
The world’s biggest hedge fund, run like a cult - wallflower
http://nymag.com/news/business/wallstreet/ray-dalio-2011-4/
======
siavosh
You can discuss the managerial points in this article, but as an aside:

I hate articles like this.

I used to work on wall street, and these sort of articles were rampant up
until the burst: they glamorize financial "wizards", hedge funds, trading life
etc. They're financial porn. They glamorize what, in my opinion, is a dubious
field. All the while attracting all sorts of people into a field that has
already proven it's "value" or lack there of to society.

I'm starting to see more and more articles like this, and it frightens me how
quickly the world is getting back to where it was just a few years ago.

~~~
dxbydt
I agree that its financial porn. I disagree on the "dubious field" and "no
value to society" premise - In the past, I've interviewed with and worked for
several s/w startups that were/are much more dubious and useless than finance.

Also, "attracting all sorts of people into the field" is really stretching it.
Getting into the field to make a serious non-trivial impact - like running a
derivatives desk or managing say a non-ferrous futures portfolio or even
something straightforward like a 130-30 long-short equities fund takes a whole
lot of expertise, something a whole lot of people simply don't have. For
example, the codebase for one of the largest 130-30 fund in the world, run by
Blackrock out of the Howard street office in SF, is actively managed by 3
Applied Math PhDs, 5 Java Programmers with CS Masters, and a dozen SQL , QA &
misc scutwork CS undergrads. The guys using the codebase ie. the portfolio
managers and the junior portfolio mgrs, are another dozen econ grads with CFAs
and some 50 years of combined market experience. Its a pretty challenging job,
and they've come up with a +ve alpha through most of the crisis, which is a
minor miracle in itself.

~~~
mkramlich
Your first paragraph contains a deductive error.

Your second paragraph has enough industry lingo and insider info that it
strongly suggests you work(ed) for a hedge fund, yourself. So your opinion on
whether it's a dubious field or of value to the society is going to be a wee
bit biased. :)

------
yosho
I interviewed with Bridgewater, it's definitely true about the personality
tests, I was given two of them and they asked me questions about my results
and what I thought about them. It was really obvious they were looking for a
certain type of person... definitely someone who was maleable.

They then asked me about a time where I disagreed with a superior and how I
handled the situation. I told them that every situation is different and that
to me... there's no one right answer. I don't think they liked that response.
Needless to say I didn't get the job, despite the fact that I aced all of
their quantitative questions. It really is all about the company culture to
them. Either you fit the cult, or you don't. I'm sorta glad I didn't.

~~~
buff-a
"They then asked me about a time where I disagreed with a superior and how I
handled the situation"

"I told them that every situation is different and that to me... there's no
one right answer."

I would have made the same mistake right out of college. The right answer
would have been to "tell them about a time where you disagreed with a superior
and how you handled the situation."

The question was not designed to produce a report on how you handle
disagreements with superiors. It was not even designed to see if you could
follow instructions like a lemming.

I suggest you look the real reason you didn't want to give an answer: the fear
that it would be the wrong answer. The fear that these people would listen to
how you handled a single situation and determine from that single data point
whether or not you are suitable for a job. So the answer you gave them was "I
don't want to give you an answer because I believe you to be short sighted
fools who have no experience of human relationships and will therefore judge
me by this one answer".

The question was designed a) to start a discussion on interactions with
superiors and b) to determine your level of fear of giving a wrong answer in
an interact with superiors.

Instead, you had a disagreement with your superiors-to-be about the quality of
their question and demonstrated that in such situations your response is to be
defensive and provide no information, instead of getting the ball rolling.

~~~
joe_the_user
Wow,

This is a good information on a pretty sinister approach....

Essentially, ask someone _bad_ question and see if they squirm. Now I
understand...

