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'Ray, this is a religion': How Bridgewater lost two top hires

202 points| saeranv | 2 years ago |nymag.com

159 comments

order

throw3823423|2 years ago

I worked with Ferrucci in BW. The internals of the employee rating system that preceded him were hilarious. In short:

Everyone is encouraged to rate anyone else in a variety of categories, as often as possible. Every rating is public. You know who is rating you, and how they did it. Those ratings are put together to get a score in every category, and can be seen by anyone. It's your Baseball Card.

The problem is that not everyone is equally 'credible' in their rating. If I am bad at underwater basketweaving, my opinions on the matter are useless. But if I become good, suddenly my opinion is very important. You can imagine how, as one accumulates ratings, the system becomes unstable: My high credibility makes someone else have bad credibility, which changes the rankings again. How many iterations do we run before we consider the results stable? Maybe there's two groups of people that massively disagree in a topic. One will be high credibility, and the other bad, and that determines final scores. Maybe the opinion of one other random employee just changes everyone else's scores massively.

So the first thing is that the way we know an iteration is good involves whether certain key people are rated highly or not, because anything that, say, said that Ray is bad at critical thinking is obviously faulty. So ultimately winners and losers on anything contentious are determined by fiat.

So then we have someone who is highly rated, and is 100% aware of who is rating them badly. Do you really think it's safe to do that? I don't. Therefore, if you don't have very significant clout, your rating of people should be simple: Go look at that person's baseball card, and rate something very similar in that category. Anything else is asking for trouble. You are supposed to be honest... but honestly, its better to just agree with those that are credible.

So what you get is a system where, if you are smart, you mostly agree with the bosses... but not too much, as to show that you are an independent thinker. But you better disagree in places that don't matter too much.

If there's anything surprising, is that more people involved into the initiative stayed on board that long, because it's clear that the stated goals and the actual goals are completely detached from each other. It's unsurprising that it's not a great place to work, although the pay is very good.

diegof79|2 years ago

I'm surprised by your comment. It's a basic knowledge of getting feedback in UX research or any social research that social pressure influences your response. That's why most feedback surveys are anonymous. Even in politics, there is an old theory called the Spiral of Silence on how people shut down their contrarian opinions in public.

It looks like Ray's fixation on "radical transparency" ignored the basics of human nature.

atoav|2 years ago

Another aspect of this kind of system is that it favours visible over invisible jobs. The people working their asses off in the technology sewer might literally keep everything running, but because they are:

A) underfunded and understaffed

B) have no time and energy for niceties

all those in more comfy positions might be inclined to vote against them, while they probably don't vote at all because they got no time for that shit.

As you said, if you let a pidgeon vote on how good your chess moves were you will get pidgeon shit on a chessboard. A costly form of bureaucratic performance art, sans the art.

duxup|2 years ago

I worked at a place where publicly praising folks via company wide emails was encouraged. It was a painful experience. Almost immediately mutual admiration societies started up. It was like a competition between these small groups to send these nauseating emails every Friday. Mostly it was sales, HR, and the executive team sending these emails.

Most folks just didn't participate and it faded away pretty fast.

thumbsup-_-|2 years ago

This is classic example of if you give people a metric (that is meant to be a condensation of things that truly matter) based on which they are evaluated it, they will just start optimizing for and gaming that metric instead of focusing on things that truly matter.

pstuart|2 years ago

Incentives are a hell of a drug.

It would be so cool if someone could apply game theory for mortals that could digest these systems and show how to make them more "fair". It may be an impossible task but it seems worthy of exploration.

nvy|2 years ago

>Everyone is encouraged to rate anyone else in a variety of categories, as often as possible.

You'd think someone with as much experience as Ray Dalio would be vigilant against overfitting a model, and that's exactly what this is.

