Ray Dalio: the seer blindsided by a bug

When the financial crisis struck in 2008, Ray Dalio’s hedge fund was well prepared to profit and he has since enjoyed a reputation for prescience. He was, he admits, not so fortunate this time round.

Ray Dalio © Getty

“It’s never easy to admit that you’re wrong, especially when you have previously earned fame (and billions of dollars) by calling the future right,” says Gillian Tett in the Financial Times. Yet Ray Dalio has done just that. The founder of the world’s largest hedge fund, Bridgewater Associates, with a personal fortune previously estimated at £18bn, concedes he was badly wrong-footed by the coronavirus market turmoil – “in sharp contrast to the 2008 financial crisis, when he and his team predicted events with such prescience that they profited handsomely”. This time around, Dalio’s $160bn flagship fund is down by about 20% because, as he admits, Bridgewater’s analytic systems couldn’t “offer any guidance” about a rare event such as a pandemic.

A Young Turk humbled

Dalio will surely be taking it in his stride. A key story in Dalio’s best-selling book – part memoir, part how-to guide – tells of his meltdown in 1982, when a series of bad bets on bonds nearly imploded his fund, wrecking his reputation as a Young Turk of the markets, says The New York Times. “Being so wrong – and especially so publicly wrong – was incredibly humbling and cost me just about everything,” he writes. “I saw that I had been an arrogant jerk… betting everything on a depression that never came.” He had to let all his staff go and borrow from his father to pay his bills.

Ultimately, Dalio’s love of markets saw him through. It began at a young age in the early 1960s. Growing up in Long Island, the son of a jazz musician, he started investing at 12, getting tips from golfers for whom he caddied. The first stock he bought was Northeast Airlines. Thanks to “a lucky merger”, the young investor “tripled his money”, notes CNBC, and he was “hooked”. By the time he graduated from high-school, Dalio had built an impressive portfolio worth thousands. After a stint at Harvard Business School, Dalio headed for Wall Street, becoming a commodities trader at Shearson Hayden Stone. But he was “temperamental” and didn’t last long, says The Times. In 1974, he punched his boss at a party; shortly after he was fired. The following year, aged 26, he founded Bridgewater from his apartment in New York city.

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Calmed by meditation

Aside from its performance (over four decades, the firm has made more money for its investors than any other hedge fund in history, according to Bloomberg), Bridgewater is best known for its unique culture, says The New York Times. Staff at his fund rate performance during meetings, scoring colleagues out of ten for open-mindedness, creativity and assertiveness and so on. Their overall rating is taken into account in investment decisions. Critics have likened this “social experiment” to Big Brother – there are horror stories about the “often brutal feedback” and turnover among new employees is high.

Still, Dalio claims to have overcome his own fiery tendencies by practising transcendental meditation. He says he is now far more interested in “the gorgeousness of nature, not the things you buy”. Based on the assumption that what he calls the “success” phase of his life is over, Dalio is no longer chasing personal glory – though doubtless recent setbacks will galvanise him to make good the fund’s losses. Confident that his legacy has been secured by the uptake of his principles, he says he now feels “free to live, and free to die”. Ommmmmm.

Jane writes profiles for MoneyWeek and is city editor of The Week. A former British Society of Magazine Editors editor of the year, she cut her teeth in journalism editing The Daily Telegraph’s Letters page and writing gossip for the London Evening Standard – while contributing to a kaleidoscopic range of business magazines including Personnel Today, Edge, Microscope, Computing, PC Business World, and Business & Finance.

She has edited corporate publications for accountants BDO, business psychologists YSC Consulting, and the law firm Stephenson Harwood – also enjoying a stint as a researcher for the due diligence department of a global risk advisory firm.

Her sole book to date, Stay or Go? (2016), rehearsed the arguments on both sides of the EU referendum.

She lives in north London, has a degree in modern history from Trinity College, Oxford, and is currently learning to play the drums.