Are Ray Dalio's Principles the Secret to His Success?

Are Ray Dalio's Principles the Secret to His Success?

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unsubscribe at any time i'm delighted to  have Rob Copeland on the channel today to discuss   his new book the fund about Ray Dalo the founder  of Bridgewater Associates the biggest hedge fund   in the world this is the first time I've been  sent a book from a publisher that required me   to sign an NDA and that's because the book is  somewhat controversial Ray doio has written   a number of books and made numerous media  appearances describing how his principles led   to his phenomenal business success rob a finance  reporter for the New York Times who was the hedge   fund reporter for the Wall Street Journal tells a  very different story I wouldn't describe this as   a negative book I feel it simply gives a different  perspective on Ray Dalo the book calls into doubt   whether Dio's well-known principles were at the  root of his success or if other attributes led to   his rise to the top of the hedge fund industry  the book draws on hundreds of interviews with   those inside and around Bridgewater and questions  if Dio's much promoted principles were truly the   secret to his success or if they were the  foundation for a toxic culture of paranoia   and backstabbing within the firm as some people  say the book just came out today so let's talk to   Rob and see what he has to say welcome to the  podcast I very much enjoyed reading your book   I got it maybe about a week ago and read it once  again kind of like zek's book I read it in a day   or two just because it's quite a compelling read  and it's it's a topic I'm quite interested in um   can you tell me about how you first like what  made you decide to write a book about Ray doio   and Bridgewater sure and first of all thank you  for having me on Ray alio and Bridgewater have   sort of been a part of my life now for probably  close to a decade and a half I actually got my my   teeth started in financial journalism at a hedge  fund trade publication and they were writing a   cover story about Bridgewater and when I joined  in 2012 so really since then it's been it's been   a topic for me I've been sort of Gob smacked by  Ray's entire publicity tour over the past six or   so years you know he wrote his own book principles  life and work and I think you can you if you know   nothing else about my book you should know that  I believe I've written the first non-fiction book   about Ray Delio and and the principles this is  the first book I've received for a review that   came with an NDA so obviously there's a certain  amount of controversy around this book um I and   I see also it's filled with footnotes from uh  Bridgewater lawyers kind of clarifying their side   of the story has Ry read the entire book are just  parts of it and kind of how does he feel about it   well what I think we'll probably hear pretty soon  how how he feels about it uh we're recording this   right before the book comes out you're right  you did sign an NDA this has been such an an   incredibly exciting nerve-wracking Journey for  me I told Ry about this book personally in mid   2020 and he responded very poorly I told him in an  email and almost uninterrupted since then before a   word was written of this book he's been hiring law  firms and PR firms to yell at me to pressure my   publisher they threatened us with a multi-billion  dollar lawsuit this is all literally before the   book was written while I'm still talking to people  about it and just because he doesn't trust you to   tell a story that he'll like it's fair to say that  Ray doesn't really like any independent journalism   about him that is less than 100% la it's not just  me I currently write for the New York Times but I   was a Wall Street Journal reporter for most of  the time I was writing this book there are New   York Times reporters that he has attacked you know  Business Insider pretty pretty much anyone um of   course other colleagues at the Wall Street Journal  now he doesn't have a copy of the book but I did   hire a fact Checker and the fact Checker sent Ry  every single fact to my knowledge that's in this   book there were lawyers instead of responding  to the fact Checker he hired a bunch of liable   attorneys to threaten lot of lawsuits they sent  us hundreds of pages of letters and I Incorporated   their feedback look I listened he he didn't want  to be interviewed in a way I didn't need him to be   interviewed he's done a lot of interviews I think  I could probably cosplay an interview as Ray doio   at at this point and and you have interviewed  him multiple times in the past right like for   the Wall Street Journal and so on oh oh yes it the  wonderful thing about Bridgewater for many years   was that it was sort of like the easiest hedge  fund ever to write about because Ry would just   get on the phone and just couldn't stop talking  so uh I I've always heard his perspective I'm   open to hearing more of it now but um look I  think it's time for other people's voices to   be heard that's what this book is about when I  read this book there's you know there there's   plenty of skepticism in there but I also felt that  there were a lot of insights as to what made Ry   successful and maybe even stories he wouldn't want  to tell himself but just even about his skill at   uh you know getting along with people he uh you  know kind of made good and influential friends   he was well read to the extent that a a rather  wealthy family took him under their wing and uh   you know uh he was even sort of asked by this  very wealthy family to sort of put some polish   on their grandchild you know they they saw that  much in race so to me there's maybe a different   perspective on what brought about race success  but a different perspective doesn't you know it   doesn't mean that either is necessarily right or  wrong what what do you think about that I think   it's really interesting what you just brought  up because I do go into race origin story Rey   has told his own origin story many many times  including in his own autobiography but what he   I think he may have mentioned them off hand  maybe once but definitely not in principles   he's never talked about this wealthy family the  Lives who really took him in as a surrogate son   and what I found so interesting was it was a  huge part of his life and how he was able to go   from being you know the son of a jazz musician to  this world famous multi-billionaire but he leaves   that out of his story because I and I I can't  answer for him why but I can say that with the   lives in the story you realize that it's not all  smarts it's also connections that he also sort   of weeded his way into this into this family  by the way not illegally either he was quite   he was quite Charming what I love about this is  after I started asking people about this family   and this whole background about Ry magically it  showed up on his Wikipedia page I didn't put it   there but all of a sudden it was like okay this  is going to be out