In the late 1960s the New York socialite Isabel Leib was vexed. Her grandson Gordon was causing the family grief with his drinking and pot-smoking, so she decided that her nice caddie might be just the person to straighten him out.
She paid the young Raymond Dallolio to befriend her grandson, inviting him to family parties and even paying for a six-week trip through Europe for the two of them, hoping that the Links Golf Club caddie might be a positive influence. It worked, with the family’s black sheep shearing his shaggy hair and ditching the electric guitar for classical music. It also set up the caddie for a remarkable career.
As reward for his services, the man — by then named Ray Dalio — was given a clerkship at the New York Stock Exchange by Isabel’s husband, Wall Street titan George Leib. The money helped finance Dalio’s MBA at Harvard Business School, and Leib’s friends later helped bankroll the economic consultancy Dalio founded in 1975, Bridgewater Associates.
Bridgewater is today a colossus of the investment industry, the world’s biggest hedge fund, with approximately $125bn under management. This has made Dalio the philosopher king of finance, sought after for his economic insight and personal bromides alike.
And yet, despite advocating a philosophy of “radical transparency”, Bridgewater has long remained a black box. The cult-like culture — from “pain buttons” to videotaping meetings for later review — are by now well known. But the details, such as how it actually manages money, have remained a closely guarded secret, even to most of the people it employs.
Until now. The financial reporter Rob Copeland has written a book that blows apart the mystique of Bridgewater and the man at its centre. The Fund manages the improbable task of living up to its strapline of “unravelling” a Wall Street legend.
It’s hard to say what is the most jaw-dropping moment. Perhaps it is when Dalio is described as berating a pregnant protégée in front of the whole senior management team until she breaks down weeping (and shares a video of it with the entire firm). Or the time he orders a group of mostly female executives to sing to him at an off-site gathering, and in return regales them with a raunchy sailor’s song.
Some are simply tragicomic. Copeland reports that Dalio at one point personally gets involved with complaints over the cafeteria food and doggedly hounds an unfortunate facilities manager, who later becomes unwell. There’s a six-week inquest into the state of whiteboards. Another time, Dalio orchestrates an extensive investigation to find out who left some errant pee next to a urinal.
Dalio would probably say he is simply conducting the unemotional business equivalent of the saying “take care of the pennies and the pounds will look after themselves”. By policing even bafflingly minor infractions of his “Principles” — the myriad pieces of Dalio dogma that make up Bridgewater’s de facto operating system — he ensures perfectionism across the board.
And in his defence, if an intrepid journalist like Copeland dedicated themselves to unearthing and detailing all our own worst aspects, it would surely also reveal a lot of awkward moments for most of us.
But the moments detailed in The Fund are dizzying in number and pettiness. That Bridgewater is a weird cult with a hedge fund attached is a well-worn joke on Wall Street, and some of its foibles have been reported before (several by Copeland himself). Having spoken to many current and former executives myself over the years, I knew the broad contours. But reading them all together in a well-told, well-structured and exquisitely reported narrative, the impact is astonishing.
As a bearlike senior executive says after breaking down in one of Bridgewater’s classic ambush-cum-trials, and escapes weeping to the bathroom: “There’s just . . . so . . . much. It . . . keeps . . . coming at me . . . from . . . every direction.”
Unsurprisingly, Dalio is not taken with Copeland’s account, dismissing it as “another one of those sensational and inaccurate tabloid books” written for “people who like gossip”.
It’s all so overwhelming that the inclination is almost to doubt the reporting. How on earth can an organisation as dysfunctional as this portrayal even survive, let alone be successful? This has been the central mystery surrounding Bridgewater for years, and has led to frequent dark whispers about it among some rivals.
Copeland argues the truth is more mundane. There is no dirty secret or any real magic beyond the innate gifts of one unquestionably brilliant if flawed man. Despite talk of artificial intelligence and deep financial truths revealed by uniquely meritocratic and unemotional debates across the organisation, behind the curtain there is mostly just the wizard of Westport himself — Ray Dalio.
Copeland suggests that, earlier in his career, Dalio’s ability to turn economic insights into simple but lucrative trading rules was what powered Bridgewater’s rise. Add in an ability to schmooze government officials for clues on major policy shifts and you have the recipe for its ascent. But gradually, Bridgewater’s ability to surf economic trends was overtaken by rivals, and instead of evolving the hedge fund became consumed by implementing Dalio’s precious Principles.
This is a plausible explanation for why the hedge fund’s performance has sagged over the past decade. However, the diagnosis of how Dalio, who has stepped back from day-to-day management, made the estimated $58bn Bridgewater has generated for investors is the only unsatisfying part of an otherwise sterling book.
There are plenty of trend-following macro hedge funds, but none has Bridgewater’s record. Therefore, anyone convinced of Dalio’s genius will not be dissuaded by this book (nor will any detractors, to be fair). The Dalio enigma remains unsolved.
Bridgewater itself takes issue with the book. In an email to staff, the hedge fund said that “there is no objective or factual basis to say that Bridgewater’s investment process is not systematised”, and stressed that claims of nefariousness had been “publicly debunked and retracted years ago”.
No one expects life at a hedge fund to be easy. People are well compensated for the tribulations. But in Copeland’s vivid telling, Dalio’s is an oddball and oppressive reign punctuated by occasional tragicomedy, which is only made bearable by fat pay cheques and indoctrination. Virtually everyone in the book seems to cry at some point — except Dalio.
The Fund: Ray Dalio, Bridgewater Associates, and the Unravelling of a Wall Street Legend by Rob Copeland, Macmillan Business £22/$32, 352 pages
Robin Wigglesworth is the editor of FT Alphaville
Join our online book group on Facebook at FT Books Café