Are Ray Dalio's Principles the Secret to His Success?

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Since founding Bridgewater nearly 50 years ago, Ray Dalio has become one of the world’s richest investors. He is widely credited with having predicted and profited from both the 1987 crash and the 2008 financial crisis. He is the founder of the world’s largest hedge fund and is one of the most successful businessmen alive, yet he professes to be seeking something more meaningful than just money or business success.

According to Dalio, his main interest, over the last twenty years is to lead others toward “meaningful lives” and “meaningful relationships” through the application of his principles.  He has written a number of books and given a Ted Talk on this topic.

Rob Copeland is a journalist at the New York Times and was previously the longtime hedge fund beat reporter at The Wall Street Journal. In his new book “The Fund” he smashes through some of the mystique built up around Ray Dalio in recent years.  He argues that very little of Dalio’s success is due to his widely promoted “Principles” and can be better explained by his ability to befriend influential people and impress them with his broad knowledge of the world, his skill at getting good publicity, and his early investment success.

Rob interviewed hundreds of Bridgewater employees in order to write this unauthorized biography that shows Ray Dalio in a very different light.
Dalio declined to be interviewed for the book and has threatened a lawsuit against Rob and his publisher.  In today's video I interview Rob to hear his account of life at Bridgewater and whether he believes Ray Dalio’s principles are worth following.

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Transcript

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I’m delighted to have Rob Copeland on the channel today to discuss his new book The Fund about Ray Dalio, the founder of Bridgewater Associates, the biggest hedge fund in the world.  This is the first time I have been sent a book from a publisher that required me to sign an NDA, and that is because the book is somewhat controversial.  Ray Dalio has written a number of books and made numerous media appearances describing how his principles lead to his phenomenal business success.  Rob – a finance reporter for the New York Times – who was the Hedge Fund Reporter for The Wall Street Journal tells a very different story.  I would not describe this as a negative book, I feel it simply gives a different perspective on Ray Dalio.  The book calls into doubt whether Dalios well known principles were at the root of his success or if other attributes led to his rise to the top of the Hedge Fund industry.

The book draws on hundreds of interviews with those inside and around Bridgewater and questions if Dalios much promoted principles were truly the secret to his success or if they were the foundation for a toxic culture of paranoia and backstabbing within the firm.

The book just came out today, so let’s talk to Rob and see what he has to say.

Patrick Boyle:

Welcome to the podcast. I very much enjoyed reading your book. I got it maybe about a week ago and read it, once again, kind of like Zeke's book, I read it in a day or two, just because it's quite a compelling read and it's a topic I'm quite interested in. Can you tell me about how you first, like what made you decide to write a book about Ray Dalio and Bridgewater?

Rob:

Sure, and first of all, thank you for having me on. Ray Dalio and Bridgewater have sort of been a part of my life now for probably close to a decade and a half. I actually got my teeth started in financial journalism at a hedge fund trade publication and they were writing a cover story about Bridgewater and when I joined in 2012. So really since then it's been a topic for me. I've been sort of gobsmacked by Ray's entire publicity tour over the past six or so years. You know, he wrote his own book. principles, life and work. And I think you can, if you know nothing else about my book, you should know that I believe I've written the first non-fiction book about Ray Dalio and the principles.

Patrick Boyle:

Yeah. And so you've obviously like one of the things I was going to joke with you that this is the first book I've received for a review that came with an NDA. So obviously, there's a certain amount of controversy around this book. And I see also it's filled with footnotes from

Rob:

Mm.

Patrick Boyle:

Bridgewater lawyers kind of clarifying their side of the story. Has

Rob:

Hmm.

Patrick Boyle:

Ray read the entire book or just parts of it and kind of how does he feel about it?

Rob:

Well, what? I think we'll probably hear pretty soon how he feels about us. We're recording this right before the book comes out. You're right, you did sign an NDA. This has been such an incredibly exciting nerve wracking journey for me. I told Ray about this book personally in mid 2020 and he responded very poorly. I told him in an email and almost uninterrupted since then before a word was written of this book he's been hiring law firms and PR firms to... at me to pressure my publisher, they threatened us with a multi-billion dollar lawsuit. This is all literally before the book was written, while I'm still talking to people about it. And

Patrick Boyle:

just because he doesn't trust you to tell a story that he'll like.

Rob:

It's fair to say that Ray doesn't really like any independent journalism about him. That is less than 100 percent laudatory. It's not just me. I currently write for the New York Times, but I was a Wall Street Journal reporter for most of the time I was writing this book. There are New York Times reporters that he has attacked, you know, business insider, pretty, pretty much anyone. Of course, other colleagues at the Wall Street Journal. Now, he doesn't have a copy of the book, but I did hire a fact checker and The fact checker sent Ray every single fact to my knowledge that's in this book. There were lawyers instead of responding to the fact checker, he hired a bunch of libel attorneys to threaten a lot of lawsuits. They sent us hundreds of pages of letters and I incorporated their feedback. Look, I listened. He didn't want to be interviewed. In a way, I didn't need him to be interviewed. He's done a lot of interviews. I think I could probably cosplay an interview as Ray Dalio at this point.

Patrick Boyle:

And you have interviewed him multiple times in the past, right, like for the Wall Street Journal and so on.

Rob:

Oh, yes. The wonderful thing about Bridgewater for many years was that it was sort of like the easiest hedge fund ever to write about because Ray would just get on the phone and just couldn't stop talking. So I've always heard his perspective. I'm open to hearing more of it now. But look, I think it's time for other people's voices to be heard. That's what this book is about.

Patrick Boyle:

Now, one thing I was gonna say, because I quite enjoyed the book, I found it very interesting, because I think anyone who, you know, I've sort of paid a certain amount of attention. It's hard not, if you're in the finance industry, not to pay attention to Bridgewater as the biggest fund out there. And you read all of this news, and there are certain kind of puzzling. I think Ray would agree that it's a non-standard hedge fund in the way it's managed and all of the... principles and a dot program that's gotten a lot of press and so

Rob:

Mm-hmm.