Yes, I'll keep this is mind...

~~~
Bootvis
Isn't that just an example of the widely used STAR[1] question? AFAIK these
are very common.

[1] <http://en.wikipedia.org/wiki/Situation,_Task,_Action,_Result>

------
arctangent
All large organisations work like this, although the culture in this company
seems to be more aberrant from the norm than usual.

Beyond a certain size [1] a company can't get by on the personalities of
individuals and has to officially define the major elements of its culture in
policies and the like.

Hackers tend to dislike these policies because they (hackers) tend to be
fiercely individualistic. But large organisations need (the vast majority of)
people to follow rigid rules [2].

[1] e.g. see <http://en.wikipedia.org/wiki/Dunbars_number>

[2] <http://en.wikipedia.org/wiki/Governance>

~~~
buff-a
But this is why such organizations fail (EDIT: or succeed sub-optimally with a
horrible culture that doesn't resemble the fairy tale policy document) . They
create a culture of "policies and the like" in which individuals are supposed
to be perfect examples. But the reality is that each business unit (of any
size) is run as personal fiefdom based on the ego and personality of the
person in charge. Such "policies and the like" are guaranteed to fail.

And the reason that they fail is because regardless of whatever they put in
print, the people in the organization are still ego machines. They still deal
with emotions rather than content. They deal with the meta-message ("this
person thinks he is clever than me") instead of the message ("this _idea_
failed to produce dollar value"). Their brain is wired to produce the meta-
message and what it means for them and their future, instead of the message,
and what it means for the company and the company's future.

So basically you got as far as reading that Company X has a Policy and stopped
reading, instead of getting the whole point which is that this company's
policy is _nothing_ like any other company's policy.

That was poor, superficial analysis on your part. Go and read Principles and
come back with a better analysis.
[http://www.bwater.com/Uploads/FileManager/Principles/Bridgew...](http://www.bwater.com/Uploads/FileManager/Principles/Bridgewater-
Associates-Ray-Dalio-Principles.pdf)

~~~
arctangent
I think you're being a little harsh on me but perhaps it's my own fault for
not explaining in more depth.

I certainly don't think that the way large organisations are currently run is
the best way for them to be run. In my own very large organisation I actually
introduced a (bespoke) system to allow communication that cuts across
hierarchical boundaries.

I've taken some serious knocks pushing my agenda and it's taking a long time
for the culture to change. Only now are some (20%) of our large number of
directors starting to "blog" openly to staff rather than sending messages up
and down the hierarchy. I hope to get managers beneath them to start using our
internal social tool too.

I know that policies fail. I'm well known as a rule-breaker within my
organisation but I'm also known as a person who can "get things done". I don't
just mean that in a technical sense, or in a works-very-hard sense, but in a
will-ignore-your-rules-to-get-things-done sense. Inevitably this means that I
tread on some toes.

However, policies do have their place in large organisations. Very few people
actually care about achieving any kind of significant change in such an
organisation - many are happy to work 9-to-5 and just do what they're told
(and do as little as possible). Policies are designed for exactly these
people.

In an ideal world every worker would actually give a damn about their work and
innovate in their own little area of responsibility. But it turns out that the
way things are structured doesn't encourage this sort of behaviour. It's very
hard to pay someone more than a lazy person with the same job title if they
have the same job title.

I acknowledge your point about how people in large organisations will often
look to better themselves at the expense of the company rather than seek to
better the company and then hope for commensurate reward. I could talk about
that for some time, but it wasn't really in the scope of my reply above. I do
understand that many people act in this way. I could talk all day about why
individuals might pursue goals different from those they're actually paid for
but I'll skip it for now.

Coming back around to your point (per paragraph 3), I'd have to say that I do
understand (as much as an individual can) the nature of large companies. My
"company" is the fourth largest employer in the world and figures for how many
people work for us tend to vary. However, it's somewhere between 1 and 2
million people. We have a very developed notion of "corporate culture" where I
work :-)

My original point was that all companies do have a culture, as do all groups
of people. Past a certain size it is always beneficial (to the shareholders)
to ensure that the individuals within your company do not act as individuals
so much but instead act in a way aligned to your corporate goals.

I did glance at the document you linked to but I don't really see the point of
reading it all just to reply to your comment :-)

~~~
buff-a
It will take somewhere between 30 minutes and the rest of your life.

