray Dalio's Partnership for Connecticut, where he held a press conference saying he would donate $100 million to Connecticut State high schools, appearing with Connecticut's governor at the time. See the striking footnote to this page (see note page 332) which says, "The partnership was dissolved after less than a year, after a phone call in which Ray Dalio allegedly told the educator appointed to lead the initiative to 'stop talking' and do only what Barbara Dalio told her, according to a lawsuit the educator filed against the organization." [This kind of bitter ending stuff definitely seems to follow Dalio around and the aggregate weight of it really adds up at this point in the book.]
273 Dalio spending more and more time with celebrities like Sean Combs and Gwyneth Paltrow.
275 David Ferrucci finally quits in 2019, likewise Paul McDowell also quits around this time.
Chapter 26: No Heroes
276 Ray Dalio's son Devon dies in a solo car crash at age 42.
277ff The Wall Street Journal writes an article noting that Dalio is ignoring his own succession plan, also reporting that Eileen Murray was in conflict with the firm about the terms of her exit; Dalio, per the author, "threw a fit" in a LinkedIn post: Dalio writes that the WSJ article was "loaded with factual errors" although per the author claims the WSJ "reviewed his complaints and found no such mistakes." Six months later Eileen Murray files a $100 million discrimination suit against Bridgewater, citing Dalio's hypocrisy of allowing transparency only when it suits the firm's interest. [I'd like to note a couple of things here. One is the fact that the author of this book actually co-wrote this WSJ article, but doesn't mention this fact in his book. This seems strange. Second, I think we can arrive at another heuristic for the modern era: when the subject of a hatchet piece claims erupts defensively in response to that piece, alleging it is loaded with factual errors, etc., that article is probably more true than not. The defensive eruption is the tell.]
278ff The spread of the coronavirus; Dalio is (wrongly) unconcerned about the investment implications, the All-Weather and Pure Alpha portfolios were both down double digits; Dalio is now less involved than ever at Bridgewater during the pandemic; the dot collector and other Principles-based mechanisms are used less and less at the firm.
281 Interesting blurb here where Coinbase did a small trial of the dot collector program: basically employees at the firm said it sucked.
282 Dalio repositions himself as an advocate for closing the gap between rich and poor.
Epilogue
285ff Bridgewater's assets peaked at $160 billion but had declined to $130 billion in the post pandemic period, but yet the firm is still running a ton of money--this is way more than any other hedge fund; Dalio continues fine-tuning his image; the author comments here on the Lieb family of Park Avenue: the sons frittered away the family fortune in divorces and poor investments; also one of the Lieb grandchildren wrote directly to the Dalio asking for a chance at an in-person interview with Bridgewater, Dalio refused, saying "your resume should stand on its own"; The author quotes employee Joe Sweet [recall he was the employee from Chapter 19 who had psychiatric problems during and after working at Bridgewater]: "It seemed to him that most everyone who bought into Bridgewater's philosophies ended up worse off except for Dalio himself."
290 Paul McDowell and his wife finally leave Connecticut behind and return to Canada.
291 Weird typo here where the author writes "Brightwater" instead of "Bridgewater"; on Katina Stefanova and her post-Bridgewater efforts running her hedge fund, Marto Capital, which collapsed to only $20m in AUM after speaking at $235m, also on Stefanova telling Institutional Investor magazine [note that there's a link to this article above, see Chapter 15, p 176] that a $1 billion investment had come from a "hyper-rich" investor, the investment never came through. Then Stefanova recasts herself as a crypto aficionado, she begins investing in NFTs and cryptocurrency.
292ff On David McCormick and his failed Republican candidacy for Pennsylvania Senate [this primary was ultimately won by Dr. Oz who went on to lose the general election.]
293 Late 2022: Dalio finally gives up control of Bridgewater but arranges to receive a $1 billion annual payout. That year pure Alpha is up 18% through October with the stock market is down significantly, with Greg Jensen getting most of the credit for this outperformance.
295 The book ends with an [odd yet intriguing] anecdote from an unnamed Davos attendee, "a financier," who shared the same flight back; he watches Dalio and his wife waiting alone at the baggage claim, fiddling with a luggage cart machine, handling his own bags, nobody even noticing him; watching in fascination, this anon thinks to himself, "Now that is a humble man."
Afterword: Ray and I
297ff The author goes through his early career, living in Manhattan, struggling, getting rejected for a job at Bridgewater, working at the magazine Absolute Return, a trade rag covering hedge funds; after being pinged by a Bridgewater recruiter in 2012 he interviews there again, but pulls himself out of the running after several interviews; his first interaction with Dalio was in 2015 after co-authoring a front page story on Dalio's views on China for the Wall Street journal; Dalio chewed him out for it, although it sounds here like although this "conversation" was off the record, the author is flattered and thrilled that Dalio even called him at all. The next piece Copeland wrote was on Dalio's falling out with Greg Jensen; then on an article Dalio wrote on LinkedIn responding to another of Copeland's articles: Dalio's response article itself contained significant falsehoods ("He claimed that my co-author and I never spoke to specific people with whom we had... and quoted me asking questions that never came out of my mouth.") and Dalio frames Copeland as an aggrieved job applicant "hell-bent" on revenge.
300 "I realized around then that although one of The Principles is 'Trust in Truth,' Dalio goes to great lengths to suppress it. He launched a years-long witch hunt to root out people talking to me and other journalists, spending untold sums on surveillance of his own staff that has, to my knowledge, never accurately identified a culprit. He went after my job, meeting with my editors and pressing for my removal from covering the firm."
Acknowledgments
303 "Early in my Bridgewater reporting journey, I received an unusually well-informed note from an unknown sender." The author goes on to say hundreds of sources like this spoke to him for the book despite the legal risks.
Note on Sources
307 On Bridgewater's 13 page non-disclosure employment agreement; on the fact that "several former employees received additional payments not to speak with me"; during fact-checking for this book many people named in the text had been pressured to recant and did so; Dalio flatly refused to talk to the author, writing, "I believe you have a long and proven track record of not trying to convey the truth"; Dalio hires "three white-shoe law firms to send a pile of threatening letters to my publisher about a book yet unwritten."
To Read:
Jack Schwager: Hedge Fund Market Wizards
Edward D. Hess: Learn or Die: Using Science to Build a Leading-Edge Learning Organization
Maneet Ahuja: The Alpha Masters
Lawrence Wright: Going Clear [history of the Church of Scientology]
Media:
Ray Dalio: How the Economic Machine Works