Why Ray Dalio should not be venerated

The firm’s thousands of other employees seem to be participants in a giant experiment based on the kind of motivational aphorisms printed in discount business books. Dalio has compiled them into a long list called The Principles, which every employee is expected to read and follow.

“It is these principles, and not anything special about Dalio – who grew up an ordinary kid in a middle-class Long Island neighbourhood – that he believes are the reason behind his success,” says a blurb for The Principles, which have been published by Simon & Schuster.

Face-to-face feedback

Under a commitment to “hyper-realism”, employees were expected to criticise colleagues in their presence. Get caught back-stabbing someone three times, and you’d be fired, Dalio said. “Most people actually love this rule,” he told the Wall Street Journal.

I’m pretty sure they don’t, but who would know? Julian Mack and David McCormick might. Part of a clique of alpha males on the Bridgewater management committee, they became running buddies, until Dalio decided that Mack might be responsible for the slow introduction of an eBay-like system in which he wanted employees to rate each other for honesty, diligence and other subjective traits.

At a meeting to identify the cause of the delays, according to Copeland, Dalio told Mack he wasn’t a big-picture thinker and was too emotional. McCormick concurred.

“During diagnoses people commonly agreed with Dalio to distance themselves from the person under fire,” the book says. “In this instance, though, McCormick was turning on a friend. The room suddenly shifted. Mack seemed to weigh his options: would he take the slight in stride or swing back?”

Mack replied: “I can see why you think what you’re saying could be true. But I don’t think David is being truthful.”

The book says: “Mack told the group that on their runs, outside of earshot of anyone else, McCormick complained about Dalio and Bridgewater. The message was clear. Dalio was surrounded by sycophants and he didn’t even know it.

“This was a bombshell. Not only had Mack accused his friend of being a slimy weasel, Mack had struck hard at the core of Bridgewater management system. What did it say about Dalio if he didn’t even realise that some people in his inner circle hadn’t bought in?”

Bridgewater’s resources were deployed to determine if Mack or McCormick were honest. Recordings of the men speaking in meetings were pulled as evidence for a showdown in front of Dalio.

At the next meeting, a week later, McCormick protested that when he had been a soldier in combat, men in his unit had to count on each other. Now, he couldn’t. “It’s not about loyalty,” Dalio responded. “It’s about truth.”

As for Mack, he described being approached by Bridgewater employees who had heard about the showdown and were too scared to speak truthfully. “Preserving a theology through its theology ends up with the theology squared,” he said.

“Dalio quickly shifted from the investigation of McCormick to a defence of The Principles,” the book says. “Here he was, inviting criticism in front of all. This very conversation, Dalio said, proved the merit of the system.

Sleazy undercurrent

“Transforming what had started as a simple diagnosis into a full-fledged, highly produced inquisition, Dalio next called a town hall for hundreds of employees. The walls were retracted between several training rooms and the cafeteria, to fit in the most attendees possible. The proceedings were recorded for later relistening by all.”

Sitting next to Dalio in front of their colleagues, Mack sought support. “I think the culture here is suppressing people’s true feelings,” he said. “Who here feels repressed?”

No one put their hand up.

“I don’t know what you’re complaining about, Julian,” Dalio said. “It’s you that has the problem.”

Mack was fired at the next management meeting.

Many more anecdotes like this one in the book portray Bridgewater as a cult-like psycho-drama with a sleazy undercurrent – a staff residence had a formal strippers policy requiring all guests to be notified of their presence.

Harry Markopolos, the analyst who realised Bernie Madoff was operating a scam, told regulators Bridgewater was a Ponzi scheme. It wasn’t, the Securities and Exchange Commission concluded, after what presumably was a more thorough investigation than the first time it looked into Madoff Securities, and didn’t check the existence of made-up bank accounts.

This week, the 74-year-old Dalio accused Copeland of fabricating quotes. “In the name of journalistic freedom, reporters can actually make up things and lie intentionally,” he said at a conference organised by Fortune magazine in Abu Dhabi.

Dalio hired lawyers, but hasn’t sued Copeland, yet. That doesn’t prove the book’s accurate. But even if some of the anecdotes are exaggerated – and there is no evidence they are – it is hard not to conclude that Dalio’s no business genius. He just likes to manipulate people.