Patrick Boyle:

on. But I guess the difference between an authorized and an unauthorized biography possibly is that, well, for example, like the problem even with an autobiography is that someone will tell you what they believe was their path to success. But actually if you spoke to their friends and family and other people, they might have very different and you know, it's not obvious what's accurate or not, but just very different stories and When I read this book, there's you know, there's plenty of skepticism in there But I also felt that there were a lot of insights as to what made Ray successful and maybe even stories He wouldn't want to tell himself, but just even about his skill at You know getting along with people he you know kind of made good and influential friends. He was well read to the extent that a rather wealthy family took him under their

Rob:

Hmm.

Patrick Boyle:

wing. And, you know, he was even sort of asked by this very wealthy family to sort of put some polish on their grandchild, you know, they saw that much in Ray. So to me, you know, there's maybe a different perspective on what brought about Ray's success, but a different perspective. doesn't, you know, it doesn't mean that either is necessarily right or wrong. What

Rob:

Well,

Patrick Boyle:

do you think about that?

Rob:

I think it's really interesting what you just brought up because I do go into Ray's origin story. Ray has told his own origin story many, many times, including in his own autobiography. But what he, I think he may have mentioned them offhand maybe once, but definitely not in principles. He's never talked about this wealthy family, the lives who really took him in as a surrogate son. And what I found so interesting was it was a huge part of his life and how he was able to go from being, you know, the son of a jazz musician to this world famous multi-billionaire. But he leaves that out. of his story. Because I can't answer for him why, but I can say that with the lives in the story you realize that it's not all smarts, it's also connections. That he also sort of wheedled his way into this family. By the way, not illegally either. He was quite charming. What I love about this is after I started asking people about this family and this whole background about Ray, magically it showed up on his Wikipedia page. I didn't put it there. But all of a sudden, it was like, okay, this is going to be out there and I'll let him answer whether he had someone update that.

Patrick Boyle:

Yeah, I mean, to me it's sort of like, I'm not sure that there's an obvious reason to hide this story either. It's sort of a great story that he's a young guy from a kind of middle working class background who's a golf caddy who manages to, because actually my takeaway was that he was very well read and he was

Rob:

Mm-hmm.

Patrick Boyle:

able to have the kind of conversations that maybe these people didn't expect of a golf caddy and they... saw something in him and he attended every thanksgiving dinner and things like that. That says something about him. It doesn't actually say anything negative. There's not much to hide, I would think, with a story like that for most.

Rob:

For most people, right, but not for Ray and not for a lot of successful business titans now. Now, Ray also has almost never talked about how his wife is a Vanderbilt Whitney. You know, she's part of this colossal famous legacy with an amazing amount of wealth. What Ray and what, you know, Elon Musk likes to talk about this, a lot of other people, they love to tell the rags to riches story about how they pulled themselves up through their smarts. clear though I believe that Ray has caused a lot of pain and I do believe that the principles are nothing like what he said I don't believe he's a dumb man I don't believe that he didn't put in the work he that but I do believe that there is a more complicated more human story that for some reason he honestly has not been interested in telling

Patrick Boyle:

Yeah, no, because it's even interesting, like some of the notes I've got down here about how he, you know, takes briefcases full of research, reports home with him every weekend, like he, you know, he's a very wealthy, very successful man who, it would appear, works very hard. Like, it's, you know, there's no,

Rob:

Mm.

Patrick Boyle:

you know, there's no sort of cruising along. I think the other, the kind of One of the big issues that I think many people have puzzled over with Bridgewater is that there's a huge staff at Bridgewater and it would appear, I think Matt Levine has kind of joked about this in the past, that almost 90% of Bridgewater is kind of, you know, people dealing with the DOT program and, you know, the extra 10% is kind of actual investment work. And that's kind of a feeling I get from your book as well. Like I feel I was three quarters through the book and I was like, who does any investing at this firm? Because, well, I'll let you take over.

Rob:

Well, first of all, I'm a- great fan of Matt Levine and he's right but he's wrong there. He's actually overestimated the amount of the firm which is devoted to actual investing. What I found out was that inside Bridgewater, which at peak had more than 2,000 employees, all these temporary contractors, Palantir, all of these consulting firms, there was something called the circle of trust inside. There were about 10 people who signed lifetime contracts and they were the only people who purportedly really knew what was going on. on with the investing. So I would actually take another step further. I would say all of this apparatus really boiled down to 10 people.

Patrick Boyle:

Well, it's even interesting because one of the big people who feature in the book is Katina Stefanova.

Rob:

Mm.

Patrick Boyle:

I hope I'm pronouncing that correctly. That's a story that I happen to know because there was a lot of press around the rise and fall of Martyr

Rob:

Mm-hmm.

Patrick Boyle:

Capital. It was sort of an interesting thing because in a way, and that's almost a question that I think almost everyone has about Bridgewater. You know, it would appear that, unless I get this wrong, it would appear that she was almost a human resources person who then went out and launched a hedge fund. And to a certain extent, then it came out that she hadn't

Rob:

Mm.

Patrick Boyle:

really done anything to do with investing at Bridgewater.

Rob:

Well, I would say, I would say this. I think human resources is maybe underplaying it a tiny bit, but it's definitely true that she was not part of the circle of trust. What I thought was so interesting was that she was very close with Ray Dalio, and he did treat her, frankly, any reasonable observer who reads the book will see that he treats her fairly monstrously, but she keeps going back to him again and again and again, and he does sort of have this siren call with people. And then, look, she did not have a positive... a separation with them. And I don't carry her water in the book. I don't claim she's one of the world's great gifted investors. But it is interesting to me that there was so much attention paid to her and so relatively little attention paid to the world's biggest hedge fund and what it's really like there under the principles in Wray.

Patrick Boyle:

Yeah, I mean, in a way I would argue that there's no real heroes in the book, you know, you go through it and actually I think that...

Rob:

Hmm. Well, Patrick, the last chapter is called No Heroes. Spoiler

Rob:

alert.

Patrick Boyle:

yeah.

Rob:

So...

Patrick Boyle:

 of the things that interested me in the book is that there's so many people who are quite wealthy. You know, one way or another, even if Ray is withholding a few bonuses for various reasons,

Rob:

Hmm.

Patrick Boyle:

people are getting wealthy working there. One of the people, I forget his name off the top of my head, but the guy from Apple, the inventor of the

iPod who worked there. He comes off reasonably well in that he sort of sees the shark circling in the water and announces that he's out, but there's even still a period of humiliation for him. And I guess the thing that surprises me is that these people get so wealthy and they're in a position where they don't have to be mistreated, but I think they're so drawn to the light or something that people...

