The Secrets Of Ray Dalio and His Dot Collector Transparency Software — With Rob Copeland

0:00Let's go inside the secrets at Bridgewater and of its founder Ray Dalio in an interview with the author of a revealing new book. All that and more coming up right after this. LinkedIn presents.

0:15Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. Today, we're going to talk all about Ray Dalio, his fun Bridgewater, and his famous computer system that let his employees raid each other in real time called the Dot Collector. And we're going to do it with the author of a brand new book. Rob Copeland is here. He's a New York Times reporter and the author of The Fund, Ray Dalio, Bridgewater Associates, and The Unraveling of a Wall Street Legend. Rob, welcome to the show. Thank you for having me. Thanks for being here. So let's talk about who Ray Dalio is and why you were interested in writing a full book about him.

0:52What sort of made him rise to that level? Sure. And sparked your interest? Sure. Well, first of all, I think people should know that I've known you for a number of years and that I once ran into you at an Alaska Airlines lounge in which... that's true it's true it's true and neither of us were flying first class but we both had credit card access and were filling up on their waffle station um before cross-country flight so that's some exclusive big technology news break right there uh but uh i it was a great moment to bond i feel like yeah it's important to give listeners a little bit of context of our relationship here let's be in the full disclosure moment so look i'm not now they know i'm not a nobody here i've seen you in a lounge.

1:33That's what I just want people to know. Well, I feel like it's the perfect setup to talk about the world's biggest hedge fund. There's a seamless seek here. And I will eventually at some point this hour answer your first question. What I'll tell you is I've been a business reporter for more than, excuse me, for about a decade and a half. And for some majority of that time, I've been reporting on and around Bridgewater Associates. It's the world's biggest hedge fund, but I'm not super interested in them just because they're a hedge fund. You know, there's a lot of big, important, frankly, boring companies.

2:09And Bridgewater is anything but boring. Its founder, Ray Dalio, has become world famous for supposedly inventing these principles, these rules, calls them principles for life and work. And he wrote a bestselling book about it. He's millions of people have viewed his TED talk. They listened to him on LinkedIn. He was interviewed by freaking Gwyneth Paltrow. He's really become this sort of pseudo celebrity. He's just become a figure far outside the financial world. And I think he's great fun to write about. Right. And so the principles are not just about like how to invest, but they are about how to live your life, how to conduct business within your organization.

2:56And to me, the thing that put Ray Dalio on my radar is that his company practices some of the most insane transparency I've ever seen, including this dot collector piece of software that people sit in meetings with iPads and rate each other's believability and other attributes. And they get a score to which, you know, supposedly they were then trusted within the organization to make decisions. Now, we're going to get into all of this more, but that to me is like the fact that he tried to go outside of finance and become this business guru really is what makes him interesting. And we don't talk a lot about a lot of hedge fund managers on this show, but it made sense to dedicate an episode because of that.

3:42Well, and let's be let's be honest. As a hedge fund manager, Ray Dalio was famous to people like me, people who are finance reporters at The New York Times. But as the inventor of the principles and this new way to live your life, and he literally calls it the holy grail. He says, if you do this, you will be rich. That has made him incredibly famous and put him in, frankly, a level that of no other hedge fund manager I can think of. Right. And we'll get to the principles. But it's first important to note that Dalio got to where he was initially based off of some really good calls. I mean, he didn't just apparate into thin air and become this person sitting down with Paltrow and talking about how to live life.

4:29He made great calls, including about two significant economic downturns that he was able to profit off of. In particular, the 2008-2009 crash, where he himself pocketed something like$750 million. Talk about like, before we get into the principal stuff and the dot collector, I mean, talk about like what initially propelled Dalio to business success. Sure. So there's two versions of this story. There's the version that Ray Dalio would tell you, and there's the version that my book, I think, breaks open. Let me tell you the Ray Dalio version, which is he starts Bridgewater. He's relatively unsuccessful, son of a jazz musician.

