Ray Dalio has founded and leads one of the worlds largest and most successful hedge funds, Bridgewater, worth 150 Billion$. Last year, and with great media fanfare, he launched his book to explain to the world his management philosophy. It’s a best seller, which is not surprising, given Mr. Dalio’s stellar reputation in the dominant business sector of our time: The guys making huge piles of money out of money: Hedge funds. Does all this money make Hedge funds or investment banks the real rulers of the world? You bet. The US government, the Senate, the Fed, International Institutions, the European Central Bank, the World Bank – all full of ex-Investment Banker in leading positions. Even the former FBI director James Comey was a Bridgewater employee. The Masters of the Universe – and Dalio is one of the Grand-Masters of the Universe.
If a Grand-Master speaks out, you better listen. So I did. I read the book already a couple of months ago and did write a post about Bridgewater’s practices: The World’s Leading Hedgefund is Relying on Key Principles of Self-Managed Organizations. But I delayed writing a full review: I was befuddled by what I read.
Outlandish, Orwellian Management Practices
Mr. Dalio is spelling out over 200 principles of “Work and Life,” principle by principles. Like the great Roman Emperor Marcus Aurelius did in his “Meditations.” How fitting.
Irony aside, I actually like the clarity and to read about the accumulated wisdom of thoughtful people. And Mr. Dalio is very thoughtful. He is driven by his worldviews, especially on management, and he share’s it with us. I think that’s grand, mainly because the management practices he employs are often so extreme and apparently over the top:
- Video Taping all Meetings. All.
- Giving performance feedback in real time during a meeting of every participant to let the person know how she is doing
- The “Pain Button” app where people can describe their emotional stress and share it with others
- The “Dispute Collector” app where people can mediate their interpersonal conflicts guided by a machine
Orwellian speech is rampant in “Principles.” Mr. Dalio talks of “tough love,” or “shoot your friend,” – all for the service of the collective.
The Rule of the Fittest
My favorite example of all those management practices is to let people vote on decisions while weighing these decisions with the “believability” of the person: An “Idea Meritocracy” where every person is eligible to vote, but only the most knowledgeable votes carry decisive weight. The believability is determined by their track records, test results, and other data. In other words: The reign of competence, instead of a reign of populists. Wow!
If only the standards that determine believability can be kept “objective” and free of corruption. Mr. Dalio doesn’t explain how to do that, but my hunch is Discipline. Adherence to formal systems, to the principles underlying the believability algorithm. Adherence to the formal system is prominent in Mr. Dalio’s business empire. Comply with the system or be fired. The attrition rate of new and very carefully selected employees is about 30% within the first year. And Bridgewater is very Elitist in selecting candidates in the first place.
Psychological safety, i.e., a safe place to speak up without the fear of retaliation, is a key feature of learning organizations or any organizations aiming at achieving innovations. Dissenters need to be encouraged. And yes, Bridgewater is a safe place to speak up, with even brutal honesty, as Mr. Dalio writes. People may even raise dissent with the system, and principles might evolve in consequence, if its ruling hierarchs choose to adopt them. But chances are that fear is rampant. Not the fear to speak up, but the fear of acting in a dissenting way, which is not in compliance with the ruling system, the principles. If everything is taped and visible to everyone, political correctness rules, and human fallibilities are suppressed. But control is maximized, too.
The central metaphor for the business which Dalio uses right at the start of the book is the machine. And as cogs in a machine people got to be kept inline, disciplined. Add to that that Mr. Dalio is very close to central figures of China’s ruling party, a country where a lot of experimentation in social control is ongoing, and the pictures become genuinely, outlandish dystopian.
And whats more: His practices are actually embraced by Robert Kegan, a Harvard Professor of Psychology and one of the worlds leading proponent of the “learning organizations”. Money, Power, and Academia united to create a Dystopia. A possible future where the Rationale, Analytic, Performing runs Amok creating a new super-collective of connected super-minds, where the apparently “dumb” are ignored by the (believability) algorithm. This is can be labeled and sold as “Intelligent Democracy”: The rule of the one with the most merits. Not far from Darwins “The rule of the fittest”.
A Great Experiment
Let’s look at the bright side. It’s is a great experiment based on many of the principles of movements like Agile, Lean, the Learning Organization, Leading Management thinkers and Behavioral Organizational Psychologists propose:
- Build more reflection into daily work routines in order to enable learning
- Trust more in the power of the collective than in individual decisions makers through structured exchanges that drive out biases, to come up with better decisions
- Give everyone a voice and a place and time to speak out
- Use data gained from objective and subjective sources extensively
- Address all level of the Organization simultaneously: Mind-Sets, Principles, and Practices
- Seek organizational growth in the inert, personal growth of individuals
Looking at Mr. Dalio’s work this way, there is a lot to learn about Bridgewater. Therefore reading “Principles” is absolutely recommended.
Long live Hierarchy & Control!
The most remarkable thing is, Mr. Dalio has added all these routines on top of the traditional management hierarchy.
In all of the 539 pages, he does not write a single line about self-managed teams. But the other times he uses the prefix “self” is revealing: Self-accountability, self-discipline, self-reflection, self-accountability. It is the individual how needs to better herself. By sticking to the collective rules set by, well Mr. Dalio. Or the Chinese communist party…
Mr. Dalio trusts the individual to get better under guidance, he trusts collective, believable weighted votings, as long as
- Superiors may veto any decision and
- Mr. Dalio (or a governing elite) sets the rules
At the heart, Mr. Dalio’s vision is not about liberation. It is about performance. About making money. If what it takes to make money is to develop individuals, so be it.
But Control is central. Full stop.
Bridgewater might be a great Place for Fawning Alphas
I like organizational designs more that give space for autonomy (a word not found anywhere in the book) and non-mainstream people – call them beta if you want.
Whats more, true innovativeness will not come from an environment that is purely ratio driven and relegates fun to an emotion that is to be reflected on and analyzed – all in the service of big performance equation that is to be solved.
The featured sentence on the promotional page of “Principles” is “Principles are ways of successfully dealing with reality to get what you want out of life“.
A bigger car, I guess. This Hedgefond even wants to exploit life itself. Putting such a line in front of the whole work shows what Frederick Laloux would call intensely “orange” beliefs, beliefs bred in the industrial revolution: It’s about getting things, about scarcity, about accumulating, and finally about consuming life itself.
I am a bit harsh, though. It’s is worthwhile reading:
It shows how the application of Agile/Lean/ Behavioral Sciences while being stuck in a Mindset of scarcity and control – instead of abundance and exploration- may quickly lead to dystopia.
This is what I think. What do you think?
- The People Of Government Sachs, New York Times 2017
- New York Times Review of Principles
- Emperor’s Marc Aurel’s Meditations
- Harvard Professor Robert Kegan’s Article on Bridgewater “Making Business Personal” and his book “An Everyone Culture” (See Sources page)
- The List of Ray Dalio’s (Bridgewater’s) Principles