Rob:

Mm.

Patrick Boyle:

tolerate, you know, there's a level of like if you're kind of being called into an inquisition and you've seen this happen

Rob:

Mm.

Patrick Boyle:

a dozen times already, you know what's happening, you know, you see the hangman standing there. It would appear to me that I'm surprised that so many people put up with this behavior, especially when they don't have to.

Rob:

Well, this really gets into the $20 billion question, right? First of all, you're thinking of John Rubinstein. And I actually remember Ray Dalio telling the editor-in-chief of the Wall Street Journal that John Rubinstein was coming in and he was going to save the day. So me finally finding out years later through reporting what really happened with John Rubinstein is just like it's watching the behind the scenes to a movie you know, that you saw many years ago. Now, why do people stay at Bridgewater? A lot of people ask that. There are probably two main questions I get. stay is it a cult? I will tell you, John Rubinstein knows better, for sure. He knows. He also got paid $50 million to do, I should probably say, he got paid about $50 million to do close to nothing of worth. And as part of his separation agreement, he got to keep the money and he wasn't allowed to say anything about Bridgewater. He's a wealthy man and he took the extra money. So this is, Ray Dalio loves to say over and over again. that they're just a small number of disaffected employees who whisper about him. And I don't think I've ever heard him address why he makes employees sign these strict NDAs, why he goes after employees who say anything anodyne about him publicly, and why he has to pay people so much when they're leaving, just to make sure they don't say anything about him.

Patrick Boyle:

Yeah, I mean, you know, there is always, I guess in Wall Street or on hedge funds, the importance of keeping secrets, in particular

Rob:

Mm.

Patrick Boyle:

investment secrets, and even, you know, you can understand having very high quality IT to prevent, we'll say at a quant firm, you can't have someone hack in and steal all your

Rob:

short.

Patrick Boyle:

trading alcohs and that kind of thing. But it would appear. that security was maybe surprisingly high at Bridgewater with people like Comey working

Rob:

Mm-hmm.

Patrick Boyle:

there. And even there's a piece in your book, I don't think you confirmed it, I think you said that there were rumors that there were microphones hidden in the woods outside of the office building

Rob:

Hmm.

Patrick Boyle:

when Comey worked out that sometimes people went out in the woods to have a private chat.

Rob:

Well, first of all, there's plenty that isn't a rumor about Jim Comey's time at Bridgewater. That's just as wacky, frankly. But it's absolutely true that there is a, I mean, an employee, a former employee, sued Bridgewater. He called it a, quote, cauldron of fear and intimidation. And rather than have that lawsuit go forward, Bridgewater paid a settlement. So it requires a reporter to go in and try to figure out the, to get to the bottom of it. So far as the surveillance goes, look, almost everything at Bridgewater is and was recorded. You're constantly being watched. People would come back to their computer screen if they didn't put a screensaver up and there'd already be a posted note from security saying, why didn't you put a screensaver up? There's an incredible amount to this day of fear inside Bridgewater that essentially anything you say or do can be used against you. It's absolutely true that people suspected that even the woods were being monitored, that even if they took a personal phone call out there, listened to. Ray and Bridgewater like to say that every trading firm protects its secrets. My findings and the book would suggest that there really weren't too many actual trading secrets to protect. That this whole security apparatus really just intimidated and squelched any true descent inside the firm.

Patrick Boyle:

Well, it's interesting, because even just, as we've just said, like the level of staffing, close to 2000 people,

Rob:

Mm.

Patrick Boyle:

you know, you look at some of the other huge hedge funds, I doubt Millennium hires anything like that many people, and it's because most of the staff at Millennium would be focused on investing. And as I said, that was one of my takeaways reading it. Like you're three quarters of the way through the book, and you're like, everyone's, you know, watching video tapes of, you know, who didn't wash their hands at the bathroom or something like

Rob:

Mm.

Patrick Boyle:

that. And no real work is getting done and that, I guess, you know, Ray is a wealthy man if he wants to spend his money on a huge sort of security apparatus and, you know, building an app that never comes to much fruition. I mean, you know, it's his money, he can spend it how he wants, but

Rob:

Mm.

Patrick Boyle:

it does... come off as quite bizarre and it also comes off maybe as a very challenging place to work.

Rob:

Well, that's the understatement of the century, a very challenging place, place to work. I, I agree with everything you said. The, you're right. The book is, does focus a lot on these internal trials and tribulations. I would also say that if you read Ray's books, not just principles, but the sequels, they say very little substantive things about investing and what he's become famous for, what he talks about in Ted talks, what he talks about in interviews with, you know, Gwyneth Paltrow, Charlie Rose. on all these TV programs, it's almost never about investing. And part of the reason for that is that he has really pinned his legacy on the idea of these quote unquote principles and on the fact that he has the answer to what you should do to live a more meaningful and meritocratic life. So I think if you read this book and you finish that and you believe that Bridgewater is a meritocratic place, you've come to a different conclusion than I have.

Patrick Boyle:

Well, there was a very comical part in the book about what Christmas is like at the Dalio household. Do you want to tell that story?

Rob:

So this was very amusing to hear. And by the way, one of Ray's sons worked at Bridgewater. So it wasn't, I made a very clear point in the reporting of this book. I didn't go around asking people about his wife. I didn't go around asking people about his kids who didn't work at Bridgewater unless they showed up at a Bridgewater event. I didn't want this to be, you know, to go there. Cause I think there's plenty

Patrick Boyle:

No,

Rob:

that Ray

Patrick Boyle:

there's

Rob:

does.

Patrick Boyle:

no muckraking, just to be clear in the book. The book is about a large business and how it runs. In

Rob:

Mm.

Patrick Boyle:

truth, as I said, it shows a lot of the positives as well. Even in terms of Ray's pitching of the principles, you could make a very good argument that Ray is a genius at getting PR and how do you run the biggest hedge fund in the world? Well, He went on Oprah while everyone else was going on CNBC. You know, like he learned how to get his name out in the world and that obviously has value.

Rob:

Well, I- I'm going to come back to your question about the about the Christmas morning, but I want

Patrick Boyle:

Oh

Rob:

to

Patrick Boyle:

yes.