5:10He did go to Harvard Business School, but he starts Bridgewater in his apartment in 1975 and does incredibly deep economic research. He researches how nations, how governments work, how whether the currencies are going to rise or fall. And he begins to be pretty good at predicting economic trends. This makes him world famous in 2008, when he is credited with being one of the very few people to see that the subprime mortgage crisis is about to burst. And to his credit, But Bridgewater's funds do make money that year. And that's a year when the stock market crashes. And that really propels him into another echelon of a figure.

5:53How was he able to see the crash before it happened? He would say that he had studied for so many decades how so many countries work that it was almost obvious in retrospect. He sends he does have evidence, by the way, he's not just claiming that he did. He does write a weekly or a daily newsletter that he sends out to clients. So he was able to point and say, look, I was warning about this, sort of wave this letter around. And that got him a lot of attention, not just in hedge funds, but invited to the White House, became friends with Ben Bernanke, Tim Geithner. These are these are the top economic figures of that era.

6:29So you're saying that the reality is a little different than the story that he's telling? The reality is a lot different. And to be honest, Alex, it is something that even I didn't know until I really started researching for this book. And I did something that I recommend no one ever does. I went back and I had a research assistant. She was amazing. I kind of plug her. Her name is Abigail Somerville. She is truly the best. And we together read every single news article that Ray Dalio had ever been quoted in from 1975 onwards. And what we found was nonstop since the 1980s, Ray Dalio has been predicting economic calamity.

7:10Virtually every single year, he has predicted a giant crash. And so what happens in 2008 is he's not lying. He did predict an economic crash of 2008. What he doesn't talk about very often is all the other years before that, that he predicted the same crash. That never happened. But it's not like his fund lost money in the earlier years. And he was able to make a significant amount of money in the downturn. So, I mean, even the fact that he did cry wolf a lot, like the fact that he was able to take what he knew, put the strategies into place and avert the catastrophe and actually make money. And I mean, isn't that exactly what you're supposed to do as a hedge fund manager?

7:51Look, let's give him a ton of credit. In the 1980s, 90s, 2000s, most people on Wall Street and beyond still believe that you made money in the markets sort of through your gut, that you could quote unquote read the tape. They called it reading the stock tape. And that was how many managers made money. like people like George Soros, who becomes a famous billionaire. That's how they did it. Ray had a different outlook. Ray said, I will do research and I will make these written rules and I will follow these rules, even if my gut tells me otherwise. And he was fabulously successful at that. Look, he made billions of dollars before anyone really even knew who he was.

8:34And that's a credit to him. Okay. And so then obviously this stuff works and he's like, well, I have the investing principles down. Now I'm going to start applying them to management and life. And this is how the principles start to emerge. Is that right? Exactly. So he he's made his billions. He's made more money than we could ever spend. Right. And he begins to say, what what is out there besides wealth for me? And he realizes that these rules that he has for investing, they really come from his overall philosophical outlook. And his philosophical outlook can be boiled down to, you should just be honest with one another.

9:13You should just, we should be able to stop this interview right now. And I should say, Alex, professionally, that question didn't work. Here's how I would have said it. You should be able to stop me in the middle and say, Rob, you're rambling. And that should be impersonal. And that if we could do that with one another, we would come to a better outcome because we would remove the emotions from it and we would just, we would move on with our day. I feel like there might be some spiritual kinship between you and Ray Dalio on that front. You're not one to hold back your opinion. Well, I think here's the main difference between me and Ray Dalio, which we'll get into, is I'm not pretending that this is some high-minded philosophy.

9:56I can just tell you what my personality is and I can tell you at that waffle bar at the Alaska Lounge. I can tell you what your personality is, but I'm not getting in front of millions of people and saying, follow me into the abyss. Right. So let's talk a little bit about that abyss, right? So the principles are all about transparency. Like, is there anything else to them or does it really all boil down to like, tell people how you feel? I mean, what's your, can you just give us some examples of what these are, how they're implemented in the firm and what, you know, what type of ground they cover.