Just goes to show you that even the most successful are susceptible to ego-driven blind spots.

motohagiography|2 years ago

The people who survive in that culture, are they interesting, and do they go on to do anything interesting afterwards?

niemandhier|2 years ago

If those scores can be seen by everybody it should be possible to mine the data and reverse engineer the algorithm.

A bad actor could use this to craft a „malicious review“.

carabiner|2 years ago

Is it true that Ray has a bias against STEM people, and prefers elite liberal arts pedigrees?

pavlov|2 years ago

Also in the Vanity Fair there’s an extract from the new book about the time the future FBI director was snooping for employees’ dirty laundry at Dalio’s hedge fund and conducting year-long show trials:

“Inside James Comey’s Bizarre $7M Job as a Top Hedge Fund’s In-House Inquisitor” https://www.vanityfair.com/news/2023/11/james-comey-dalio-br...

It’s every bit as strange as it sounds.

catlover76|2 years ago

Lawyers really like external validation from authority figures, and Dalio sounds like a douche whose ego needs for others to feel they want his external validation.

The section with the multiple investigations of the employee who didn't bring in the bagels really brings that home lol

Match made in heaven.

monkeydreams|2 years ago

> It’s every bit as strange as it sounds.

Nope. Much, much stranger.

sbierwagen|2 years ago

Very funny. If it's true that all the talk of computers and statistical modelling at Bridgewater is bullshit, and it's just a vanilla hedge fund, then it reminds me of the story from The Man Who Solved the Market that Renaissance was founded as a quant fund but none of the algorithms actually worked, so Simons just traded on hunches until D.E Shaw started competing with them years later.

steveBK123|2 years ago

A lot of people think of this in too much of a binary fashion. Hunches vs Quant.

It's really more of a continuum.

Or you could broadly tranche into 4 categories - 1) pure hunches, 2) pure quant ML stuff (I don't know what this signal even means, but computer say number go up), 3) hunches that you validate with data (kind of like the scientific process), and 4) the reverse - quant ML/data that you validate with logic/hunches (computer says number go up, but why would this pattern exist, who is on other side of this, what are the tail risks, etc).

voisin|2 years ago

I read that book too, albeit a number of years ago when it first came out, and I don’t recall “none of the algorithms actually worked” being true.

derivagral|2 years ago

Renaissance has a very effective legal dept. I'm sure their math stuff is also great, but I was struck a bit reading an old story about the other side of one of their lawsuits/investments regarding a small town. Part of the business is definitely squeezing out an extra 5-10% from distressed exotic assets bought at discounts.

The mythology focusing on math/quant I think is a feature, for them.

Apologies for not finding the original; my $SE appears to be dominated by a recent tax deal instead.

pk-protect-ai|2 years ago

I wonder when they actually do their work. I mean, if you're constantly evaluating your colleagues and their work, when do you find the time to get your own work done? Or are you just making up numbers for these evaluations?

mszcz|2 years ago

Hey, those evaluations won't evaluate themselves you know! That's important work!

ng12|2 years ago

I've heard a lot about Bridgewater and frankly don't understand how they hire anyone. If you're smart enough to get offers at top-tier funds surely you'd rank BW last because of this (very public) insanity.

Have they just resigned themselves to the uphill battle?

ughOk|2 years ago

I interviewed at Bridgewater a few years ago. I ended up passing on the job but it was tempting.

I love the idea of strong feedback. I've always wanted work to feel like I'm lifting weights with my buddies: We constantly critique each other. We all want to get better and any advice or critique is welcome.

In general, withholding criticism is a sign that either:

1. The person needing advice is more concerned with their ego than actually getting better. They get mad about criticism or find it hurtful.

2. The person who is withholding advice either has nefarious purposes, has a low option of you (they assume you fall into category 1), or simply doesn't care about helping you.

Criticism is the respectful, professional thing to do. It assumes the best in people - that they're trying their best and want to get better.

You shouldn't be an asshole by the way. If you phrase your criticism in a way where someone is likely to get defensive then it's less likely to be effective. Empathy is an important skill in teaching.

