Of all the hedge fund world’s secrets, few are more closely guarded than the inner workings of Bridgewater Associates Inc. Now, founder Ray Dalio plans to share his management system and corporate culture with the world.
“We’re about to take the algorithms we have, and we’re going to give them to others,” Dalio said in an interview with Bloomberg Television. “We’re figuring out how to make that fit in a number of other companies, to just pass it along.”
It’s a radical turn for a radical firm. The billionaire leader of the world’s largest hedge fund has developed one of the more unusual approaches to management, and more recently turned them into computerized apps. There’s the Dot Collector, which employees use to rate one another on a grid visible to the entire firm; the Pain Button, used to record emotions like anger or frustration; and Baseball Cards, a summary of each employee’s strengths and weaknesses — again, available for all at Bridgewater to see.
Several large technology companies in Silicon Valley are eager to implement his ideas, said Dalio. He declined to name them and estimated the first roll-out is at least 18 months away.
“In Silicon Valley there’s more of that notion that there’s a power in crowd-sourced decision-making and that it is idea-meritocratic,” said Dalio. “Traditional organizations are more challenged by that.”
In Dalio’s view, most companies are “dishonest” or “dysfunctional” because they don’t let employees speak freely and decision-making is often clouded by emotion or swayed by internal politics. While cautioning that he hadn’t studied them closely, he named Twitter Inc. and Netflix Inc. as two he admires.
Years of secrecy have made Bridgewater the subject of fascination and skepticism. The firm’s practice of recording interactions among employees and encouraging junior staffers to criticize higher-ups in public drew comparisons to cult-like behavior, comparisons Dalio rejects.
“It’s the reason for the success that I’ve had, that Bridgewater’s had,” he said. “This is not utopian. This is realistic.”
Academics who studied Westport, Connecticut-based Bridgewater have praised its methods. Robert Kegan, a psychologist and professor at Harvard University’s Graduate School of Education, identified Bridgewater as one of the few “deliberately developmental organizations.”
Dalio, 68, details some of Bridgewater’s tools in his new book, “Principles,” which is being published this month. In it, he writes that he was motivated in part by Joseph Campbell’s studies in comparative mythology, specifically the final stage in a hero’s journey when the returning adventurer shares what he has learned.
The book also recalls the “breakthrough” moment in 2012 when Dalio realized Bridgewater could take the same approach to management decisions that it had taken for years with investment decisions: program them into computer algorithms.
"I am confident that it can be the same," Dalio told Bridgewater’s management committee in a Nov. 10, 2012, memo he called "The Path Out: Systematizing Good Management." "The only questions are whether it can happen fast enough and what will happen in the meantime."
Dalio is still figuring out exactly how to distribute his management tools. One thing he has decided: They won’t be a money-making business for Bridgewater.
“Principles” is the first of two books by Dalio. The second will contain his theories on economics and investing, and Dalio described it in the interview as an expansion on the 31-minute, animated video, "How the Economic Machine Works," which he posted in 2013.
Those topics are of even greater interest to Bridgewater’s hedge fund rivals. Competitors may be disappointed, however.
"I’m not giving away the algorithms, but I am giving away the concepts," he said. "I’ll let others decide whether it’s helpful."
For someone with so much faith in computers, Dalio sees risks as well. He’s worried that machines will displace people, creating unemployment and exacerbating inequality. Dalio sees the majority of Americans, those in the bottom 60 percent of the economy, as most vulnerable.
“Technology’s evolution is increasingly replacing the uniqueness of man and that’s exasperating the divide,” he said. “It means that you are either doing that creative programming or you’re left out. And what you’re coming up with is ways that people are not needed.”
Dalio joins other business leaders, ranging from Deutsche Bank AG Chief Executive Officer John Cryan to IBM Corp. CEO Ginni Rometty, who have raised concerns that technologies such as advanced robotics and artificial intelligence will destroy too many jobs too quickly.