10:30So his overarching philosophy is called radical transparency, which means that things that could be, that would normally be kept secret should be held out in the open. So for instance, any meeting at Bridgewater should be taped and anyone should be able to listen into it and to weigh in on it later. This philosophy basically comes down to, we should find the most believable person, the most trustworthy person and get them involved in every decision in their remit. Now, the principles themselves, and we could talk about this for hours and we won't, but they basically boil down to seeing a natural order of things.

11:11He makes a lot of comparisons to the animal kingdom. He says, for instance, when the lion, I might have the animals here wrong, but the meaning is true. When the lion eats the hyena, that's terrible for the hyena, but it's part of the natural order of things and it would fall apart if we didn't let the lion eat the hyena so there is a an appeal to that right you you can't listen to what i'm saying and not say okay i i see that yeah and then how did it manifest itself in the firm well the problem is it's very different um in practice than how he has described it in person so at the beginning in, say, around that 2008 financial crisis, the principles were really just sort of like one man's word.

11:58It was just a few sentences written on a piece of paper, and it was a few nice metaphors, and no one took it all that seriously. Sort of like how you walk into an office, you walk into an apartment building, and it's written on the wall, have a sunny day. It doesn't mean you have to put that into your heart and take that with you all day. The problem is he keeps writing more and more principles, and they get less philosophical and more literally. And they say things like, if someone does something wrong, they prescribe for what he calls public hangings. So now we should learn from each other's mistakes by watching us metaphorically execute someone, which at Bridgewater would be firing them.

12:42He says that we should diagnose even the smallest problem. So if something goes wrong, if something as small as, you know, the peas in the cafeteria are wilted one day, we should haul in the head of the cafeteria in front of video cameras. We should really probe, in his words, we should probe what happened, what thought process led to those peas. And we should frankly humiliate people. Yeah. And so that gets us into this dot collector example where people basically hold iPads in meetings and start rating their coworkers based off of their belief ability and other attributes. And then apparently that's the way that they weight decisions in the firm.

13:26I want to talk about that at length when we come back to the break. So why don't we do that? We're here with Rob Copeland, the author of The Fund, Ray Dalio Bridgewater Associates and the Unraveling of a Wall Street Legend. We'll be back right after this to go deep into the dot collector and real time transparency at Bridgewater. Did you know your credit card points and miles can lose value to inflation? Credit card companies often reduce the redemption value of your points and miles. Now, imagine a credit card with rewards that can grow in value. With the Gemini credit card, you can earn Bitcoin or one of over 50 other cryptos instantly with no annual fee.

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16:03And we're back here on Big Technology Podcast with Rob Copeland, author of The Fund, Ray Dalio, Bridgewater Associates, and the unraveling of a Wall Street legend. Okay, so before the break, we teased a little bit about the dot collector. Let's just go with an example. Can you tell us a little bit about how this thing would collect feedback on people in real time? Sure. So everything we've been talking about, all these ratings, what's happening is Ray and all the employees are rating themselves, rating each other in categories like ability to think clearly, things of that nature. That's not a literal category.

16:39And each time I rate you, I'd be rating you right now, by the way, during this conversation. I might be saying, Alex, I'm not really feeling the critical thinking from you. I might be giving you a four out of 10 on critical thinking literally right now. I just put it into, I'd have an iPad with that. That would be a dot. Yeah, come on, Rob. I read the book. I mean, at least give me a six. I mean, ability to read, I'll give you a 10. Okay, great. By the way, do the same. You'd be able to see that I was doing that. And you could say, well, I'd give you a five on ability to diagnose truth. So all of these ratings, which are called dots, they're all accumulated on something that Bridgewater called its baseball cards.