After years spent working with companies in SF - where criticism is generally avoided at all costs - Bridgewater piqued my interest.

I tried to discern if Bridgewater shared my outlook but, ultimately, I just couldn't tell. I asked extremely pointed questions - uncomfortable things I wouldn't normally ask in an interview. But I figured they wanted radical candor, right?

I asked every interviewer things like "How important is making sure people actually hear this criticism?", or "Couldn't people just use this as an excuse to be a jerk?". All the answers were wishy-washy.

Plus, they force constant feedback. More feedback is good. But constant? It felt like it'd be, at best, distracting. And at worst, like it would lead to a lot of false criticism. If you _have_ to criticize, even if you don't have an opinion, then are you really making people better?

In the end I got the impression that they value criticism for the sake of criticism. And it generally seemed like giving criticism was more highly valued than ensuring people actually heard what you were saying (communication skills and empathy weren't emphasized). They'd confused the forest for the trees.

refurb|2 years ago

I had a chat with someone working at Bridgewater. After meetings they basically debrief with feedback. Even internal meetings. This person seemed pretty happy with it, but it seemed like a bit of overkill? I have 3-6 meetings a day, am I really going to hear feedback for each?

And the issue I have with feedback is that there is a big difference between feedback to improve something where the person is deficient (e.g. you should learn about net present value), and feedback that is just about the person's style (e.g. you ask too many questions).

People are different. There is more than one way to skin a cat. For example, some people develop a solution through an analytical approach - defining a goal, looking at all options, coming up with some objective way to rank them, then filtering down.

Other people do it in a very "messy" way (or what some percive as messy). They immediately come up with a solution, then refine as they go based on what they learn and what other people think (e.g. questions, opinions, etc).

Is one way better than the other? No. But if someone kept giving me feedback on my particular style, I'd start to get annoyed. If it's not wrong, then there shouldn't be feedback. You actually want people with different styles, it can prevent group think and personally, I learn a lot by working with people who approach problems different.

I get the sense Bridgewater feedback is just used to shape behaviors in the model of some ideal form (i.e. the New Soviet Man), not feedback that improve people whatever their style is. But I might be wrong.

glimshe|2 years ago

Bridgewater's practices sound like an episode of Black Mirror - indeed, that one where any person could realtime rate anyone else.

If you want to get continuous feedback, all you need to do is to get married.

yieldcrv|2 years ago

I mellowed out when I realized crystal energy chasers and systems peddled by MBAs were equally unsubstantiated and unfalsifiable, seeking answers to the same things: fulfillment and productivity

immibis|2 years ago

Yeah, but the MBAs can take away your food supply.

strangattractor|2 years ago

I love the pee story here.

A long time ago I was friends with a facilities person at Apple. She told of a peculiar case where she was called in to take care of a problem in one of the conference rooms. Apparently someone had not thought a meeting had gone well. That evening they had returned to the conference room and taken a dump on the table. Message received.

Maybe someone was trying to send a Ray a message with a puddle of pee:)

saghm|2 years ago

That's pretty awful; making some random innocent cleaning person deal with literal shit does nothing to the person you're actually mad at.

KRAKRISMOTT|2 years ago

Wait until you hear about "dot collector". Any Bridgewater veterans care to comment?

slibhb|2 years ago

There was a NYT article about Bridgewater and Dalio last week: https://www.nytimes.com/2023/11/01/business/how-does-the-wor...

If these articles are right, the picture I'm coming away with is that Dalio had some good strategies that gave him an edge decades ago but now his competitors have caught up and pulled ahead. Apparently Bridgewater no longer has any quantitative edge and it's really just Dalio and a few close advisors making calls from the gut. Plus all this weird nonsense about "principles".

toomuchtodo|2 years ago

Same deal with Bill Gross (“the bond king”). Macro tailwind, a few good compounding successes, and riding that draft for the remainder.

