I read Ray Dalio’s Principles back in 2018. Without much knowledge beforehand of Bridgewater Associates or its emblematic founder, I found the book to be a reasonable autobiography paired with some scattershot advice. It didn’t live up to its namesake: yes, there were principles aplenty, but they were haphazardly organized, overwhelming in quantity but lackluster in deep insights. Instead of presenting an overarching philosophy won through decades of financial success, the vaunted principles felt like a grabbag of vague guidelines that could be applied selectively, which sometimes was required as they contradicted each other.
Published last year, The Fund provides a darker perspective on how the principles came to be and their centrality to the biggest hedge fund in the world. Written by a journalist at the Wall Street Journal, this book tells a less flattering story: of how Dalio floundered before founding his firm; of his early wins and losses, but highlighting Bridgewater’s recent underperformance; and of the development of the stringent set of rules that govern his firm. In its 3–4 decades of existence, Dalio’s strong personality drove its culture to be painfully political, all the while insisting that strict application is the only way to ensure fair and equal treatment.
The Fund gets into Ray Dalio’s early life and career in ways that Principles glossed over, usually in a less flattering light. Specifically, the book talks about Dalio’s early failures at other investment firms, marrying into a wealthy family, and leveraging that capital to seed Bridgewater Associates. To his credit, his trading strategies in the early days did produce better-than-market returns, which combined with his developing relationships with foreign political leaders over the years massively expanded the firm’s assets under management (AUM), en route to becoming one of the biggest hedge funds in the world. As hedge funds charge management fees on their AUM in addition to a cut of trading profits, the sheer size of capital invested pays for the firm’s operating expenses and high salaries, regardless of how well the funds are doing.
Another point the book makes is Dalio’s consistent drumbeat of negative predictions—warning against forthcoming macroeconomic headwinds, hyperinflation, government deficits, etc., which has of course been occasionally prescient but directionally misguided. It’s the CNBC version of the news mantra, “If it bleeds, it leads“—more attention is paid to predictions of impending financial doom, regardless of whether those predictions ever materialize. Granted, unlike random TV pundits, Bridgewater does make major investment decisions based on these proclamations, but that conviction is also a part of the reason why its flagship funds have been returning less than simple index funds.
But the most damning revelations have to do with how the firm is run internally, the development and eventual subsumption of Dalio’s Principles into its culture, and various projects and initiatives—spanning months to years to a decade or more, in some cases—to elevate Principles into ironclad rules. The company prided itself on brutal peer ratings and reviews, panels adjudicating everything from opinion differences to personal conflicts1, and integrating snippets of pop psychology to evaluate its employees.
Worse, this elaborate and toxic system of people management applied to everybody but Ray Dalio himself, who would claim objectivity and egalitarian adherence but would brush off any attempts by others to hold him to the same standards. That is, he invented new principles on the spot to get his desired outcomes, override others’ judgments if he disagreed, and generally bullied his subordinates until he got his way because—well, he’s the boss who signs the checks. Eventually, his executives learned to withhold critical feedback for the sake of self-preservation and not bother bursting his bubble. Now, like Hatching Twitter, some of the dynamics are a bit too oblivious and thus likely embellished by the author for narrative, but some of the stories that have leaked out of the company over the years, along with Principles book and its critical reception, lend credence to the storylines.
Again, the environment reminds me of Netflix and its famous cultural tenets, laid out in more detail by another book, Powerful. My hypothesis for how Netflix—and now Bridgewater—can develop and maintain their unique culture is simply that they paid people a lot and money made up for a lot of work grievances. Not everyone can emulate their salary structures; turns out, the vast majority of companies don’t have the business models to use bucketloads of money as a sweetener. Throughout the book, The Fund provides anecdotes of employees who were miserable in their environment; some realized quickly it wasn’t worth the tradeoff, others stayed on for a decade or more, shackled by their self-imposed golden handcuffs.
The Fund is a fine example of the non-fiction subgenre of corporate exposés. It offers a good amount of investigative journalism, much of it corroborated with publicly available information and timelines. It shows that even very successful businesses—minting billionaires along the way—have foibles like the rest of us; all the money sloshing around serves to amplify and distort.
Often with the euphemism of “finding and confronting” the subject’s own weaknesses.↩
