Hedge Fund Guru Ray Dalio Reveals His Closely-Guarded Workplace Secrets
In the world of finance, legendary hedge fund guru Ray Dalio is best known for his unbelievable success, his practice of Transcendental Meditation twice a day, and his unique approach to principles-based decision-making. Since starting Bridgewater out of his two-bedroom apartment in 1975, Dalio and his firm have made more money for their clients than any other hedge fund in history, according to LCH Investments.” He attributes much of that success to the firm’s unorthodox workplace and its management philosophy dedicated to radical transparency, in which employees exchange brutally honest assessments of each others’ work performance and personalities.
For years, Dalio’s 123-page manifesto of principles was closely guarded with a few copies surreptitiously shared in the world of finance. Now Dalio is sharing those workplace secrets with the world in his new book, Principles, as well as launching a series of apps with colorful names like Baseball Cards, the Pain Button, and the Dot Collectors.
Dalio is also taking his show on the road, traveling to Silicon Valley for book readings and meetings with top executives. Many in the tech sector are already fans.
This interview has been edited and condensed for clarity.
Fast Company: Can radical transparency work for everyone–even those personalities who don’t respond to it?
Ray Dalio: Before I get into the radical transparency part, I want to make sure to emphasize that it only works towards a greater goal. My goal was to build an idea meritocracy full of meaningful work and meaningful relationships. And to get at those goals through radical truthfulness and radical transparency, for people to see things for themselves.
Suppose we’re working together, and a hundred of us were working together, why wouldn’t I let you see everything and why shouldn’t we be able to talk about it?
To have an idea meritocracy, you need to do three things: Put your honest thoughts on the table, engage in thoughtful disagreements–how do you disagree without it being a problem?–and then you have to have rules to get past your disagreements. Good for any relationship. And for every workplace in which you want to have quality exchanges and thoughtfulness.
FC: Is it really for every workplace?
RD: Listen, if you say I want this group of people to just follow these instructions and skip all that. For example, maybe you just want to tell corporals and privates in the Army: “Just do this thing.” That’s totally fine. That’s functional, I’m not objecting to that.
If you want thinking people, these principles can work for you. If you do it, it’s so fabulous, it cuts through all the bullshit. If people put all of that on the table, if you have thoughtful disagreement, and you build better relationships.
At a McDonald’s, you would decide, who is that idea meritocracy among? Is it 25 people, 250, 2500? What is that circle of an idea meritocracy?
FC: How can these principles apply in Silicon Valley, where in recent years the headlines have been full of stories about overvaluations, immature bros, hype, impractical ideas?
RD: You have to understand that was me. I was a bro. That’s where I was 40 years ago.
What this [book] shows them is the journey that I went through—from having just 67 people and deciding to think about how you deal with each other. What I learned is that if I wrote down the principles for each time I get into a situation, how would I handle that situation? And I communicated about it openly and we talked about it. It made a world of difference.
Your audience [readers of Fast Company] are those type of people who are going to go through it, go through that experience. They have to define how they are going to deal with each other.
The work principles has a principle for everything I encounter: What do I do with a person who’s loyal and terrific but not doing a great job? Or someone who has a legal problem?
It’s used at Bridgewater as a reference book, not as a book you sit and read. The part at the end [of my book] is like a reference book. Like a user manual for who you are going to encounter at work and in business.
All these entrepreneurs? I know these people. I’ve asked them to take different personality tests and I ask them questions: What is it that allows them to go from visualization to actualization? Because they visualize these audacious goals and they goddamn built them out. As I write in the book, they have a “knowledge of their own and others’ weaknesses and strengths so they can orchestrate teams to achieve them.”
[Some of those tools are listed in the book’s appendix. Contract Tool is an app that lets people make and monitor their commitments to each other. It was inspired by the typical situation after a company meeting in which people walk away and lose track of was agreed upon. The Dot Collector is an app used in meetings that allows people to record their assessment of each other on any number of several dozen attributes, which are “laid out in a grid that updates dynamically.”]
The companies that have been most excited about these principles are all those Silicon Valley companies. Reed Hastings has said that they have substantially affected how he does business. Jack Dorsey and Bill Gates, too. I’ll be out there later this month. And I’m doing a podcast with Marc Andreessen.
FC:Would radial transparency work in the Trump White House?
RD: Yes. It depends on how big your circle is. Not the goal in itself, but it’s the idea of idea meritocracy–to know that any one individual doesn’t have the right answer, to know what you don’t know, and how to get at the right answer. It’s very important for the president of the United States to make clear his principles but also to think as a country: What are the principles that bind us together and what are those that divide us and how can we get past our disagreements to do the right actions?
FC: Any last pieces of advice, beyond the principles you’ve outlined?
RD: How to deal with failures, how to embrace failures, how to let failures be great. You won’t learn without failures, and how you deal with them—does this kill me or is this a great learning experience?
Every one of them–Bill Gates, Elon Musk, Steve Jobs–they all encountered failures. And in all cases, it was probably the best thing that happened to them. Failure produces change and metamorphosis to make you better–don’t put your hand on the hot stove again! Your pains should be cues to trigger high-quality reflections that make you better.