there and we you know I'll   let him answer uh whether he had someone up  that yeah I mean to me it's sort of like it's   I I'm not sure that there's an obvious reason  to hide this story either it's sort of a great   story that he's a young guy from a you know kind  of middle workingclass background who's a golf Cy   who manages to you know through cuz actually my  takeaway was that he was very well read and he   was able to have the kind of conversations that  maybe these people didn't expect of a golf caddy   and they saw something in him and you know he  attended every Thanksgiving dinner and things   like that like you know there's that that says  something about him it doesn't it doesn't actually   say anything negative like there's not much to  hide I would think with a story like that for for   most people for for most people right but not not  for Ray and not for a lot of successful business   Titans now now Ry also has almost never talked  about how his wife is a Vanderbilt WI um you know   she's part of this colossal famous uh Legacy with  with an amazing amount of wealth what Ry and what   you know Elon Musk likes to talk about this a lot  of other people they they love to tell the rags   to Rich's story about how they pulled themselves  up through their smarts and I I want to be clear   though I believe that Ry has caused a lot of pain  and I do believe that the principles are nothing   like what he said I don't believe he's a dumb man  I don't believe that he didn't put in the work he   that but I do believe that there there's a more  complicated more human story that for some reason   he honestly has not been interested in telling  yeah no CU it's even interesting like the some   of the notes I've got down here about how he you  know takes brief cases full of research reports   home with him every weekend like he you know he's  a very wealthy very successful man who it would   appear works very hard like it's you know there's  no uh you know there's no sort of cruising along   um I think the other the kind of one of the the  big issues that I think many people have puzzled   over with Bridgewater is that that there's a huge  staff at Bridgewater and and it would appear I   think Matt LaVine has kind of joked about this  in the past that almost 90% of Bridgewater is   kind of uh you know people dealing with the dot  program and you know F uh the the extra 10 % is   kind of actual investment work and that that's  kind of a feeling I get from your book as well   like I I I I feel I was three quarters through  the book and I was like who does any investing   at this firm because um well I'll I'll let you  uh take over there well first of all I'm a great   fan of Matt LaVine and he's he's he's right but  he's wrong there he's actually overestimated the   amount of the firm which is devoted to actual  investing uh what I found out was that inside   Bridgewater which had at Peak had more than 2,000  employees all these temporary contractors paler   all of these consulting firms there was something  called the circle of trust inside there were about   10 people who signed lifetime contracts and they  were the only people who purportedly really knew   uh what was going on with the investing so I I  would actually take another step further I would   say all this apparatus really boiled down to to to  10 people well it's it's even interesting because   one one of the big uh people who feature in the  book is Katina stepanova I hope I'm pronouncing   that correctly and that that's a story that I  happen to know because it was a a big uh there   was a lot of press around sort of the rise and  fall of of mar Capital unless I get this wrong it   would appear that she was almost a human resources  person who then went out and launched a hedge fund   and to a certain extent then it came out that she  hadn't really done anything to do with investing   at Bridgewater well I would say I would say this  I think Human Resources is is maybe underplaying   it a tiny bit but it's definitely true that  she was not part of the circle of trust what   I thought was so interesting was that she was very  close with Ray Delio and he did treat her frankly   any reasonable Observer who reads the book will  see that he treats her fairly monstrously but she   keeps going back to him again and again and again  and he does sort of have this siren Call with with   people and then look she did not have a a positive  depart uh separation with with them and I don't   carry her water in in the book I don't claim she's  a she's one of the world's great gifted investors   but it is interesting to me that there was so much  attention paid to her and so uh relatively little   attention paid to the world's biggest hedge fund  and what it's really like there under under the   principles in Ray in a way I would argue that  there's no real heroes in the book you know you   go through it and well Patrick the last chapter  the last chapter is called No Heroes spoiler so   one of the things that that interested me in the  book is that there's so many people who are quite   wealthy like you know one way or another like even  if uh Rey is withholding a few bonuses for various   reasons people are getting wealthy working there  and one of the people I forget his name off top   of my head but the guy from Apple the inventor  of the iPod who worked there there's he comes   off reasonably well in that he sort of sees  the shark circling in the water and announces   that he's out but there's even still a period of  humiliation for him and I guess the thing that   surprises me is that these people get so wealthy  and they're in a position where they don't have   to be mistreated but they I I think they're so  uh drawn to the light or something that people   tolerate you know there's a level of like if if  you're kind of been called into an inquisition   and you've seen this happen a dozen times already  you you know what's happening you know you see   the hangman standing there it would appear to me  that that I I'm surprised that so many people put   up with this Behavior especially when they don't  have to well this really gets into the 20 billion   question right first of all you're thinking of  John Rubenstein and I actually remember Ray doio   telling uh the editor-in-chief of the wal Street  Journal that John Rubenstein was coming in and he   was going to save the day so me finally finding  out years later uh through reporting what really   happened with John Rubenstein is is just like  it's watching the behind the scenes to a movie   you know uh that that you saw many years ago now  why do people stay at Bridgewater a lot of people   ask that the probably two main questions I get  why do people stay is it a cult I will tell you   John Rubenstein John Rubenstein knows better for  sure he knows he also got paid $50 million to do   he I should probably say he got paid about $50  million to do close to nothing of worth and as   part of his separation agreement he got to keep  the money and he wasn't allowed to say anything   about Bridgewater he's a wealthy man and