In April 2019, Connecticut announced a prodigious deal with billionaire Ray Dalio, founder of the world’s largest hedge fund, Westport-based Bridgewater Associates. Dalio’s foundation would donate $100 million to the state’s public schools, Connecticut taxpayers would kick in $100 million more, and a nonprofit organization established by the state to administer the funding would raise another $100 million from charitable sources.
That nonprofit was called the Partnership for Connecticut.
The partnership, whose leaders included Gov. Ned Lamont, several state legislators, and Dalio’s wife Barbara, immediately faced questions over transparency. Under the arrangement lawmakers approved, the partnership was exempt from key ethics and disclosure rules.
The endeavor, embattled from the start, barely lasted a year (though it did spend $24 million in March 2020 to purchase laptops for students at the onset of the COVID-19 pandemic). A former chief executive then took the partnership to arbitration in late 2020, alleging she received low-level assignments, was expected to “rubberstamp” whatever programs Ray and Barbara Dalio chose, and that her reputation was damaged by rumors and lies spread among the partnership.
The saga — which many viewed as an attempt by the billionaire to exert his personal influence on policy without public scrutiny — followed a similar pattern to some of the stories of former Bridgewater employees, detailed in Rob Copeland’s “The Fund: Ray Dalio, Bridgewater Associates, and the Unraveling of a Wall Street Legend,” published this week.
The behemoth hedge fund’s stature, and coffers, grew explosively after the characteristically pessimistic Dalio predicted “the big one” in late summer 2007, just ahead of the Great Recession. Copeland writes, “As the world hit rock bottom, Ray Dalio was on top.” (Bridgewater currently manages about $150 billion in assets.)
But in the years that followed, Copeland writes, Dalio turned his attention to cultivating Bridgewater’s workplace culture, a system he described as “radical transparency” — and some former employees might describe as traumatic.
There were cameras and recording devices all over the firm’s Westport’s offices. Employees were encouraged to file complaints about their colleagues in an internal log, where they critiqued each other on everything from poor management to personal debt to failing to wash one’s hands or even serving wilted peas in the cafeteria.
From the issues that arose, Dalio developed a set of “principles” for behavior that he believed, if followed, would provide resolution to any of the firm’s internal issues. Employees ranked each other — in public scorecards, in real-time — based on how well they lived up to each of the principles (a practice called “dotting”). And if a serious violation occurred, teams assigned to investigate could pull recordings and present a case — usually in front of a large group of people, with the intent of everyone learning a lesson from their colleague’s mistakes.
People sobbed openly in these “drilldowns” (often coordinated by then general counsel James Comey, who would go on to lead the Federal Bureau of Investigation). But many of them stayed on afterward, their cases memorialized as lessons in the firm’s video archives. According to the book, Dalio believed that this kind of transparency was necessary to root out people who weren’t fit to work at Bridgewater.
The vast majority of the firm’s employees weren’t involved in investing decisions during those years, Copeland writes. And “the more time that folks at Bridgewater spent on The Principles — and its associated arguments, dottings, trials, and public hearings — the worse the company’s investments seemed to perform.”
Both Dalio and Bridgewater issued statements Tuesday disputing the book’s merits. The company said: “The exaggerated depiction attempts to take aim at who we are by painting a distorted and inaccurate picture through a series of strung-together stories.” Dalio called it “another one of those sensational and inaccurate tabloid books written to sell books to people who like gossip.”
(Copeland is a finance reporter for the New York Times and former hedge fund beat reporter for The Wall Street Journal.)
Dalio is a legend in the finance world, and his public image — intellectual, approachable guru — has been carefully cultivated. But while he espoused a culture of “radical transparency” that in theory encouraged everyone to speak their minds, many of his employees were afraid to disagree with the founder. Those who did saw their scorecard rankings drop.
The concept of transparency, which he has touted so widely, doesn’t seem to live up to its billing. In the case of the Partnership for Connecticut, its leadership panel took a public endeavor — which, by law, should be fully transparent — and exempted it from transparency. That didn’t go over well.
At Bridgewater, new management-level hires went through a typical cycle, Copeland writes. Their hiring was celebrated publicly and internally. They’d be given a first assignment in an area beyond their expertise, and they’d usually fall short. Then the interrogations over their failures would follow. If the shaming led the new hire to quit, it was only natural, Copeland writes. “He was applying his approach to investing rules — testing what worked, and throwing out what didn’t — to human resources.”
The partnership’s chief executive settled her claims in private arbitration, but the issues she cited publicly aren’t dissimilar from those described in Copeland’s book.
A third of new employees lasted less than a year and a half at Bridgewater. Naturally, those who departed the firm signed nondisclosure agreements.
Dalio is no longer at the helm at Bridgewater, the Principles are no longer mandatory training for new hires, and the taped trials of employees who violated those principles have been deleted from the firm’s “Transparency Library,” Copeland writes. These days, Dalio’s audience is much wider than the firm’s 1,200-plus employees who used to file in on Monday mornings to hear him talk about the latest economic research — gatherings called “What’s Going on in the World.”
Last month, Dalio made his annual visit to speak to attendees of the Greenwich Economic Forum at the Delamar Hotel in Greenwich. He showed an animated video and offered insights from his research on the direction he expects for the “changing world order” (characteristically pessimistic). As he talked, many in the audience took notes.
Dalio concluded by telling the Delamar Hotel audience how, at 74, he’s working on his legacy and looking to give back.
“The most important thing for me is to pass along everything,” he said. “To pass along some of the knowledge and principles that I’ve learned over a period of time — which is why I’m doing this, why am I writing books and so on — and to pass along the wealth, and to pass along … Bridgewater. What a joy it’s been.”
On LinkedIn, where he counts more than 2.5 million followers, Dalio dismissed Copeland’s book Tuesday in a post. “The book won’t matter to people who know Bridgewater and me well, and they are the people who matter most to me,” he wrote. “From this point on, I’m not going to give it more attention.”