17:22So it's essentially every employee, all their ratings, sort of just like a baseball player, you'd be able to see their stats, their RBIs. And this is something called the dot collector. So it's collecting all of your dots. It's ingesting thousands of ratings in all of these different categories. and the idea being that we've collected all of these dots and that I should just be able to pull it up and say if Alex and Rob are having a disagreement, I should be able to say, well, I can see that in all these other meetings, Alex has actually been judged to be pretty good at XYZ and Rob has not. So I'm going to side with Alex on this one.

18:05How did this not incite very vicious internal politics? I mean, if you're walking out of a meeting and you have, do you see who's rating you what? Alex, it's cited the most vicious internal politics. You do see what people are rating you. You can rate them back. You can also take polls. So let's say I really believe, Alex, this conversation is going terribly. I think everyone agrees with me. I can stop this in its tracks and I can put up a poll on the dot collector and I can say, do you think Alex is looking at this right? and people can vote. By the way, whichever one of us loses that vote, we're going to get a whole lot of negative dots.

18:48Really? I want to point one other thing that people might be thinking. Okay, so you've got this dot collector, but how can you force people to use it? You know, I've got a job. You've got a job. Maybe I just go throughout my day and maybe the peas in the cafeteria are wilted, but maybe that doesn't rise to the level of a dot for me. What Bridgewater starts doing is it starts telling employees, you have to rate a certain number of incidents per day. You have to put in dots. And not only that, but a certain percentage of your dots must be negative. So they are forcing you. Stack ranked. Exactly.

19:29They are. If there weren't internal politics before, they they're now guaranteeing there will because I can't just walk around and say, great job, guys. I have. And I'll say Ray Dalio's defense here is, remember, his whole philosophy is trust in truth, is to offer frank feedback. So if you're not offering a certain amount of negative feedback, then we're never going to grow. Then we're just patting each other on the back. You know, Rob, it seems like this was kind of the distilled essence of the feedback cultures we've seen. It doesn't exist in a vacuum. The idea of being harsh with feedback doesn't exist just in Bridgewater.

20:13It's been the subject of books. It exists within Netflix to some extent. Meta has it, though I think a little bit softer than the Bridgewater, like actual constructive feedback, although everybody talks about feedback. I mean, do you see this as more of like a product of a moment and or did it influence that moment? I would say yes and yes, both. First of all, this is definitely the wildest, most extreme example of this idea. Reed Hastings and Ray Dalio actually, there are a lot of similarities to their culture. And Ray has talked about it inside Bridgewater about how much he admires what Reed has done.

20:57What I would say is that technology, the ability to have this dot collector, the ability to rate in real time has sort of poured gasoline on this. Because it's very different. Remember, it's very different if you and me, we're not alone right now, unless this is the lowest rated episode in big technology history. But if we're alone and I'm saying, Alex, let me just look at you straight on and just say, like, what you said in that meeting, I didn't think that came in your mouth very well. Here's how I would have said it. Probably there's a shared trust between us. We can move on. It's very different when we start talking about doing this essentially in public on a huge scale.

21:36And Bridgewater had, you know, 2 ,000 employees at peak when everyone can see what everyone else is getting rated for in real time. And then it's a snowball rolling down the hill to hell. Yeah. Is it like an Uber driver where you get a certain low rating and you're booted off the app? It's well, yes. First of all, literally, if you don't have high enough ratings in certain categories, you will get what Bridgewater calls sorted, sorted out. They don't call it getting fired. They call it sorting you. Sounds like a mafia term. You said it, not me. The what I would say is. Like an Uber driver, you know, if you get an Uber, if you see your Uber driver has what's a bad rating now, by the way, it's like four, seven, five.