he took  the extra money so this is Ray alio loves to say   over and over again that there are just a small  number of disaffected employees who whisper about   him and I don't think I've ever heard him address  why he makes employees sign these strict ndas why   he goes after employees who say anything anod  about him publicly and why he has to pay people   so much when they're leaving just to make sure  they don't say anything about him you know there   is always I guess in Wall Street are on uh you  know hedge funds this the importance of keeping   secrets in particular investment secrets and  even you know you can understand having very   high quality it to prevent we'll say at a Quant  firm you can't have someone hack in and steal all   your trading alos and that kind of thing but it  would appear that security was maybe surprisingly   high at Bridgewater with uh you know people like  Comey working there and even there's a a piece in   your book uh you know I I don't think you you  confirmed it I think you said that there were   rumors that there were microphones hidden in the  woods outside of the office building when Comey   worked out that sometimes people went out in  the woods to have a private chat well first of   all there's plenty that isn't a rumor about Jim  comey's time at Bridgewater that's that's just as   uh as wacky frankly but it's absolutely true that  there is a I mean an employee a former employee   sued Bridgewater he called it a quote cauldron of  fear and intimidation and rather than have that   lawsuit go forward Bridgewater paid a settlement  so it requires a reporter to go in and and try to   figure out the to get to the bottom of it so far  as the surveillance goes look almost everything   at Bridgewater is and was recorded you're  constantly being watched people would come   back to their computer screen if they didn't put a  screen saver up and they' already be a posted note   from security saying why didn't you put a screen  saver up there's an incredible amount to this day   of fear inside Bridgewater that B that essentially  anything you say or do can be used against you   it's absolutely true that people suspected that  even the woods were being monitored that even   if they took a personal phone call out there it  would be listened to Ry and Bridgewater like to   say that every trading firm protects its Secrets  my findings and the book would suggest that there   really weren't too many actual trading secrets to  protect that that this whole security apparatus uh   really just intimidated and squelched any true  dissent inside the firm well it's interesting   because even just as we've just said like the  level of Staffing close to 2,000 people you know   you look at some of the other huge hedge funds  I I doubt Millennium hires anything like that   many people and it's because most of the staff at  Millennium would be focused on investing and and   as I said that was one of my takeaways reading it  like you're three quarters of the way through the   book and you're like everyone's you know watching  videotapes of you know who didn't wash their hands   at the bathroom or something like that and no real  work is getting done and that that I I guess you   know Ry is a wealthy man if he wants to SP spend  his money on a huge sort of security apparatus and   uh you know building an app that That Never Comes  to much fruition I mean you know it's his money he   can spend it how he wants but it it does come off  as quite bizar and it also comes off maybe as a   a very challenging place to work well that's the  understatement of the century a very challenging   place place to work I I agree with everything you  said the you're right the book is is does focus a   lot on these internal trials and tribulations  I would also say that if you read rais books   not just principles but the sequels they say very  little substantive things about investing and what   he's become famous for what he talks about in TED  Talks what he talks about in interviews with you   know gwenneth paltro Charlie Rose on all these  TV programs it's almost never about investing   and part of the reason for that is that he has  really pinned his legacy on the idea of these   quote unquote principles and on the fact that he  has the answer to what you should do to live a   more meaningful and meritocratic life so I think  if you read this book and you and you finished   that and you believe that Bridgewater is a is a  meritocratic place then uh then you've come to a   different conclusion than I have well there there  was a very comical part in the the book about what   Christmas is like at the Dalo household do you  want to tell that story so this was this was very   amusing to hear here and by the way one of Ray's  Sons worked at Bridgewater so it it wasn't I I   made a very clear point in the reporting of this  book I didn't go around asking people about his   wife I didn't go around asking people about his  kids who didn't work at Bridgewater unless they   showed up at a Bridgewater event I didn't want  this to be um you know to go to go there because   I think there's plenty that R does there's no mck  raking just to be clear in the book like the book   is about a a large business and how it runs and  you know I think in truth as I said it shows a   lot of um the positives as well like even you know  like in terms of Rey's pitching of the principles   you could make a very good argument that Ry is a  genius at getting PR and and how do you run the   biggest hedge fund in the world well he went on  Oprah while everyone else was going on CNBC you   know like he he learned how to get his name out in  the world and that obviously has value I'm going   to come back to your question about the about  the Christmas morning but I want to talk about   the the I I would agree with you he is brilliant  at PR I would also say to my knowledge he's never   spoken publicly about that Oprah interview and  it's because it was a bit embarrassing for him   for me to get that Oprah interview I I actually  had to figure out who at Harbo Productions Oprah   I had to find the right person I had to ask for  the archives I had to sign a release it's not   that episode of Oprah that he was is he's never  talked about it um and I believe it's because in   retrospect if you look back on what he said on  Oprah uh he he really comes across uh I would   say it's not appropriate for 2023 I put it that  way but but let me answer with Christmas morning   because it's one of my favorites which is that it  was relayed inside to many people at Bridgewater   including by his son who worked at Bridgewater  that on Christmas morning if his own kids gave   him a gift that he didn't like or that he didn't  think was appropriate he would ask them right then   why did you buy this gift what thought process  did you go through that made you think this was   a good gift like can you imagine I've never by the  way given my dad a gift that he actually liked I'm   fairly sure true I my dad has never done well  out of gift from me either yeah exactly so it's   my dad