No book has resonated with Ray Dalio quite like Joseph Campbell’s The Hero With a Thousand Faces. The work, which Dalio’s second-oldest son, a filmmaker, gave him a few years ago, explores the archetypal hero’s journey—think of the myths of Prometheus and Odysseus—and his eventual return. “[T]he hero comes back from this mysterious adventure with the power to bestow boons on his fellow man,” Campbell wrote. Those words spoke to Dalio, the founder of the world’s largest hedge fund, who knew exactly what he wanted to pass along: his Principles.
The Principles are about 200 rules that Dalio, 68, has refined over the past four decades and began committing to paper during the mid-2000s. They outline a process for living and managing a business, often with banal catchphrases—“Don’t try to please everyone,” “Clearly assign responsibilities,” “Don’t bet too much on anything,” etc.—and include footnotes, flowcharts, and even a few doodles. The Principles, as Dalio has said before, are “being lived out” at Bridgewater Associates, where about 1,500 employees on the company’s pine-forested campus in Westport, Conn., must check their egos and speak their minds while managing $162 billion.
“I believe what we’ve done is magical, that it is wonderful,” says Dalio, who, wearing a blue-checked shirt that’s loose on his lanky frame, looks more Mister Rogers than Wall Street billionaire. He’s so full of energy at the beginning of our interview this summer that his hands tremble. Dalio says he hates the limelight, but he’s recently started tweeting, just gave a TED Talk, and will publish the Principles as a 600-page book for the first time this September. He’s also planning a second title that will detail his economic and investment principles, which he’s closely guarded for years.
“I believe in the idea-meritocratic process,” Dalio continues. “I believe in specifying one’s principles clearly. I believe in radical truth and radical transparency to achieve meaningful work and meaningful relationships. I wish it existed all over. I wish it existed in Washington. It’s the reason for our success—not me. I want to make it clear to pass it along, and then disappear.”
Before he can disappear, though, Dalio has a succession plan to see through. Even before reading Campbell’s book, he had initiated a decade-long transition to hand over Bridgewater’s reins and step out of the picture. (Dalio plans to relinquish his co-chairman title within the next five years, but he says he wants to be involved in the company’s investments until he dies.) As if that process weren’t daunting enough, the ultimate goal of Dalio’s successors is nothing short of monumental: not only to ensure that the firm’s culture lasts for the next 100 years but also that Bridgewater become an “everlasting institution.”
Although Dalio prizes his Principles, getting the world to accept his boon is another matter. Bridgewater isn’t for everyone. Most meetings are recorded. Employees must rate one another on one of about 75 attributes—some with funny-sounding names such as Designing the Movie Script and Willing to Touch the Nerve—about 15 times a week to create data to confirm that the right people are in the right jobs and to help them better interact with one another. Dalio says that as much as 30 percent of the population couldn’t tolerate a Bridgewater-esque environment.
To make sure everyone absorbs the Principles, new employees go through a three-week boot camp. Even long afterward, staffers have a weekly quota of homework that includes watching case studies and answering how they would solve a problem based on the rules. Their answers are compared with other employees and their ratings adjusted accordingly. That emphasis on reinforcing the company’s culture through technology is where things might get even more interesting. Dalio says he’s thinking about open-sourcing the computer code Bridgewater has developed, an artificial intelligence program dubbed PrincipleOS that does everything from summarize meetings to analyze reasons a person might be feeling anger, confusion, or embarrassment when interacting with a colleague. The programs could automate about three-quarters of Bridgewater’s management decisions within the next five years, according to the company.
Getting the right leadership team in place hasn’t been entirely smooth since the transition officially began in 2010, with the senior executive roles looking a bit like musical chairs. Dalio even briefly returned to day-to-day management last year following a disagreement among executives. The episode ended with longtime colleague Greg Jensen stepping down from his co-chief executive officer role, which he’d shared with Eileen Murray. Former Apple Inc. executive Jon Rubinstein was then hired as co-CEO to much fanfare, only to last about 10 months. Murray and David McCormick now run Bridgewater as co-CEOs. It’s McCormick’s second stint in the role. Early this year, he considered joining President Trump’s administration as deputy secretary of defense before opting to remain in Westport.
The transition comes as returns at the hedge fund’s flagship product have faltered, just like at other so-called macro managers. Since the beginning of 2012, Bridgewater’s Pure Alpha II has posted an annualized return of 2.5 percent, according to a document reviewed by Bloomberg Markets, a far cry from its historic average of 12 percent. It’s down 2.8 percent this year through July. (A smaller Bridgewater hedge fund, Pure Alpha Major Markets, has fared better, as has the company’s long-only product.)
Even a hardcore fan is concerned about performance. “Their returns have been unspectacular recently, and it makes you wonder if this is the beginning of the end,” says Michael Rosen, chief investment officer of Angeles Investment Advisors, who’s steered clients to Bridgewater since the early 2000s and prizes its research reports over others in the industry. “There’s only been one market cycle since the financial crisis, and so if this performance continues in the next cycle, then there may be cause for concern.”