Rob:

talk about the that I would agree with you. He is brilliant at PR. I would also say to my knowledge, he's never spoken publicly about that Oprah interview and it's because it was a bit embarrassing for him for me to get that Oprah interview. I actually had to figure out who at Harpo Productions, Oprah, I had to find the right person I had to ask for the archives. I had to sign a release. on is he's never talked about it and I believe it's because in retrospect if you look back on what he said on Oprah he really comes across I would say it's not appropriate for 2023. I'll put it that way. But let me answer with Christmas morning because it's one of

Patrick Boyle:

Oh

Rob:

my

Patrick Boyle:

yes,

Rob:

favorites

Patrick Boyle:

yeah.

Rob:

which is that it was relayed inside to many people at Bridgewater including by his son who worked at Bridgewater that on Christmas morning if his own kids gave him a gift that he didn't like or that He would ask them right then, why did you buy this gift? What thought process did you go through that made you think this was a good gift? Like, can you imagine? I've never, by the way, given my dad a gift that he actually liked. I'm fairly sure

Patrick Boyle:

No,

Rob:

that's true.

Patrick Boyle:

my dad has never done well out of gifts from me either.

Rob:

Yeah, exactly. So my dad is a big fan of the New York Yankees and I think I've bought him every book that's ever been written about the New York Yankees. But you can just see it's fairy Ray Dalio to even with his own family, even on Christmas morning, you can imagine them giving him a tie that he thinks is ugly and him saying, I want to probe your thought process here with this tie. It's like it would, it's, if it weren't true, it would seem too strange to be true, you know?

Patrick Boyle:

No, there's an interesting thing in the book because I feel even I've got a copy of one of his principles books here that I can't claim to have read in its entirety but I have

Rob:

Mm.

Patrick Boyle:

looked through it. And I think there is a thing of sort of Wall Street guys, investors in particular kind of short term investors are always fascinated with decision making, right? Because that's what you do for a living. and getting good at making good decisions and analyzing your bad decisions might improve your work. So I do understand that, but it would appear that for a long time, Ray didn't really do this so much. Like at what point did

Rob:

Mm.

Patrick Boyle:

the principal sort of take over from the investing process at Bridgeway?

Rob:

So the really crazy thing about researching this book is I thought that I would find the moment, you know, that moment when the principles are metastasized and weaponized. And I could say, okay, from this moment onwards, it really, you know, jumped the shark. And the truth is that the principles, he doesn't even begin to talk about such things as principles until about 2005. He's already a billionaire by then, by the way. He's already, he's got more money than you could and Bridgewater's a very successful firm, and he starts to look for a higher meaning in life, that he's about something more than money. And when the principles begin, when he starts talking about them inside Bridgewater, even his longtime partner, Bob Prince, who's still there, tells people, look, these are just raised things, these are just raised principles. Like, we can respect them, but this isn't tablets handed from the Mount. And then as time goes on, becomes more famous after so-called predicting the 2008 financial crisis, he starts to sort of weaponize them against people. He keeps making up more and more principles and it's probably for the last 10 years I think it's fair to say that his close to full-time job has been deleting principles, creating principles, finding new ways to put people on trial according to the most principled man.

Patrick Boyle:

Yeah, it would appear there's something slightly Nostradamus-like about some of these principles in that even the greatest devotees struggle to analyse them in the same way. And I guess one

Rob:

Mm.

Patrick Boyle:

of the parts of the book is about how he hired in teams of people to sort of code them up.

Rob:

Mm.

Patrick Boyle:

Do you want to explain that and kind of how that went?

Rob:

So this is core to Ray Dalio's public argument. which is that he uses the principles to create this whole ratings apparatus where employees rate one another. And so that through this quantitative system, it separates the wheat from the chaff that we find we suss out the best talent inside Bridgewater at certain things. And I am, I'm gonna spoil something in the book, but it's in the introduction. So it's in the first 10 pages, which is that this whole system was rigged from second number one to make Ray Dalio the top or close to top ranked person in almost all important categories. And once you know that, once you realize that to be true, and it is true, the whole thing looks different. Then you realize that he's creating all of these tools to talk about essentially to re-prove that he's the greatest over and over and over again.

Patrick Boyle:

Well, there's even a number of sort of entertaining points in the book where he'll have a disagreement with someone. I think there was even, I forget there was a professor from Harvard who was in town. They had a disagreement and Ray said to them, well, I think you'll find you're wrong. Let's run a quick poll on the iPads to see who's right here. And all of his employees are voting. And then he goes, well, you know, I won that poll, you're wrong. And it's like, well, everyone in the room is economically incentivized to say that one of these two people is correct, but do you think he doesn't realize that or he realizes it, but he just kind of wants to win the argument?

Rob:

So first of all, that's Niles Ferguson, the fairly

Patrick Boyle:

Yes.

Rob:

famous Harvard professor, and yes, that did happen. It's actually a favorite thing of Ray and others at Bridgewater to do is you stop a meeting at his tracks and you hold a poll. But remember, your votes are sort of weighted based on how believable, how credible you are, so Ray's vote counts more than yours. Now,

Patrick Boyle:

But

Rob:

so

Patrick Boyle:

even

Rob:

far,

Patrick Boyle:

if it was equally

Rob:

hmm.

Patrick Boyle:

weighted, if we have the CEO and the cleaning person in an argument, and you ask the staff who's the winner of the argument, it's like, uh, who's name is on my paycheck again?

Rob:

I know,

Patrick Boyle:

It's

Rob:

isn't

Patrick Boyle:

pretty

Rob:

it a

Patrick Boyle:

easy.

Rob:

fun read? Honestly, it's, and by the way, Patrick, you're not even exaggerating. That poll does exist. It's in the book of him and a facilities person. So that's, you're not even making that up. The, does he know that it's all horse shit is a big question. You know, if he knows that it's all, you know, bunk, to me, that would be to believe in Such a profound level of evil really given the pain that he has caused. So, you know, I'm not a psychologist. I can't tell you what he knows and doesn't know, but I choose to believe that he doesn't know. Because if he did really know the effect of his actions on others, and as the book makes clear, people have told him over and over again in writing, in emails, you know, in absolutely, you know, if he, I think he's for some reason he stopped himself from really realizing what he is and what the principles are. Because if I think about it another way, then I just find it too upsetting.

Patrick Boyle:

There is like one defence that he puts forth, I forget it might have been his lawyers who sent it to you,

Rob:

Hmm.