is a big fan of the New York Yankees and I  think I've bought him every book that's ever been   written about the New York Yankees and but you can  just see it's fairy Ray delot even with his own   family even on Christmas morning you can imagine  them giving him a tie that he thinks is ugly and   him saying I want to probe your thought process  here with this tie it's like it would it's if it   weren't true it would it would seem too strange  to be true you know no the there's an interesting   thing in the book because I feel even I've got a  a copy of one of his principal books here uh that   that I can't claim to have read in its entirety  but I have looked through it and I think there is   a thing of sort of Wall Street guys investors in  particular kind of short-term investors are always   fascinated with decision making right because  that's what you do for a living and getting good   at making good decisions and and analyzing your  bad decisions might improve your your work so   so I do understand that but it would appear that  uh for a long time Rey didn't really do this so   much right like at what point did the principle  sort of take over from the investing process at   Bridgewater so the the really crazy thing about  researching this book is I thought that I would   find the moment you know that moment when the  principles are metastized and weaponized and I   could say Okay From This Moment onward it really  you know jumped the sh shark and the truth is that   the the principles he doesn't even begin to talk  about such things as principles until about 2005   he's he's already a billionaire by then by the  way he's already he's he's got more money than   you could ever spend and Bridgewater is a very  successful firm and he starts to look for like   a higher meaning in life that he's about something  more than more than money and when the principles   begin when he starts talking about them inside  Bridgewater even his longtime partner Bob prince   who still there tells people look these are just  raay things these just raay principles like we   don't we can respect them but like this isn't this  isn't tablets handed from from the mount um and   then as time goes on as he becomes more famous  after so-called predicting the 2008 financial   crisis he's he starts to sort of weaponize them  against people he keeps making up more and more   principles and it's probably for the last 10  years I think it's fair to say that his close   to full-time job has been deleting principles  creating principles finding new ways to put people   on trial according to the principles and promoting  himself publicly as the world's Premier most   principled man it um it it would appear there's  something slightly uh Nostradamus like about   some of these principles in that even the greatest  devotees struggle to um uh to to analyze them in   the same way and I guess one of the parts of the  book is about how he hired in teams of people to   to sort of code them up um do you want to explain  that and kind of how that went so so this is core   to Ray Delio's public argument which is that he  uses the principles to create these this whole   ratings apparatus where he where employees rate  one another and so that through this quantitative   system system you know it separates the wheat from  the chaff that we find we sus out the best talent   inside Bridgewater at certain things and I am I'm  going to spoil something in the book but it's in   the introduction so you'll you know it's in the  first 10 pages which is that this whole system   was rigged from second number one to make Ray  doio the top or close to top ranked person in   almost all important categories and once you know  that once you realize that to be true and it is   is true the whole thing looks different then you  realize that he's creating all of these tools to   talk about essentially to reprove that he's the  greatest over and over and over again well there   there's even a a a number of sort of entertaining  points in the book where he'll have a disagreement   with someone I I think there was even um I forget  there was a professor from Harvard who was in town   they had a disagreement and said to them well I  think you'll find you're wrong let's run a quick   poll on the iPads to see who's right here and all  of his employees are voting and then he goes well   you know I won that poll you're wrong and it's  like well everyone in the room is economically   incentivized to say that one of these two people  is correct but does he do you think he doesn't   realize that or he realizes it but he just kind  of wants to win the argument so that first of   all that's n Ferguson The Fairly famous Harvard  professor and yes that did happen it's actually   a favorite thing of Ry and others at Bridgewater  to do is you stop a meeting at his tracks and you   hold a poll but remember your your votes are  sort of weighted based on how how believable   how credible you are so rais vote counts more than  yours now but but even if it was equally weighted   if we have the CEO and the cleaning person in  an argument and you you ask the staff who's the   winner of the argument it's like um who whose  name is on my paycheck again I know isn't it a   fun read honestly it's it's and by the way Patrick  you're not even exaggerating that poll does exist   it in the book of him and a facilities person so  that's that's you're not even making that up the   does he know that it's all horeshit is is a big  question you know if he knows that it's all you   know bunk to me that would to believe in such  such a profound level of of evil really given   the pain that he has caused so you know I'm  not a psychologist I can't tell you what he   knows and doesn't know but I choose to believe  that he doesn't know because if I if he did if   he did really know the effect of his actions on  others and as the book makes clear people told him   over and over again in writing in emails you know  in absolutely there you know if he I think he's   for some reason he stopped himself from really  realizing what he is and what the principles are   um because if I think about it another way then I  I just find it too upsetting there there is like   one defense that he puts forth I forget it might  have been his lawyers who sent it to you sort   of said um that interviewing ex employees to to  write a book like this is a bit like interviewing   someone's ex-wife to uh to write a book about  them in in that of course all you'll get is the   complaints and I I do think there is some validity  to that argument but the the other side of that is   that that polling your employees uh you know  is is not going to to bring you to a great   answer either but how do you feel about that like  were there employees that you spoke to because of   course it's easy to discuss maybe the the sort of  more scandalous outcomes but were there employees   you spoke to who seemed maybe more devoted to  the firm who who felt that the principles had   helped them like that that uh you know following  this approach lifted them up and made