------
arkitaip
All this talk of culture got me thinking of Zappos and all the great things
that Tony Hsieh & his team are doing there. Although Zappos is equally serious
about their culture, it's interesting that it seems very different from
Bridgewater's - or is it? Both are incredibly successful, quirky companies run
by very strong leaders with a lot of charisma, totally dedicated to their
principles, companies and corporate culture. Comparing the cultures of these
companies would be very interesting - maybe something for a journalist or
blogger?

~~~
rick888
It's almost like comparing countries.

Some are dictatorships, others are free and more democratic.

~~~
arkitaip
Heh :) They seem like each other's opposites but both are incredibly
successful and liked by their respective employees. Maybe the truth about
great corporate cultures is finding people who believe in your principles
above anything else no matter how crazy they might seem?

------
dct47
Sometimes it's better to be a cult than a mass organized religion.

Seriously, if you actually read the philosophy, it's extremely logical and
sensible. I would expect it to resonate with most engineering-minded people.
Basically it's just: be realistic about things, base decisions on logic and
not emotion, demand high standards, strive to get better all the time. What's
the problem? In most competitive disciplines -- e.g., pro sports -- people
value harsh feedback so they can improve. Why isn't this the case in most
American businesses?

Personally, I'd rather be a part of an organization like this than a part of a
typical large firm, where there's constant politics, gossip, and rampant
realization of the Peter Principle
(<http://en.wikipedia.org/wiki/Peter_Principle>).

Dalio responds to a lot of similar criticism in a letter to Dealbreaker when
his document was first leaked last year ([http://dealbreaker.com/2010/05/ray-
dalio-explains-his-princi...](http://dealbreaker.com/2010/05/ray-dalio-
explains-his-principles/)).

------
jbreinlinger
"radical transparency" is a powerful concept. Weird and uncomfortable at first
- but I generally like it. In case anyone want's to see their 100+ page
internal company manifesto, it's right here:

[http://www.bwater.com/Uploads/FileManager/Principles/Bridgew...](http://www.bwater.com/Uploads/FileManager/Principles/Bridgewater-
Associates-Ray-Dalio-Principles.pdf)

------
periram
I was made an offer by BW but could not take it for personal reasons. Here is
my take.

a. It did not strike as a cult to me. It is pursuit of excellence. b. I met
some of the smartest yet simple minded people there. c. The whole idea is that
the focus should be on productivity and pursuing truth. d. People spend
inordinate amount of time in proving their conclusions, rather than seeing
things objectively. That is what the culture tries to tackle; head on. e. I
saw decisions being made with egos put aside. It was like watching a flock of
birds move together. They all understood where they were going, implicitly. f.
Read ray's principles and see if you can find a hole in them, I would be glad
to hear your arguments. g. If I founded a company, it would take inspiration
from this culture.

PS: I have currently no vested interest in them.