Patrick Boyle:

sort of said that interviewing ex-employees to write a book like this is a bit like interviewing someone's ex-wife

Rob:

Hmm.

Patrick Boyle:

to write a book about them, in that of course all you'll get is the complaints. And I do think there is some validity to that argument, but The other side of that is that polling your employees, is not going to bring you to a great answer either. But how do you feel about that? Were there employees that you spoke to, because of course it's easy to discuss maybe the

Rob:

Hmm.

Patrick Boyle:

sort of more scandalous outcomes, but were there employees you spoke to who seemed maybe more devoted to the firm, who felt that the principles had helped? them, like that following this approach

Rob:

Mm.

Patrick Boyle:

lifted them up and made them think more clearly.

Rob:

So the argument that you've just put forward, which you're right. D'Aliot's put forward and his lawyers put forward is it's nothing short of a straw man argument. I didn't simply speak to ex-employees I spoke to many current employees I spoke to people with great fondness for Ray who feels sad about What he's become and what the principles have become it's not a bunch of I've told people with you know Just complicated feelings who said that there were good aspects to this But then they would see it turned against them or turned against others and it just made them sick you know in the book we have His own, you know human resources people telling him in writing that this is what people are saying people fear being fired Constantly and him just dismissing it. So I don't buy that it's you know, it's just a bunch of X wives I agree with him if you wrote a book and you just spoke to You know people who didn't who had acrimonious departures. I agree that would be misleading. That's not what happened here so So far as

Patrick Boyle:

Now,

Rob:

they're being Please go

Patrick Boyle:

well, I was gonna say, another interesting bit in the book, it's kind of early on in Ray's career, when he speaks with Paul Tudor Jones, and he, to a certain extent, this is almost a bit of a foundation of principles, where he explains to Jones that he wants to put together a bunch of rules for investing that are based on kind of good decision-making, and to- invest that way and to only change a rule once research has been done that shows that the new rule is better than the old rule. That was an interesting story but it didn't at least in the early days work out right.

Rob:

Well, let's give Ray credit here. That was a genuinely. impressive approach in the late 80s early 90s and you're right

Patrick Boyle:

Yep.

Rob:

Paul Tudor Jones took a look at his system and said That it wasn't worth employing at Tudor Of course ironically then Ray who also lives in Greenwich, Connecticut with Paul Becomes much wealthier than Paul from

Patrick Boyle:

Yeah.

Rob:

allegedly this very this very system What's what's interesting is that what this approach though Ray claims? he's literally said it's quote timeless and universal and you know and I know and anyone in the financial industry that it is so hard to stay ahead on trades. You have to invest so much in technology and even then you may not be right. The idea...

Patrick Boyle:

Well, I used to work years ago for Victor Niederhofer, who was one

Rob:

Mm.

Patrick Boyle:

of the early quant traders, and Vic's core belief is that any system that you can find that works has to stop working as people employ it, because your trading changes the markets. But in a way, when I look at that early conversation between Ray and Tudor, it's... It's almost like he's come up with an idea for quantitative trading, but maybe isn't a quant himself, you know? So, and I think

Rob:

Mm.

Patrick Boyle:

that was even how it fell down, was that he put rules forth, but then I believe Tudor's team back-tested those rules, and they didn't find

Rob:

Mm.

Patrick Boyle:

that, they sort of sounded logical, but they didn't work in the real world. And

Rob:

Mm.

Patrick Boyle:

did Ray move towards eventually, like is there sort of a, quantitative basis do you believe for his trading since then?

Rob:

So the word quantitative is interesting there. Because Bridgewater is very careful, and Ray, to describe it as systemized. It's a systemized system. So there is an investment system, they would say. Now to the degree to which it is quantitative in a Niederhofer way or Renaissance technologies way, there's no evidence that it is. And in fact, there's a lot of evidence that it isn't because it would, Bridgewater simply doesn't invest or employ those types of employees. They don't have that type of trading system. As I say in the book, someone as recently as 2018 who joined the investment team couldn't believe his eyes they were still using Microsoft Excel So this isn't a Renaissance technologies The argument so far is the best that I could tell and I spent a lot of time talking to current and former investment employees there is that if There is a rule if there is a theory of history that Bridgewater considers that a system that systematized Now and to be fair in the 1990s in the early 2000s that may literally have been a fair definition of systematized. I don't believe that it is anymore because the world has blown past that and we now we now know to Sigma and Millennium and all these firms when they say that they have a systematized investment process they mean bang process.

Patrick Boyle:

Yeah, yeah, no, because that was, because to a certain extent, even looking at Ray's Principles book, in a way I would argue, of course, based on my background, that the way you come up with trading principles is statistical analysis, right? Like

Rob:

Mm.

Patrick Boyle:

you come up with a rule, you see if it worked, and then you see if it works. while the principles in Ray's book seem almost to be leaning in that direction but never really becoming numerate. They seem to sort of stay in the world of their descriptive ideas that can have many meanings.

Rob:

So you and I know you've read the man who solved the market about Renaissance technologies.

Patrick Boyle:

Yeah.

Rob:

My friend Greg Zuckerman wrote that great book. Even in that book, you know, Jim Simons says essentially that even he doesn't even fully understand every trade that's going on at every moment and that he shouldn't because he

Patrick Boyle:

Yeah.

Rob:

does this colossal thing and that, you know, ideas go stale constantly. So to the degree that Bridgewater and Ray have always stuck to rules that only Ray can understand. They are falling behind the standard of the true leading hedge funds. That's what I would say.

Patrick Boyle:

And another big part of the book was almost the idea that at a certain point, Ray kind of was inspired by, I guess two big names came up, Warren Buffett, but maybe more so Steve Jobs.

Rob:

Mm.

Patrick Boyle:

And maybe sort of building a legacy of being remembered as sort of a great business leader or someone whose thoughts sort of go down in history as being... of great import. Do you think that's really like kind of the Ted Talks and whatever is that his goal is to have sort of a legacy that is greater than just a numeric returns that he achieved at Bridgewater?