them think   more clearly so the argument that you've just put  forward which you're right Delio's put forward and   his lawyers put forward is it's nothing short  of a straw man argument I didn't simply speak   to ex-employees I spoke to many current employees  is I spoke to people with great fondness for Ry   who feel sad about what he's become and what the  principles have become it's not a bunch of I spoke   to people with you know just complicated feelings  who who said that there were good aspects of this   but then they would see it turned against them  or turned against others and have just made them   sick you know in the book we have his own you know  Human Resources people telling him in writing that   this is what people are saying people fear being  fired constantly and him just dismiss missing it   so I I don't buy that it's you know it's just a  bunch of EX Ex-Wives I I agree with him if you   wrote a book and you just spoke to uh you know  people who didn't who had acrimonious departures   I agree that would be misleading that's not  what happened here another interesting bit in   the book it's kind of early on in Rey's career  um when he speaks with Paul Tudor Jones and he   to a certain extent this is almost a bit of a  foundation of Prince Les where he explains to   Jones that he wants to put together a bunch of  rules for investing that are based on kind of   good decision making and to invest that way and  to only change a rule once research has been done   that shows that the new rule is better than the  old Rule and that that that was an interesting   story but it didn't at least in the early days  work out right well let's give Ray credit here   that was a genuinely uh impressive approach in  the late ' 80s early 90s and you're right Paul   tutor Jones took a look at his system and said  that it it wasn't worth employing at at tutor   um of course ironically then Ry who also lives in  Greenwich Connecticut with with uh Paul becomes   much wealthier than Paul from allegedly this  very this very system what's what's interesting   is that what this approach though Ray claims he's  literally said it's quote Timeless and Universal   and you know and I know and anyone if any in the  financial industry that it is so hard to stay   ahead on trades it is you have to invest so much  in technology and even then you may not be right   I used to work years ago for Victor neidhofer who  was one of the early Quant Traders and Vic's core   belief is that any system that you can find that  works has to St stop working as people employ it   because it you know the your trading changes  the markets but in a way when I look at that   early conversation between Rey and Tudor it's  um it's almost like he's come up with an idea   for quantitative trading but maybe isn't a Quant  himself you know so and I think that was even how   it fell down was that he put rules forth but then  I believe tutors team back tested those rules and   they didn't find that they sort of sounded logical  but they didn't work in the real world and did did   Ry move towards eventually like is there sort of  a a a quantitative basis do you believe for for   his trading since then so the word quantitative  is interesting there because Bridgewater is very   careful and Ray to to describe it as systemized  it's a systemized system system so there is an   investment system they would say now the degree  to which it is quantitative in a Neer Hofer   way or Renaissance Technologies way there's no  evidence that it that it is and in fact there's   a lot of evidence that it isn't because it would  Bridgewater simply doesn't invest or employ those   types of uh employees they don't have that type  of trading system as I say in the book someone   as recently as 2018 who joined the investment  team couldn't believe his eyes they were still   using Microsoft Excel so this isn't a Renaissance  Technologies the argument so far as the best that   I could tell and I've spent a lot of time talking  to current and former investment employees there   is that if there is a rule if there is a theory of  history that Bridgewater considers that a system   that's systematized now and and to be fair in the  1990s and the early 2000s that may literally have   been a fair definition of systematized I I don't  believe that it is anymore because the world has   blown past that and we now we now now two Sigma  and Millennium and all these firms when when they   say that they have a systematized investment  process they mean bang bang bang process to a   certain extent even looking at uh Ray's principles  book in a way I would argue of course based on my   background that the way you come up with trading  principles is statistical analysis right like   you you find you come up with a rule you see if  it worked and then you see if it works um while   the principles in Ray's book seem almost to be  leaning in that direction but never really uh   becoming numerate they seem to to sort of stay  in the world of uh uh their descriptive uh ideas   that that can have many meanings so you and I  know you've read the man who solved the market   about Renaissance Technologies my my friend  Greg zuckman wrote that it's a great book even   in that book you know Jim Simons says essentially  that even he doesn't even fully understand every   trade that's going on at every moment and that  he shouldn't because he is this colossal thing   and that you know ideas go stale constantly  so to the degree that Bridgewater and Ry have   always stuck to rules that only Ry can understand  they are falling behind the standard of of the   true leading hedge fund that's what I would say  another big part of the book was almost the idea   that at a certain point Rey kind of was inspired  by I guess two big names came up Warren Buffett   but maybe more so uh Steve Jobs and maybe uh sort  of building a legacy of being remembered as sort   of a great business leader or someone whose whose  thoughts sort of go down in history as being um of   great import do you do you think that's really  like kind of the TED talks and whatever is is   that his goal is to have sort of a legacy that  is greater than just the numeric returns that   he achieved at Bridgewater okay so Patrick I know  that at point in this interview I have used some   hedging language and I've been careful because  I'm under a multi-billion dollar lawsuit threat   however I'm not going to use hedging language here  there is no doubt in my mind that Ray Doo's goal   is to be seen as a Steve Jobs like Warren Buffett  like figure period full stop I would be shocked   if he claimed otherwise he has been obsessed with  years for for years with being someone like Steve   Jobs he wanted Walter Isaacson to write his own  biography he hires Steve Jobs's you know former   lieutenant John Rubenstein like like we talked  about absolutely could not stop talking about   Steve Jobs for years years and that if you really  want to know why does he keep talking about the   principles why can't he admit what we know to be  true if you read this book you know it's not