22:20I think I'd like I get kicked off Uber. Anything under like 4.6, you might as well not be driving. If we run out of things to talk about, this ends up with you and me checking our Uber ratings together. We're going to do it at the end. And I better be higher than you, Alex. I don't even want to live. I don't think there's a chance of that. I'm not the kind of guy who gets a high Uber rating. I'm the kind of guy who says take the bridge, not the tunnel. That's a New York joke for our West Coast listeners. the um right the problem is if i can walk into a meeting and i can already see that you alex have a lot of red dots have a lot of bad feedback on say you can finish me off and i should finish you off by the way because there is very little incentive for me to go against the curve because if i stand up for you now i'm putting myself out there publicly and you know yeah go ahead well i i I spoke to someone, I spoke to a lot of people with this experience, but I spoke to someone who was there for only about three months and she had a pretty rough transition at Bridgewater, but she wanted to stay.

23:29She wanted to learn to use the principles to learn more about herself, but she said it was just a negative feedback loop. She said, if you mess up in your first week, you are marked as the weak prey and then it just gets piled and piled onto you and you can't stay. Now, I want to say something really important here, which is everything that I've just said to you. If Ray Dalio were here right now, he would tell me that I was only talking to disaffected employees and that many people love it. But I can tell you that for this book, I went and I got the internal HR emails. I got their own memos, people telling Ray this is a self-defeating loop, that people are scared that at any moment they may be fired.

24:16And the real scary thing for me about Ray Dalio and Bridgewater is that he knew, he did know, he does know, and he will continue to know that this is the real impact of the principles and he apparently does not care. Well, he's also, there are plenty of enablers, right? I mean, if you looked at, he did that 60 Minutes interview or it was either them or Ted or maybe both, where he's talking about the dot collector and the reporters like in the room being like, wow, they're like really rating based off of the system. And he's like showing it off. And I just think that like in the popular imagination, there's like no feeling that like what is happening or no like statement that what is happening is pretty messed up.

25:05Absolutely. Look, and we've seen this, You see this in tech all the time, these tech heroes who are here to save us. I was blown away researching this book. You know, Adam Grant, very famous organizational psychologist, Wharton professor, writes bestselling books. He goes in and he sees Ray Dalio and he witnesses this and he writes that it's based in it. He devotes a whole chapter of his book to it. And he writes that it's basically one of the greatest things he's ever seen. Later, Ray Dalio hires Adam Grant to a paid job as a consultant. This is a talk about a feedback loop. I mean, you can you can decide that for yourself.

25:46But yes, 60 minutes CBS, CBS this morning. So many interviewers, they just sat, heard Ray Dalio's version of things and said, well, this is fantastic. Listen, I like you a lot, Alex. I don't think you should run for president. I don't like I it's just like he got put on this other level and no one just stopped and said, hold on a second. How about we just switch the angle of it, switch the aperture? Why don't we ask the people who work for him what it's really like? Well, anyway, did did other companies try to embody this? Like, did the other companies try to build the same software? So this was Ray's great dream.

26:27And he talked about it endlessly inside Bridgewater. and they spent more than$100 million on this technology. His great dream is that the principles and the dot collector would be adopted by other companies. And he went to some of the most famous men in business. You know, he told people inside Bridgewater, he was talking to Elon Musk about doing this at Tesla. He visited Jack Dorsey when Jack Dorsey was running Twitter. You know, Bill Gates endorsed the principles. the wild thing is that all of these quite famous and successful people they sat and they listened and they never said anything publicly against ray but most of them did not actually adopt these ratings tools which should tell you quite something right so he had these like what would you call them outwardly constructive relationships with silicon valley royalty but But when he tried to sell them on the actual product that he bet his whole life on, it was a no.

27:26Well, and he did. He was successful with one company, sort of. So he was successful with Coinbase. I don't know exactly how, but he got Coinbase to do a trial program where they brought the dot collector to Coinbase. And spoiler alert, the reaction among Coinbase employees was quite poor. And when reporters asked Coinbase about this, Coinbase's defense was it was not that that this was their defense. It was this product was so unpopular that not enough employees used it to make it worth continuing. So they didn't they neither defended nor insulted it. They just said nobody wanted it. And I know that that was very devastating for Ray.