Rob:

Okay, so. Patrick, I know that at points in this interview, I have used some hedging language and I've been careful because I'm under a multi-billion dollar lawsuit threat. However, I'm not going to use hedging language here. There is no doubt in my mind that Ray Dalio's goal is to be seen as a Steve Jobs-like, Warren Buffett-like figure, period, full stop. I would be shocked if he claimed otherwise. He has been obsessed with years, for four years, with being someone like Steve Jobs. He wanted Walter Isaacson to write his own biography. He hires Steve Jobs as you know, former lieutenant John Rubinstein like we talked about absolutely could not stop talking about Steve Jobs for years and That if you really want to know why does he keep talking about the principles? Why can't he admit what we know to be true? If you read this book, you know, it's not what he says it is He can't he can't because he's put all his chips in that basket by saying that I am the most principled man on earth.

Patrick Boyle:

Hmm. Yeah, it's interesting because it, you know, I've only paid so much attention to him. Like, it's kind of a thing that I see in the background. Like, there's a fairly regular news flow about Ray and the principals. But, yeah, it's never really struck me as being, what can I say? It... They strike me as rather vague rules, you know, and even his, you know, he's brought on many, you know, about a year ago I feel I saw a video with like P. Diddy

Rob:

Yep, yep.

Patrick Boyle:

and Ray, like talking about, did he claim, is the idea that Ray is P. Diddy's mentor?

Rob:

Literally, not even the idea, Ray says, P. Diddy asked him, Ray Dalio, to be his mentor. I asked P. Diddy's representatives to confirm that. They would not confirm that. I think that speaks for itself.

Patrick Boyle:

Now, does Ray rap at all? Like, is there any evidence of rap music having come from Ray?

Rob:

There is not. I would also say there's very little evidence that I found of true animating joy coming from Ray except when he is, you know, flaying one employee or another. I'm not saying he doesn't have hobbies or joys that he doesn't have happiness in his life, but for years he has seemed to be just miserable with those around him. That is a Steve Jobs quality, too, by the way, if you read Walter

Patrick Boyle:

Well,

Rob:

Isaacson's

Patrick Boyle:

it

Rob:

book.

Patrick Boyle:

is an interesting thing because in a funny way, many extremely successful people, they

Rob:

Mm-hmm.

Patrick Boyle:

are extremely successful because they are so focused on their thing. And so, you know, it wouldn't be as much fun to necessarily hang out with someone like that as someone who lives a looser and less focused life. You know, it's, you know, even you read about people like Warren Buffett, you know, he... comes off as a very nicer old gentleman on TV, but equally I believe he spends 100% of his time trolling through the accounts of companies.

Rob:

Yeah.

Patrick Boyle:

He wouldn't be a guy you'd go out for a drink with on a Friday night.

Rob:

So I'll... I'll tell you this even though it's not about Ray Dalio, because I think you'll enjoy it, which is two or three weeks ago I spent about a half hour, 45 minutes talking to Ken Griffin, the founder of Citadel, for a New York Times story that we did about Harvard's response to and the Harvard student groups. This is not about the book. But I've known Ken on and off. I nor Ken would claim to be personal friends. I'm a reporter who occasionally covers him. But in the course of the conversation, you know, we're talking, he's asking my opinion, He's sort of saying like, well, you know, I'm here to interview you. Whatever. It's a back and forth. He knows he's talking to the New York Times. I'm not claiming again that, you know, that this was the unvarnished Ken Griffin. In all of my conversations with Ray Dalio over the years, He never demonstrated that quality, that ability to just have the back and forth. He just wanted to

Patrick Boyle:

Mm.

Rob:

tell you why he was right over and over and over again and why you were wrong over and over again. And I have to imagine that if that's what he's saying to me, who was a Wall Street Journal and a New York Times journalist, you have to transpose that to what if you worked for him, what if you were his child, what if you were a friend. Because if he can't even put it on just a little bit just for me, the Wall Street Journal Gosh, what is he like behind closed doors?

Patrick Boyle:

Yeah, I guess I'm only so surprised that one of the wealthiest people in the world is awfully intense just because I think

Rob:

Oh, Ken is intense.

Patrick Boyle:

it's sort of like,

Rob:

They're

Patrick Boyle:

yeah.

Rob:

all intense. Sorry, I didn't

Patrick Boyle:

Mmm.

Rob:

mean for the crosstalk. I will just say they're all intense, but they don't all spend their entire conversation with you telling you how you're wrong and they're right. They have other

Patrick Boyle:

Yeah,

Rob:

interests.

Patrick Boyle:

yeah, no, it's a bit of a puzzle. It would appear as well, at least in the book, there's a feeling that there are certain chosen ones at Bridgewater for whom the rules don't seem to apply. Like for example, often when there's a big disputed work that's controversial, it sounds like it's all videotaped, edited. uploaded for everyone to watch and to analyze even maybe years later when they join the firm. But there's one or two staff members who seem to not undergo the same scrutiny and I'm slightly surprised that that's the case because you would almost think that someone who is so focused on this system would broadly apply it or not apply it at all. Like it's a bit interesting that there are Possibly chosen ones within the firm. What do you think causes that?

Rob:

Well, first of all, I would say if your reveal is that at Bridgewater all animals are equal, but some are more equal than others, I would agree with you on that. I know it's like a cliché to bring up at this point, but look, raised number two, Greg Jensen for many years was the one that everyone thought would succeed him. And as the book gets into... Greg really did was held to a different standard for many, many years. And then when Greg came just that close, just about when he was just about to reach that golden chalice, Ray puts him on trial and Ray pushes him all the way down. And he makes Greg go on what he calls a hero's journey, you know, to the bottom and back. So I... I do believe it is all planned. You know, he allowed Greg to get just right there and then wanted to be able to show that even Greg can be broken by me.

Patrick Boyle:

Hmm. It's also, I guess, maybe somewhat understandable that there's a feeling that Ray wants, you know, I think it's a large criticism of hedge funds in general that they never have a continuity plan. Like Goldman Sachs, Morgan, the investment banks have a continuity plan. The hedge

Rob:

Mm-hmm.

Patrick Boyle:

funds are always sort of one guy, and if that guy loses his edge, or if he retires, there's not much left. Ray seems to have attempted to have the continuity plan but I think equally never wants to give up any control and I think there's many sort of even small businesses, family businesses, things like that where you see that sort of thing at play. Is it very different at Bridgewater or it's just sort of that

Rob:

Hmm.

Patrick Boyle:

idea on steroids?

Rob:

Well, it's definitely that idea on steroids. I would say what's different about Bridgewater is that, you know, you can have a family, you know, but the guy who runs the laundry by my apartment, I believe he'll be there until he physically cannot be. But he's not claiming otherwise. Ray,

Patrick Boyle:

Mm.