what   he says it is he can't he can't because he's put  all his chips in that basket but saying that I am   the most principled man on Earth yeah it's it's  interesting because about a year ago I feel I saw   a video with like P Diddy and um yeah and Ray like  talking about did he claim is the idea that Ry is   P Diddy's Mentor literally not even the idea Ry  says P Diddy asked him Ray doio to be his mentor   I asked P Diddy's representatives to confirm that  they would not confirm that I think that speaks   for itself now does Rey rap at all like is there  any evidence of rap music haven't come from Ry   there there is not I would also say there's very  little evidence that I found of true animating Joy   coming from Ry except when he is you know faying  one employee or or another um I'm not saying he   doesn't have hobbies or jewes that he doesn't  have happiness in his life but for years he has   seemed to to be just miserable with those those  around him um that that is a Steve Jobs quality   too by the way if you read Walter ison's book in  a in a funny way many extremely successful people   they are extremely successful because they are  so focused on their thing and so you know it it   wouldn't be as much fun to necessarily hang out  with someone like that as someone who uh lives   a looser and less uh focused life you know it's  you know even you read about people like Warren   Buffett you know he comes off as a very uh nicer  Old Gentleman on TV but equally I I believe he you   know spends 100% of his time trolling through the  accounts of companies you know he he's not a he   he wouldn't be a guy you'd go out for a drink with  on a Friday night so I'll I'll I'll I'll tell you   this even though it's not about Ray Delio because  I think you're you'll enjoy it which is two or 3   weeks ago I I spent about a half hour 45 minutes  talking to Ken Griffin the founder of Citadel uh   for a New York Times story that we did about um  Harvard's response to um in the Harvard student   groups this is not about the book but I've known  Ken on and off we not none neither I nor Ken would   claim to be personal friends I'm a reporter who  occasionally covers him but in the course of the   conversation you know we're talking he's asking  my opinion I'm sort of saying like well you know   I'm here to interview you whatever it's a back  and forth he knows he's talking to the New York   Times I'm not claiming again that you know that  this was the unvarnished Ken Griffin in all of   my conversations with Ray doio over the years he  never demonstrated that quality that ability to   to just have the back and forth he just wanted  to tell you why he was right over and over and   over again and why you were wrong over and over  again and I have to imagine that if that's what   he's saying to me who you know a Wall Street  Journal and a New York Times journalist you   you have to transpose that to what if you worked  for him what if you were you know his his child   what if uh what if you were a friend because if he  can't even put it on just a little bit just for me   the Wall Street Journal and the New York Times  gosh what do he like behind closed doors yeah   I I guess I'm only so surprised that you know  one of the wealthiest people in the world is   awfully intense just because I think Ken is sort  of like they're all intense but they don't all   spend their entire conversation with you telling  you how you're wrong and they're right they have   they have other interests it's a bit of a puzzle  it it would appear as well at least in the book   there's a feeling that there are certain chosen  ones at Bridgewater For Whom the rules don't seem   to apply like for example often when uh there's a  a a big dispute at work uh that's controversial it   sounds like it's all videotaped edited uploaded  for everyone to watch and to analyze even maybe   years later when they joined the firm but there's  one or two staff members who seem to not undergo   the same scrutiny and and I'm slightly surprised  that that's the case because you would almost   think that someone who is so focused on this  system would broadly apply it or or not apply it   at all like it's it's a bit interesting that there  are possibly chosen ones within the firm what what   do you think causes that well first of all I would  say if if your reveal is that at Bridgewater all   animals are equal but some are more equal than  others I would I would agree with you on that   I know it's like a clich to bring up at this  point but look raise number two Greg Jensen for   many years was the one that everyone thought would  succeed him and as the book gets into Greg really   did was held to a different standard for many many  years and then when Greg came just that close just   about when he was just about to reach that that  that golden chalice Ray puts him on trial and Ray   pushes him all the way down and he makes Greg  go on what he calls a hero's journey you know   to the bottom and back so I I do believe it is all  planned you know he allowed Greg to get just right   there and then wanted to be able to show that  even Greg can be broken by me a large criticism   of hedge funds in general that they never have  a continuity plan like Goldman Sachs Morgans the   investment banks have a continuity plan the hedge  funds are always sort of one guy and if that guy   loses his Edge or if he retires there's not much  left um Ry seems to have attempted to have the   continuity plan but I think equally never wants  to give up any control and and I think there's   many sort of um even small businesses family  businesses things like that where where you see   that sort of thing at play is is it very different  at Bridgewater or it's just uh sort of that idea   on steroids well it's definitely that idea on  steroids I would say what's different about   Bridgewater is that you know you can have a family  you know the the guy who runs the launder B my by   my apartment I I believe he'll be there until  he physically cannot be but he's not claiming   otherwise Ray for literally two decades claimed  that he was just about to retire he was trying to   retire he had a system to retire but then he would  always find an excuse why those around him were   disappointing him and when they were disappointing  him it was neverita bling excuse to show why   he Ray doio couldn't quite leave them now this  continues to the present day you know I reported   in the New York Times just a few weeks ago that  even now he's allegedly retired he allegedly   doesn't have a full-time job there but he's still  on the board and he suggested to the board that   since their Investments aren't working maybe he  Ray Delio should be starting his own fund inside   Bridgewater he's you know that's quite different  from just not wanting to retire that's want that's   always needing and wanting to be right yeah now  another thing that was surprising in the book was   are maybe not surprising when you realize maybe  how uh how uh important control appears to be to   Rey is some of the heroes that he is supposed  to look