------
lefstathiou
The fact that similar Bridgewater stories are cropping up out of no where is
no coincidence. They are clearly ramping up their PR. I wonder why...

~~~
rluhar
Going public? (though they explictly said they won't). Hedge funds are
notoriously sensitive about privacy. The fact that Bridgewater has been
featured in a number of high profile articles in main stream media makes me
wonder if they are looking to go public, or to attract further funding (i.e.
more clients).

Alternately, it could be as simple as Mr. Dalio wanting to do a bit of self PR
before an impending book release?

------
dabadu
"[While] the rest of the financial sector was busy pumping rocket-grade helium
into the credit bubble, a young Bridgewater investment associate named [...] "

Helium is not explosive.

------
EugeneG
The article is naturally pop-ish. The actual Principles book from the website
is quite interesting though. It comes off sounding a bit like a self-help
book, but nonetheless it attempts to solve certain significant issues in large
organizations. People begin to worry about ego, credit, allies, etc. Values
that are relevant to doing a good job - understanding a problem, finding the
right solution, being honest - are no longer a priority. These are all values
that might be easy to keep in a start-up sized business, but the question is,
how do you scale these values to a large 1000+ person organization? Perhaps
Bridgewater has this answer.

------
Hominem
Hahaha, I briefly dated an HR person for bridgewater. She were very serious
about culture first, skill second. They had a very strong bias towards certain
Ivy League schools and certain personality traits. She gave me a long lecture
when I was staffing up a project, told me looking for specific types of
programmers was all wrong, I needed to find what makes great programmers and
go out and recruit them even if they had never programmed. Too bad I had 6
months, not 30 years.

Edit: Is that the same Holden Karnofsky who was caught astroturfing MetaFilter
for GiveWell.com? If so, he is a pretty well known guy, not some rank and file
nobody.

------
johnny4000
i used to work at bridgewater as a developer. i liked the culture there and
wish more companies had cultures like them. why would you want to work at a
place full of problems hidden from sight. no one calls you out because they
don't like you. they do it so that you can get better and don't make the
mistake again and that your peers also do not make that mistake. if you are
not confident enough to be able to learn from your mistakes and make sure your
cohort are also not making mistakes then you should look else where to work.

also its not cult like there. cults try to remove you from your previous
surroundings and indoctrinate you so serve a leader because they promise you
salvation. i was not promised salvation and i was given a pay check and could
leave if i wanted to. i will say it is some what like a club in that if you
don't fit the mold then you will be fired. by the mold i mean from a business
perspective you should act according to proper business protocol (which for
them more or less means learn from everyone's mistakes, call out bad business
decisions so that others can learn from someones mistake, know your
understanding of the market decays so it should always be questioned and
updated).

as for the siavosh's comments relating to finance being a "dubious field", i
would change that to there are many dubious people in finance. also by dubious
i'm assuming he is referring to random walk hypothesis or some such logic. If
you look at ren techs 45% return since its inception in 1988 i would not call
that dubious, so there are players who understand the market and many dubious
people who do not.

i think having a binary opinion about the merits of finance (specifically
capital allocation) benefiting society are wrong. You can easily point to
bernie madoff and say see...useless! or you can think of all the investors who
had the courage and means to invest in apple computers or genentech. was
correctly picking to allocating capital to apple a waste of societies
resources?

------
mian2zi3
I think it is interesting that this thread (at the the time of posting this
comment) has 62 comments and 122 points, while 3 posts of the Bridgewater
philosophy (which is quite interesting and a more substantial read than this
article) have a collective 7 upvotes and 0 comments.

------
omarish
Sounds interesting. Not sure whether I agree with his philosophies or not, but
here's a PDF of Principles, the book that the article referred to:

<http://dl.dropbox.com/u/274/Principles.pdf>

~~~
buff-a
Or a direct link to their website:

[http://www.bwater.com/Uploads/FileManager/Principles/Bridgew...](http://www.bwater.com/Uploads/FileManager/Principles/Bridgewater-
Associates-Ray-Dalio-Principles.pdf)

------
pvodsevhcm
> The Goldmanite trails off. “What do they do? No, seriously. Do you know?”

So not even Goldman Sachs knows what they do? Goldman is also incredibly
secretive, so kind of funny to see one of theirs being surprised by that
behavior elsewhere.

~~~
mdda
One of the key things that Goldman has (as a hedge fund) is the ability to see
what all their clients are doing. Because they really are a sell-side shop.
Hedge Funds, OTOH, are used to being spokes, rather than hubs, and so don't
expect to know what everyone else is doing.

Goldman's prop days are numbered (theoretically) with the new legislation that
inhibits banks trading their capital so vigorously.