Rob:

for literally two decades, claimed that he was just about to retire. He was trying to retire. He had a system to retire. But then he would always find an excuse why those around him were disappointing him. and when they were disappointing him it was inevitably an excuse to show why he, Ray Dalio, couldn't quite leave then. Now

Patrick Boyle:

Mm-hmm.

Rob:

this continues to the present day. You know, I reported in the New York Times just a few weeks ago that even now he's allegedly retired. He allegedly doesn't have a full-time job there, but he's still on the board and he suggested to the board that since their investments aren't working maybe he, Ray Dalio, should be starting his own fund inside Bridgewater. He's, you know, that's quite different from just not wanting to retire. That's one that's always needing and wanting to be right.

Patrick Boyle:

Yeah. Now another thing that was surprising in the book was, or maybe not surprising once you realize maybe how important control appears to be to Ray, is some of the heroes that he is supposed to look up to like, it says Putin and Xi in China and even to the extent of having sort of a team of, what would you call it, sort of security personnel that he refers to as the Politburo.

Rob:

Sure.

Patrick Boyle:

Is that, like, is that widely spoken about, this idea that, like, his sort of interest in authoritarian leaders are?

Rob:

Nothing is widely spoken about at Bridgewater. There is a culture of, or there was a culture of not saying what you knew would get Ray angry. So far as the creation of the Politburo, which is literally, Ray was literally inspired by China's, there's almost nothing I can say about that the name doesn't say in itself. He literally created a Politburo inside Bridgewater, which functionally existed to invest pretty much anyone Ray wanted for any reason. And all of these people inside Bridgewater, all of these purportedly independent thinkers, all of these people who you know have the power and responsibility under the principles to speak the truth, they all went along with it. They took the pay check and they kept going.

Patrick Boyle:

Now, as the book draws to a close, there's a bit of a feeling that at least within, as the principles went out into the world in terms of, you know, Ray's TV appearances and speeches and so on, that the COVID lockdowns might have brought a lot of the systematized principles within Bridgewater to, if not an end. that they were reduced significantly. Is that what you see?

Rob:

That's true. It proved to Ray, for Ray, tough to be a bully, you know, through Zoom. And Bridgewater and Ray have never acknowledged that. He continues to go on and talk about the principles as if, you know, nothing has changed. But at the end of 2021, Bridgewater lays off the majority of the staff, which is devoted to this huge apparatus. You know, the Politburo doesn't exist anymore. It only really exists in the popular imagination. to talk about it. Ray asked Bridgewater to pay him, this man is worth an estimated $20 billion, he wanted Bridgewater to pay him a licensing fee to continue to use the quote unquote principles tools after Ray had retired. And it was a grave miscalculation because that was a great excuse for the current leadership of Bridgewater to say, oh no, we can't pay for that and then to dump it.

Patrick Boyle:

But isn't the firm still majority owned by him? Like he could, if they're managing his money, he could just force them to, you know, follow his rules or no? Is it much more of an independent firm now?

Rob:

Here's how I'll answer that. Who do you think has the power? Do you think it's the person who has the name Chief Executive? Do you think it's the person who has the title Chief Investment Officer? Or is it the one man who at any moment could simply decide to write a tweet or a LinkedIn post or go on CNBC and say one sentence, all he has to do is say, I don't have confidence in the current leadership of Bridgewater Associates. That's all he has to do. The firm is

Patrick Boyle:

Mm.

Rob:

over. So

Patrick Boyle:

Yeah.

Rob:

who really holds the power here?

Patrick Boyle:

Yeah, I mean, it would seem, and even just the fact, like if he announced that he was pulling, he was managing his own money rather than having the firm manage his money. Once again, it's even, it's back to that problem of continuity at hedge funds. It's still very much tied to the founder, unless you have a replacement who sort of almost outshines the founder of the firm, right?

Rob:

Well, and this is why Bridgewater for years wanted to talk about its quote unquote investment system that would live on past Dalio. What I found so interesting was the firm was briefly doing quite well, I think about two years ago, and they credited that in a letter to investors. They credited that to an investment committee, a new investment committee, that did not include Ray Dalio. So, you know, there's some tension there.

Patrick Boyle:

What has the long-term performance of Bridgewater been? Like has it generally, because say what you will about whether a guy is likable or not. You

Rob:

Mm.

Patrick Boyle:

don't really put your money at a firm because the founder is likable. You put it there to generate returns. I know in the book it implied that returns fell off after.

Rob:

Hmm.

Patrick Boyle:

the credit crunch but if you look at the entire history of the firm kind of on a what can I say like not just returns but a sharp ratio

Rob:

Mm.

Patrick Boyle:

or returns for volatility basis like has it been a good place for people to have their money?

Rob:

Well, I would disagree with you on one thing. Yes, it's true that you or I, when we're looking at our 401k, we want to make the best return risk adjusted. But I would actually disagree and say that you do, institutional investors in many cases do put their money with firms where they like the founder, where they buy into the story. Now, so far as, and Ray is one of the world's great storytellers. Now, so far as the returns, if you look from inception, from the start of Bridgewater, of course, they're going to look good. money under management. If you look over the past say 13 years since the start of 2011, it's extremely poor performance relative to the markets, relative to other hedge funds. It's muddled around flat many years and Ray has used that unbelievably to his advantage. He says, well look, we're not losing you money. We're stewards of capital. It is a wonderful But it doesn't appear to be lasting forever because this firm peaked at around $168 billion. Now it has, last I checked, around $125 billion, maybe even less. If this firm can't...

Patrick Boyle:

is still massive.

Rob:

Oh my gosh, I'll take it, by the way.

Patrick Boyle:

Yeah.

Rob:

I accept.

Patrick Boyle:

And the fees, I thought at one point in the book, was the management fee over 3% or something like that?

Rob:

It depends, it is a sliding scale and there's a number of funds, but the firm was so big that on pure alpha, even just a 2% management fee was just

Patrick Boyle:

mass.

Rob:

an incredible annuity for everyone. And

Patrick Boyle:

Yeah.

Rob:

remember, in hedge funds, you're paying a performance fee on any performance over zero. So

Patrick Boyle:

Yeah.

Rob:

markets since 2010 have been up, up overall. So the fact that Bridgewater hasn't been close to matching them doesn't even matter too much a performance fee just on any raw performance, period.