up to like uh it says Putin and X in   China and even to the extent of having uh sort  of a a team of uh what would you call it sort of   security Personnel that he refers to as the polit  bureau sure is that like is that widely spoken   about this idea that like his sort of interest  in authoritarian leaders or nothing is widely   spoken about at at Bridgewater there is there is  a a culture of or and there there was a culture   of not saying what you knew would you know would  get Ry angry so far as the creation of the poot   Bureau which is literally he Ry was literally  inspired by China's there's almost nothing I   can say about that that the name doesn't say you  know in itself he literally created a poot Bureau   inside Bridgewater which functionally existed to  investigate pretty much anyone Ray wanted for any   reason and all of these people inside Bridgewater  all of these purportedly independent thinkers all   of these people who you know have the power and  responsibility under the principles to speak the   truth they all want they all went along with  it they took the paycheck and they kept going   now as the book draws to a close there's a bit  of a feeling that at least within it as the the   principles went out into the world in terms of uh  you know Ray um TV appearances and speeches and so   on that the co lockdowns might have brought a lot  of the systematized principles within Bridgewater   to if not an end uh that that they were reduced  significantly is that is that what you see that's   that's true it it it proved to Ry for Ry tough to  be a bullet you know through zoom and Bridgewater   and Ray have never acknowledged that he continues  to go on and talk about the principles as if you   know nothing nothing has changed but at the  end of 2021 Bridgewater lays off the majority   of the staff which is devoted to these this huge  apparatus you know the poet Bureau doesn't exist   anymore it it only really exists in the popular  imagination and in Rey continuing to to talk about   it Rey asked Bridgewater to pay him this this  man is worth an estimated $20 billion he wanted   Bridgewater to pay him a licensing fee to continue  to use the quotequote principl tools after Ray had   retired and it was a grave miscalculation because  that was a great excuse for the current leadership   of Bridgewater to say oh no we can't pay for that  and then to dump it but but isn't the firm still   majority owned by him like he could if they're  managing his money he could just forced them to   uh you know follow his rules or no is it is it  much more of an independent firm now here's how   I'll answer that who who do you think has the  power do you think it's the person who has the   name chief executive do you think it's the person  who is the title Chief investment officer or is it   the one man who at any moment could simply decide  to write a tweet or a LinkedIn post or go on CNBC   and say one sentence all he has to do is say I  don't have confidence in the current leadership   of Bridgewater Associates that's all he has to  do the firm is over so who who really holds the   power here yeah I mean it would seem and even  just the fact like if if he announced that he   was pulling uh he was managing his own money  rather than having the firm manage his money   to get it once again it's even it's back to that  problem of continuity at hedge funds you know it's   still very much tied to the founder unless you  have uh you know a replacement where who sort   of uh almost outshine outshines the founder of  the firm right well and this is why Bridgewater   for years wanted to talk about its quote unquote  investment system that would live on past diio   what I found so interesting was the firm was  briefly doing quite well uh I think about two   years ago um and they credited that in a letter  to investors they credited that to an investment   committee a new investment committee that did  not include Ray Delia wow H so you know there's   some tension there and what has the long-term  performance of Bridgewater being like has it   has it generally cuz you know say what you will  about uh you know whether a guy is likable or   not you know you don't really put your money  at a firm because the founder is likable you   put it there to generate returns um I know in  the book it implies that returns fell off after   the credit crunch but in the you know if you look  at the entire history of the firm uh kind of on a   what can I say like not just returns but a sharp  Ratio or returns for volatility basis like has it   been a good place for people to have their money  well I would disagree with you on one thing yes   it's true that you or I when we're looking at our  401K we want to we want to make the best return   risk adjusted but I I would actually disagree and  say that you do in in institutional investors in   many cases do put their money with firms where  they like the founder where they where they buy   into the story now so far as and and Ry is one  of the world's great storytellers now so far   as the returns if you look from inception from  the start of Bridgewater of course they're going   to look good it includes years where the firm  had virtually no money um under management if   you look over the past say 13 years since uh  since the start of uh 2011 11 it's extremely   poor performance relative to the markets relative  to other hedge funds um it's muddled around flat   many years and Rey has used that unbelievably to  his Advantage he says well look we're not losing   you money we are stewards of capital it is a it is  a wonderful marketing slogan but it doesn't appear   to be lasting forever because this firm peaked  at around $168 billion now it has last I checked   around 125 billion maybe even less if this firm  which is still massive oh my gosh I I'll take it   by the way but I'll I accept um and the fees I  I thought at one point in in the book were the   was the management fee over 3% or something like  that on on it depends the is a sliding scale and   there's a number of funds but the firm was so big  that on pure Alpha even just a 2% management fee   was just an incredible annuity for everyone and  um and remember in hedge funds you're paying a   a performance fee on any performance over zero so  yeah markets since 2010 have been up up up overall   so the the fact that Bridgewater hasn't been  close to matching them doesn't even matter too   much because they're charging a performance fee  just on any raw performance period no it's it's an   interesting one because well for one thing fees do  appear to have gener generally come down quite a   lot like I think most I think most funds nowadays  you can probably invest at one and 10 like there's   not not many people that get away with 2 and 20  anymore but even the initial idea of 2 and 20   was sort of a a thing where you'd take a great  money manager and you'd say look uh you know go   wild but with a hundred million and we'll pay you  this big fee structure but once it gets into the   billions you know the idea was that the two would  sort of cover