Ray Dalio says he’s not everyone’s idea of a great boss. But Dalio, founder of Bridgewater Associates, is starting to look like the Steve Jobs of hedge funds: exacting, infuriating and — there’s no way to sugarcoat it — kind of odd.
The singular culture Dalio has fostered inside Bridgewater, the world’s largest hedge fund, was on full display Wednesday, when he announced that the man he’d hired to help run his $160 billion firm, and presumably set the stage for a smooth succession, had abruptly departed.
That executive, Jon Rubinstein, knew from tough bosses: he’d worked for Jobs for 16 years. One of the creators of the iPod, Rubinstein lasted all of 10 months at Bridgewater. It’s a familiar story at the firm, where Dalio’s quirky workplace culture — he calls it "radical transparency" — churns new recruits like few others. Dalio, halfway through a 10-year succession plan, is now replacing Rubinstein with an insider who almost left the firm early this year.
“We mutually agree that he is not a cultural fit for Bridgewater,” Dalio said of Rubinstein in a client note posted on LinkedIn Wednesday.
Unique Culture
Plenty of investment chiefs have struggled to groom a successor. Izzy Englander, George Soros and Seth Klarman have all stumbled as they tried to install the next-generation leader at their firms. But Dalio, 67, is something special. His goal is to find someone to help overturn five years of middling performance and who will embrace and maintain Bridgewater’s unorthodox culture — where disagreement is encouraged, employees grade each other on interactions, and talking about others behind their backs is deemed a "lack of integrity."
Rubinstein helped to plan a redesign of Bridgewater’s technology and will remain as an adviser to the firm. He ended up more focused on day-to-day tasks rather than big-picture strategy, according to a person with knowledge of the matter. Frustration has mounted among those revamping the firm’s technology because of the difficulty recruiting engineers to Bridgewater’s culture and its Connecticut headquarters, slowing the pace of updating legacy systems, the person said.
Dalio and Rubinstein declined to comment for this story.
Before Rubinstein’s arrival in May, a longtime insider and co-investment head, Greg Jensen, held the role of co-CEO. But Jensen gave up that title after disagreeing with Dalio over whether the founder was sticking with his hedge fund succession plan.
Another Pick
Dalio’s latest choice is David McCormick, the firm’s president, who has been at the firm since 2009. A West Point graduate who once worked under George W. Bush, he was poised to join the Trump administration as deputy defense secretary, but withdrew his name, in part because of friction with his future boss, Defense Secretary James Mattis. He will join Eileen Murray, who has been at the firm eight years and co-CEO for four. Dalio plans to hand responsibility of Bridgewater to a team rather than a single leader.
"I’m excited about this change and expect to remain a professional investor at Bridgewater until I die," Dalio said in the post Wednesday. “Or until those running Bridgewater don’t want me anymore.”
Rubinstein’s appointment to Bridgewater was a head-scratcher for people close to the tech executive, according to someone who knows him, since his background was in consumer-electronics hardware. He left Apple in 2006 and later became CEO of Palm Inc., the maker of a once-groundbreaking handheld digital assistant. He stayed at Palm after it was acquired by Hewlett-Packard.
Dalio has taken his time ceding control of the firm, saying it would take a decade for the transition to occur. In 2011, he said he was stepping down from day-to-day management, and took on the role of “mentor,” though he kept his job as co-CIO. Since then, returns have averaged just 3.5 percent annually, a far cry from the double-digit gains Bridgewater produced earlier in its history. Assets have fallen below their peak of $169 billion in 2015 as investors decamped.
Early Years
Dalio stepped in again as interim co-CEO last year after his disagreement with Jensen, who joined the Westport, Connecticut-based firm more than two decades ago as an intern.
The son of a jazz musician and a stay-at-home mom, the Long Island native started Bridgewater in 1975 out of his apartment. At first it was an investment research firm focusing on risk management and macroeconomic data. He later started managing money for pension plans, using investment formulas he’s developed over the past four decades to make calls on currencies, commodities, stocks and bonds.
The firm, which he describes as an “intellectual Navy Seals,” is ruled by 210 principles, rules of the road that range from “Don’t try to please everyone" (210) to “Don’t pick your battles, fight them all” (96).
Roving Raters
Employees carry around iPads with apps that allow them to rate each other on their contributions. Each worker has a “baseball card” with their ratings for various attributes. One key project underway at Bridgewater is developing algorithms based on employee data to help automate decision-making at the firm.
Dalio readily admits that Bridgewater is a tough place to work. The turnover rate is "unusually high" within the first two years for new employees, with 21 percent leaving in the first year and another 10 percent in the next, Dalio has said. Those rates then drop off to 3 percent by the fifth year — which is “exceptionally low,” he said in a January LinkedIn post. Jensen and Prince have each been at the firm for decades.
“This pattern is a result of Bridgewater’s culture and its having tough and unique standards,” he wrote. “The company is not for everyone but for those who it is for, there is nothing like it.”
This article was provided by Bloomberg News.