They don’t retire, they just graduate to “thought leaders” because what else are you going to do with that much free time and ego. The money no longer matters, all that is left is to chase status.

https://www.google.com/search?q=bill+gross+lucky

https://www.cnbc.com/video/2013/04/03/great-investors-more-l...

https://www.reuters.com/article/us-janus-henderson-billgross...

https://www.sec.gov/news/press-release/2016-252 (ETF pricing violations mentioned in the book)

https://us.macmillan.com/books/9781250120854/thebondking

(highly recommend the book "The Bond King" for deep background on Gross' professional career and PIMCO)

mamonster|2 years ago

Dalio is a perfect example of just how much finance has evolved over the last 30-40 years. Risk parity today is a turbo vanilla strategy that every systematic shop can offer and that a master student in fin. eng. can probably build, and yet in like 1990 this was the forefront of systematic investing and got you paid. Bridgewater today is still riding on the fact that they "invented" risk parity.

MattPalmer1086|2 years ago

Ugh, I had a recruiter approach me a couple of years ago to work for some company that had a "radical openness" culture or something like that. The idea was supposedly that everyones ideas were valid and hierarchy didn't matter and that everyone should challenge anything no matter who they were in the organisation.

The way they sold it sounded a bit culty to me, and the potential for abusive behaviour seemed high. Didn't make me want to work for them.

com2kid|2 years ago

> The idea was supposedly that everyones ideas were valid and hierarchy didn't matter and that everyone should challenge anything no matter who they were in the organisation.

On the engineering side, ideally this is how things are done anyway.

I've never had a problem digging into the ideas presented by engineers more senior than me, and I've always encouraged junior engineers to question any ideas I present.

Everyone, independent of seniority, is blind to giant gaping flaws in their own ideas. People also don't know what they don't know. If I have a gap in my knowledge, any plans I come up with are not going to take what I don't know into consideration if I don't know that I don't know something.

lispisok|2 years ago

> The idea was supposedly that everyones ideas were valid and hierarchy didn't matter and that everyone should challenge anything no matter who they were in the organisation.

Treating all ideas as valid is fine if that means all ideas get evaluated. For hierarchy you need somebody who can be the decision maker when a consensus cannot be reached otherwise the most stubborn opinionated people become the de facto decision makers. I experienced that situation before and resulted in some very bad implementations and massive tech debt and the people who stuck us with those bad decisions got to avoid responsibility and leave other people cleaning up the mess they created.

lubutu|2 years ago

When I was looking for work back in 2016 there was a company who advertised their way of working as "infrared", if I remember correctly. It was all about total openness and autonomy. For example, they asked one employee to decide how many hours everyone should work per day, and they decided on something, which was then applied company-wide. This was apparently "democracy in action". Quite odd. I think they've since dropped that whole thing.

whatshisface|2 years ago

I would have tried to challenge it during the interview, so that if they hired me I'd know they were legitimately pluralistic.

htrp|2 years ago

Radical Openness is definitely Bridgewater

ilaksh|2 years ago

That's a completely different thing from constantly rating each other in public with more senior people's ratings being given more weight.

hn_throwaway_99|2 years ago

> The truth is that at Bridgewater, some are more equal than others. And Ray Dalio is the most equal one of all.

Major Animal Farm vibes.

Almondsetat|2 years ago

It’s an almost verbatim quote from the book, of course it has “Animal Farm “””vibes””” “

ilaksh|2 years ago

I think this is just human nature. Dalio just systematized it and put it out in the open. We are primates.

kevinventullo|2 years ago

The fact that Ferrucci didn’t immediately see through this insanity makes me question his supposed genius. Like the job was never to make some ultra-intelligent system, the job was to stroke the CEO’s ego by saying “Look, hard math proves that you’re the smartest guy in the room.”

radicaldreamer|2 years ago

Who is doing the trading? It seems like making money is almost an afterthought and other traders can't seem to find these Bridgewater whale trades.