~~~
yummyfajitas
_One of the key things that Goldman has (as a hedge fund) is the ability to
see what all their clients are doing._

If you have evidence of this, please notify the SEC so they can permanently
shut down Goldman's brokerage operation and file criminal charges against the
people involved.

~~~
EugeneG
Not sure why you would say that.

If you buy a stock from me, and I talk to 1000 more people just like you, who
all buy more shares of the same stock, I will have a view that this stock is
getting a lot of interest. Nothing illegal or criminal about that.

~~~
yummyfajitas
_If you buy a stock from me, and I talk to 1000 more people just like you, who
all buy more shares of the same stock, I will have a view that this stock is
getting a lot of interest. Nothing illegal or criminal about that._

If you are in this position, you work in brokerage. You have this view, but
since you don't work on the prop desk, you have no ability to act on it [1].

It is highly illegal for you to reveal this information to anyone working the
prop desk.

[1] You could trade on your own personal account, but that is highly regulated
also.

~~~
EugeneG
No. You don't necessarily work in a brokerage. You work as a market maker. You
are obligated to constantly show a price at which you will buy and a price at
which you will sell. Inherent to being a market maker is using the information
the market tells you to take views (which influence the buy/sell prices you
show to the market - which of course influences your profitability). Do not
confuse this information with "insider trading." This is very, very different.
Knowing information about the company fundamentals that is non-public is
highly illegal. Knowing that a lot of people want to buy stock from you and
using that to influence your trading is not.

~~~
yummyfajitas
I was responding to this: "One of the key things that Goldman has (as a hedge
fund) is the ability to see what all their _clients_ are doing...Hedge Funds,
OTOH, are used to being spokes, rather than hubs, and so don't expect to know
what everyone else is doing."

A market maker is merely a prop desk running a particulra strategy. They have
no information on Goldman's clients. They behave exactly like any hedge fund.

Insider trading is a red herring, I don't know why you bring it up. Mdda
claims Goldman is breaching their fiduciary duty to their clients.

~~~
EugeneG
"A market maker is merely a prop desk running a particulra strategy. They have
no information on Goldman's clients. They behave exactly like any hedge fund."

The common understanding is that a market maker is not exactly a prop desk.
The clients of a market maker are the counterparties who take the other side
of the market maker's markets. (These counterparties are Goldman clients).
Market makers are not hedge funds and don't fundamentally behave like hedge
funds, though I suppose both during their line of work take views on markets,
so there are some similarities.

My point was, market makers, by definition, know what (their) clients are
doing and take market views based on this. The major value in being a market
maker (which is a huge part of Goldman's capital markets business) is seeing
client flow.

------
latch
First time I've heard of Radical Transparency
(<http://en.wikipedia.org/wiki/Radical_transparency>) seems freakin' awesome.

------
tzury
4 == 1 @ [http://nymag.com/print/?/news/business/wallstreet/ray-
dalio-...](http://nymag.com/print/?/news/business/wallstreet/ray-
dalio-2011-4/)

------
rajpaul
There was a new yorker article about this

[http://www.newyorker.com/reporting/2011/07/25/110725fa_fact_...](http://www.newyorker.com/reporting/2011/07/25/110725fa_fact_cassidy?printable=true&currentPage=all)

Transparency is an interesting theme in the New Yorker article. Dalio sees ego
as being a major barrier to success. He makes efforts to create an
organization where frank discussions can take place without emotions getting
involved.

~~~
rhizome
Ego minimization is a hallmark of cults, inflicting torture, and the military.
What Dalio is looking for is a reliably top-down-authoritarian company.

~~~
buff-a
Complaining about ego minimization is a hallmark of egos.

~~~
rhizome
Observations aren't the same thing as complaints.

~~~
buff-a
Using logical fallacies[1] to complain, and then claiming that those remarks
were merely "observations" is a hallmark of egos.

    
    
      [1] http://www.fallacyfiles.org/guiltbya.html

~~~
rhizome
Are opinions hallmarks of egos as well?

~~~
cakeface
I think one of Dalio's principles answers that.

"Ask yourself whether you have earned the right to have an opinion."