the hiring of a few staff members   and paying the rent on the office and the 20 was  the was the incentives like that that's where the   wealth was being generated while obviously when  you get into the billions uh the two becomes uh   frankly uh if not really more significant than  the 20 right uh AB it's the oldest Story Ever   Told in in hedge funds that um about these these  incentives um but what I I will say is in order to   keep that that management fee in order to keep  those assets you've got to be able to convince   people that you over and over even in bad years  that you have a repeatable investment system to   stick with you and I can't criticize Rey for  being anything other than the world's greatest   hedge fund marketer and in in that sense now if  there were because people do want to learn you   know the reason even people read biographies  autobiographies whatever it might be is that   they want to walk away with a few lessons as to  like are there things that I could change about   myself to uh you know sort of optimize The Way I  Live to um you know to be more successful whatever   successful means are there takeaways like have you  learned something from Rey um about sort of how to   uh you know that has improved your life absolutely  i' I've even sent talked to Ray about this and and   his he has a principle called trust in truth which  is essentially means uh to you know try not try   not to find excuses to to lie they trust in truth  now he doesn't follow this really very often but   it's a great it's a great principle and the what  I honestly have taken out out of him is from him   rather is this IDE idea that if if you're in a  disagreement with someone it's okay just to stop   the stop in his tracks and say hey I think this  is what we're disagreeing about I think it's this   thing what can we have it out just right here on  this so that we can move past it as opposed to   you know looping back two hours later to say like  finding the core of the problem and saying this if   if we can solve this we can solve the whole thing  right I think it involves much more empathy and   and that humans are endlessly more complicated  than than Ry might believe but I have honestly   learned that even in my my day job you know at the  New York Times if I'm having a disagreement with   an editor instead of trying to convince her of my  perspective I say okay let's find a third option   here you know it's like we're not eye to eye here  there must be something that like that we both uh   agree with so I've honestly taken taken a lot  from that um I would say that the other thing   that anyone reading this book uh hopefully should  should take away is that there there isn't always   a reason for things you know there not everything  in your life has to be because of a grand system   or a grand dominoes it's okay for there to be  disappointments sometimes there's luck sometimes   you're unlucky and you can move past that it's  it's there are there you right that there are no   Heroes so to speak in this this book but there are  many people even though they're they're totally   they're not powerful at Bridgewater who make the  smallest of stands and then they remove themselves   from it and I find them honestly quite inspiring  because they do what they can but then instead of   staying there and taking the money or instead of  staying there continuing to argue they say okay   I've lost they pick up their chips and and they  go home and I've learned a lot from that sometimes   you're not going to convince the other person and  yeah no there there's interesting things because   you know you you could look at Bridgewater  and say gosh there's an awful lot of Staff   attrition but equally I look around Wall Street  in general you know I remember in my 20s when I   started working at an investment bank and in my  head I thought it would be a whole bunch of you   know grayhair old men and you turn up and there's  really no one on the trading floor much above the   age of about 35 you know and the investment  industry is kind of like that where there's a   lot of you know I guess if you look at the size  of the uh analyst classes at an investment bank   and then the number of MDS you know a lot of  people fall along the path do do significantly   more fall along the path at Bridgewater or is is  this just the nature of the financial industry   that that people get sort of either pushed  out or weeded out however you want to view   it look there's a there's a tremendous amount of  attrition at Bridgewater and I personally don't   have the numbers and I don't believe that he's  ever given them out so I couldn't compare it to   a Morgan Stanley but what I what I would say is  is this that the asset management industry RIT   large is a is a great business for the asset  manager so the I don't quite buy any of the   high-minded patina of if I work for black rock  or Blackstone I'm helping retirees um you know   Teachers Retirement Systems you know ETA Etc  I I I don't need to hear that it's okay the   asset management industry is a great place to  be when you're the asset manager collecting   collecting the fee um I am in journalism you  know I'm a I'm a reporter even in journalism   I would say they becomes a point in your 30s  early 40s where a lot of people do do leave and um I I think it's okay to have multiple interests  in your life this is actually a ray Delia thing   for me but I what I what saddens me most about  him is that he never had another interest he   just kept talking about the principles he never I  don't I have joy in my life I have disappointment   I have you know you I have no doubt that you  do too you know we have we have ups and downs   and he just he just kept flogging this one this  one thing and couldn't accept that the time had   passed and I think to go back to your earlier  question that that probably is the greatest   lesson that I've learned well that's probably a  great point to wrap up the uh the conversation   here I would tell my viewers uh you know that  this book it by the time this video comes out   the book is probably available on Amazon um  it's a great read uh it's very interesting   and actually I would argue you know I've got  both of the books here principles and the fund   and it's reasonable to read both of them and  sort of see both sides of the story and even   uh you know I'll I'll be interested I as you've  said you you expect Rey to uh you know come out   and respond to to uh what's said in the book  and it I'm sure both you and I will find it   interesting to see what he has to say look I  people ask me all the time what I think about   principles about his book and I say it's it's  an autobiography it's one man's opinion it's   fascinating to get inside one person's head what  what I've written is what it's like for the rest   of the people around R alion Bridgewater and  I think that's perfectly valid too so on that   note we'll wrap up the interview I'll leave  a link to Rob's book in the descr

2023-11-14 01:06

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