Is it all a front or a Madoff situation?

jeffreyrogers|2 years ago

The SEC investigated them a long time ago and determined that their trades were legitimate but just done in convoluted ways. There is a recent NYT piece that covers it. There's a new book about Bridgewater coming out so that's why there are so many articles about them recently.

steveBK123|2 years ago

There's no reason BW needs to be a whale. No matter how big these funds are, liquid global markets are gigantic. They are in equities, rates, fx, all sorts of derivatives thereof.

They are generally making millions and millions of smaller trades. So sure they have $100B AUM and maybe 5x levered to $500B. But across a million positions that's .. an average $500K position size.

Few if any of these funds ever have like $10B sitting in a single trade.

And even if they did, consider the result of a quick google search "Average daily trading volume of U.S. treasury securities 2000-2018. In 2018, the average total volume of treasury securities traded per day was over 547 billion U.S. dollars."

throwawaaarrgh|2 years ago

With enough money and power, a crazy asshole can get people to work towards any premise, whether they believe in it or not.

wolverine876|2 years ago

We want meritocracy, and in theory we reward merit with capital and power. But merit can change quickly - and power tends to corrupt and reduce merit - while power and capital remain.

From the article's description, CEOs like to flaunt their corruption and lack of merit these days.

efitz|2 years ago

I had an ex-Bridgewater colleague a couple jobs ago, who brought “Radical Transparency “ with him.

One on one he was a nice enough guy, and he was super smart. In meetings or as a manager he was a nightmare and left a dumpster fire of problems in his wake including driving off nearly his whole team.

karaterobot|2 years ago

I feel like 75% of the CEOs I've met have essentially been this high on their own supply, they just been the tyrants of smaller kingdoms than Bridgewater.

tamimio|2 years ago

Most of these hedge funds CEOs are psychopaths and completely unfit to be in the society if it wasn’t for the wealth they have, a lot of people used to put up with that but since COVID, a lot have been changed, that’s why they hate the remote work, it doesn’t feed their narcissistic egos.

RGamma|2 years ago

This may have been just a stupid delusion by Dalio but some day one of these sociopaths is gonna get their hands on the wrong AI model and end us all.

The necessary precondition of private individuals side stepping democratic control via their unchecked powerful organizations is already established. Gotta hope for the whistleblowers...

erulabs|2 years ago

I think you're seeing it wrong. When CEOs no longer need scientists and engineers, when they can speak their will into existence directly, they will immediately destroy themselves. This rating system, had the CEO gotten it's say, would not have made Bridgewater thrive. That stupid ideas are often impossible to accomplish is a huge barrier to stupid leadership screwing themselves sideways.

Anyways, thats the optimistic take :P

immibis|2 years ago

This is already happening, and has nothing to do with LLMs. Look at the other thread about banks closing customer accounts for no reason.

dwaltrip|2 years ago

> His main interest, as he wrote in his best-selling autobiography-cum–self-help book, Principles: Life and Work, is to lead others toward “meaningful lives” and “meaningful relationships.”

> Staffers were given iPads and directed to rank one another on a one-to-ten scale on their performance dozens of times per day in categories derived from Dalio’s Principles

> The goal of all the data, Dalio would say, was to sort everyone at Bridgewater on a single scale.

———

Truly they’ve stumbled on the heart of human connection and meaning.

hinkley|2 years ago

If it comes out that Dalio was secretly sleeping with five different people at the company, at the same time, let's just say that my response would be, "that tracks."

adamgordonbell|2 years ago

His book had many insane ideas for running a company. I assume the power of PR is why it was well received.

yen223|2 years ago

"Dalio would often review the results in his office ... chewing on Scotch tape, as was his habit when he was concentrating..."

This article really buried the lede here

ketzo|2 years ago

Does he have a special dispenser at his desk? Does he have one strip he chews on throughout the day, or does he get a new one after every meeting? Is it folded up, balled up?