Patrick Boyle:

No, it's an interesting one because, well, for one thing, fees do appear to have generally come down quite a lot. Like, I think most, I think most funds nowadays, you can probably invest at one in 10. Like, there's not many people that get away with two and 20 anymore. But even the initial idea of two and 20 was sort of a... a thing where you take a great money manager and you'd say, look, you know, go wild, but with $100 million and we'll pay you this

Rob:

Mm.

Patrick Boyle:

big fee structure. But once it gets into the billions, you know, the idea was that the two would sort of cover the hiring of a few staff members and pay the rent on the office. And the 20 was

Rob:

Mm.

Patrick Boyle:

the incentives like that. That's where the wealth was being generated. While obviously when you get into the billions, the 2 becomes frankly if not really more significant than the 20, right?

Rob:

It's the oldest story ever told in hedge funds about these incentives. But what I will say is in order to keep that management fee, in order to keep those assets, you've got to be able to convince people that you, over and over, even in bad years, that you have a repeatable investment system to stick with you. And I can't criticize Ray for being anything other than the world's greatest hedge fund marketer in that sense.

Patrick Boyle:

Now if there were, because people do want to learn, the reason even people read biographies, autobiographies, whatever it might be, is that they want to walk away with a few lessons as to like, are there things that I could change about myself

Rob:

Mm.

Patrick Boyle:

to sort of optimize the way I live to be more successful, whatever successful means? Are there... takeaways, like have you learned something from Ray about sort of how to, you know, that has improved your life?

Rob:

I- Absolutely. I've even sent talk to Ray about this and he has a principle called trust in truth, which is essentially means to, you know, try not to find excuses to lie. Like trust in truth. And he doesn't follow this really very often, but it's a great principle. And what I honestly have taken out of him is, from him rather, is this idea that if you're in a disagreement with someone, it's okay. just to stop it in its tracks and say, hey, I think this is what we're disagreeing about. I think it's this thing. Can we have it out just right here on this so that we can move past it? As opposed to looping back two hours later

Patrick Boyle:

like

Rob:

to say,

Patrick Boyle:

finding the core of

Rob:

let's

Patrick Boyle:

the problem

Rob:

just.

Patrick Boyle:

and saying this, if we can solve this, we can solve the whole thing.

Rob:

Right, I think it involves much more empathy and that humans are endlessly more complicated than Ray might believe. But I have honestly learned that even in my day job, at the New York Times, if I'm having a disagreement with an editor, instead of trying to convince her of my perspective, I say, okay, let's find a third option here. We're not eye to eye here. There must be something that we both agree with. So I've honestly taken a lot from that. I would say that the other thing that anyone reading this book hopefully should take away is that there isn't always a reason for things. Not everything in your life has to be because of a grand system or a grand dominoes. It's okay for there to be disappointments. Sometimes there's luck. Sometimes you're unlucky. And you can move past that. It's... You're right that there are no heroes, so to speak, in this book, but there are many people, even though they're not powerful at Bridgewater, who make the smallest of stands and then they remove themselves from it. I find them, honestly, quite inspiring because they do what they can, but then instead of staying there and taking the money or instead of staying there continuing to argue, they say, okay, I've lost. They pick up their chips and they go home. And I've learned a lot from that. Sometimes you're not going to convince the other person. End.

Patrick Boyle:

Yeah, no, there's interesting things because, you know, you could look at Bridgewater and say, gosh, there's an awful lot of staff attrition. But equally, I look around Wall Street in general. You know, I remember in my 20s when I started working at an investment bank, and in my head, I thought it would be a whole bunch of, you know, grey herald or old man. and you turn up and there's really no one on the trading floor much above the age of about 35, you know.

Rob:

Hmm.

Patrick Boyle:

And the investment industry is kind of like that where there's a lot of, you know, I guess if you look at the size of the analyst classes at an investment bank and then the number of MDs, you know, a lot of people fall along the path. Do significantly more fall along the path at Bridgewater or is this just the nature of the financial industry, that people get sort of either pushed out or weeded out however you want to view it?

Rob:

Look, there's a tremendous amount of attrition at Bridgewater and I personally don't have the numbers and I don't believe that he's ever given them out. So I couldn't compare it to a Morgan Stanley. What I would say is this, that the asset management industry writ large is a great business for the asset manager. So the... I don't quite buy any of the high-minded patina of... Blackstone, I'm helping retirees, you know, teachers retirement systems, you know, etc, etc. I don't need to hear that. It's okay. The asset management industry is a great place to be when you're the asset manager collecting the fee. I am in journalism, you know, I'm a reporter. Even in journalism, I would say there becomes a point in your 30s, early 40s where a lot of people do leave. And I think it's okay to have multiple interests in your life. This is actually a Ray Dalio thing for me. What saddens me most about him is that he never had another interest. He just kept talking about the principles.

Patrick Boyle:

Mm.

Rob:

I have joy in my life. I have disappointment. I have no doubt that you do too. We have ups and downs and he just kept flogging this one thing and couldn't accept that the time had passed. To go back to your earlier question, that probably is the greatest lesson that I've learned.

Patrick Boyle:

Well that's probably a great point to wrap up the conversation here. I would tell my viewers that this book, by the time this video comes out, the book is probably available on Amazon. It's a great read, it's very interesting and actually I would argue, I've got both of the books here, Principles and The Fund, and it's reasonable to read. both of them and sort of see both sides of the story. And even, you know, I'll be interested, as you've said, you expect Ray to, you know, come out and respond to what's said in the book. And I'm sure both you and I will find it interesting to see what he has to say.

Rob:

Look, people ask me all the time what I think about principles about his book. And I say it's an autobiography. It's one man's opinion. It's fascinating to get inside one person's head. What I've written is what it's like for the rest of the people around Ray Daly and Bridgewater. And I think that's perfectly valid too.

So, on that note we will wrap up the interview.  I’ll leave a link to Robs book in the description along with a link to Principles by Ray Dalio – if you want to read both.  Rob’s book is a real page turner and I would recommend it to my viewers.  Don’t forget to sign up Compounded Daily – the free newsletter I mentioned at the start of the video using the link in the description.  If you enjoyed this interview, you should watch my interview with Zeke Fox on his book Number go Up next. Talk to you soon, bye.