2/26/2024: The Best Marketer in the World

Principles are complicated

I recently read The Fund: Ray Dalio, Bridgewater Associates, and the Unraveling of a Wall Street Legend by Rob Copeland, Will Damron, et al. A friend recommended this book to me. I have read Ray Dalio’s two best sellers: Principles and The Changing World Order. Principles is an interesting and thought provoking book. Though I don’t agree with what he said in The Changing World Order that China is going to be the new superpower that will replace the USA soon. But Ray Dalio is certainly a good story teller. From this book we also learned that he is a great marketer.

This book basically said Principles and the Bridgewater management system Ray Dalio touted is a sham. The good sound bites such as “Pain + Reflection = Progress” and “Truth at All Costs” sound good on paper but are borderline bullying in practice. There are many many details about how toxic Bridgewater’s work environment was. It was a pretty brutal takedown. But I am not surprised. I am old and cynical enough to know most autobiographies like Principles should be taken with a grain of salt. Mr. Dalio’s lack of self awareness is also understandable since everyone is on his payroll. Think about this. When he asked his underlings, who is right me or Mr. Rando? Of course all the underlings would respond that Mr. Dalio was right and Mr. Rando was wrong. It’s laughable Mr. Dalio used this polling as an example of radical transparency and truth at all costs. He also periodically put people through videotaped *trials* to achieve “Pain + Reflection = Progress”. In one incident, one female employee was asked to mark the dates she had sex with her boss. The employee quit (understandably) but this tells us how far these *trials* could get. Most people put up with this crap because Bridgewater paid people extremely well.

Mr. Dalio is a great marketer. He is a permabear. His fund investment returns were good during 2000 - 2002 and 2009-2011 bear markets but were pretty lackluster and severely underperformed SPY 0.00%↑ in the past 10 years. But somehow Bridgewater became America’s largest hedge fund with $150B+ assets under management. (It’s now <$100B AUM but Mr. Dalio is no longer involved with Bridgewater.) Mr. Dalio is a great storyteller and relationship builder. He raised a lot of money from the Mideast and China despite poor fund performance. According to this book, it’s pretty fair to say his supposed *edge* is very very thin, basically non-existent but he is great at forming powerful narratives such as the Big Cycle in the Changing World Order. In other words, he sounds really credible and what he said made a lot of sense but these great talking points didn’t materialize into actual returns. He was able to monetize his storytelling skills to raise a lot of money for Bridgewater, which generated enormous management fees regardless of performance.  Mr. Dalio walked away a decabillionaire while investors earned a paltry return on Bridgewater funds. 

I suppose the moral of the story is that narratives largely don’t match reality. We human beings love great stories but please don’t believe these stories at face value. The actual world is a lot more complicated and nuanced. Someone who is good at talking about investments is not necessarily a good investor in terms of investment performance. Someone who is good at talking about management principles is not necessarily a good manager.