So many questions. So, so many.

lawlessone|2 years ago

It's too weird to make up.

TheCleric|2 years ago

Yeah the rest of it can be chalked up as narcissistic business personality, but this? This is psychotic. A billionaire chewing on scotch tape.

cjohnson318|2 years ago

I stopped listening to Ray Dalio when he trotted out the meme about out of control crime in big cities at the beginning of one interview or another. I don't know if he's lazy, or out of touch, but I don't like it when people are fast and loose with extremely verifiable information. Like, maybe you have expert intuition the future of inflation, that's great; but if you're going to talk about extremely verifiable information, like per-capita crime rates in American cities, then you should have your facts straight.

gottorf|2 years ago

> if you're going to talk about extremely verifiable information, like per-capita crime rates in American cities, then you should have your facts straight.

To be fair, if his claim is "out of control crime" and you interpret it as "out of control crime rates", you're talking about different things. There's enough anecdotal evidence to suggest that in some big cities, the occurrence of certain kinds of crime (like cars being broken into) is up, yet reporting is down, leading to a lower crime rate that doesn't reflect the street-level reality accurately.

Of course, this isn't a problem limited to this domain.

kyleyeats|2 years ago

Would you say that believability is very important to you?

eschneider|2 years ago

"Scientology, but for hedge funds!"

hardwaregeek|2 years ago

Man, this feels like something out of Severance. Creating an AI model of Dalio to properly rank employees according to tenants? What the hell?

ilaksh|2 years ago

Hm. When is Severance coming back? Such a great show.

I assume Dalio has been having a field day with ChatGPT/LLMs.

j7ake|2 years ago

It’s sad to see so many person/hours wasted spinning their wheels to please a narcissist.

skywal_l|2 years ago

It could be argued that none of what was done at Bridgewater ever created actual value anyway.

immibis|2 years ago

Most of the economy is people spinning their wheels to please narcissists. It's the foundation upon which modern capitalism is built.

renewiltord|2 years ago

[deleted]

taway1237|2 years ago

>It's always funny when some rag tries to say "X declined to comment". No one is going to comment on some random crap you publish on what's a glorified blog

Strong disagree. I like when people writing articles at least give the other side a chance to comment. It makes me feel the piece is less obviously biased. Of course it can be abused by giving the other side just a dew hours to comment (so basically no real chance), but it's still better than nothing.

Orangeair|2 years ago

> No one is going to comment on some random crap you publish on what's a glorified blog.

I have no idea why the article doesn't lead with this, but it's adapted from a book:

> Dalio declined to be interviewed for the book from which this article is adapted.

wolverine876|2 years ago

What defines a 'glorified blog'? What research did the author do?

23B1|2 years ago

It's interesting. I have seen rating systems work – in the military. They're harsh to some, but in some situations, you have to filter out B and C players to keep the A players alive. I do think transparent systems w/360º peer reviews are better than many others. I wonder what else is out there that might work.

dogman144|2 years ago

We’re talking about OERs and NCOERs right? Those pencil-whipped, boilerplate evals where if you have a 300 PT score and don’t get a DUI/beat your spouse, 1/1? The process that takes 24 months to kick someone out?

I don’t think you know what you’re talking about in this regard and/or didn’t serve, candidly.

mgaunard|2 years ago

The problem is that the majority of people are bad, so trusting the majority is a bad idea.

giraffe_lady|2 years ago

You mention rating so maybe you're talking about enlisted only, which granted I don't know how those work.

But the up-or-out system used for officers in the US military is notorious for being primarily political after like O3 and historically almost comically incapable of rejecting unqualified but politically sophisticated/connected officers.

passion__desire|2 years ago

Prediction markets : Have a system where people can make predictions in semi serious fashion in any field, record them with reasoning and probability numbers and match them later on. Atleast this will prove how deeply they know about a field they are interested in. Tagline: Prediction is Intelligence

esafak|2 years ago

How does the military rating system work?