Friday, December 23, 2016

Bridgewater, World’s Largest Hedge Fund, Is Building An Algorithmic Model Of Ray Dalio's Brain

Or something.
I may have gotten confused on the details.

From The Wall Street Journal:

The World’s Largest Hedge Fund Is Building an Algorithmic Model From its Employees’ Brains
Bridgewater wants day-to-day management—hiring, firing, decision-making—to be guided by software that doles out instructions
Deep inside Bridgewater Associates LP, the world’s largest hedge-fund firm, software engineers are at work on a secret project that founder Ray Dalio has sometimes called “The Book of the Future.”
The goal is technology that would automate most of the firm’s management. It would represent a culmination of Mr. Dalio’s life work to build Bridgewater into an altar to radical openness—and a place that can endure without him.

At Bridgewater, most meetings are recorded, employees are expected to criticize one another continually, people are subject to frequent probes of their weaknesses, and personal performance is assessed on a host of data points, all under Mr. Dalio’s gaze.

Bridgewater’s new technology would enshrine his unorthodox management approach in a software system. It could dole out GPS-style directions for how staff members should spend every aspect of their days, down to whether an employee should make a particular phone call.

The system remains under development, and the exact details of its operations are still being debated inside the firm. One employee familiar with the project described it as “like trying to make Ray’s brain into a computer.”

Bridgewater manages $160 billion, the most of any hedge-fund firm. It has earned clients twice as much total profit as any rival, says LCH Investments NV, a firm that puts client money into hedge funds. Mr. Dalio personally earned $1.4 billion last year, according to research firm Institutional Investor’s Alpha.

Bridgewater’s flagship fund, however, was down about 12% on the year at one point in 2016, causing alarm inside the firm. The fund has since recovered to being up 3.9% in mid-December. A lower-fee fund was up 8.1%.

Rules for Bridgewater’s staff are laid out in a 123-page public manifesto known as the “Principles,” which every employee is expected to know and diligently apply. Along with maxims such as “By and large, you will get what you deserve over time,” the Principles are filled with advice from Mr. Dalio such as “Don’t ‘pick your battles.’ Fight them all.”

Bridgewater says about one-fifth of new hires leave within the first year. The pressure is such that those who stay sometimes are seen crying in the bathrooms, said five current and former staff members. This article is based on interviews with them and more than a dozen other past and present Bridgewater employees and others close to the firm.

Mr. Dalio returned to run Bridgewater earlier this year after stepping back to a mentor role six years ago. Within a few weeks, he gathered managers under a tent and said the firm had grown bloated and inefficient. The fix, he said, would be a “renovation,” in which weak employees were let go.
Staff cuts began almost immediately. Since his return, head count is down by about 150, or 10%. Hundreds more may be cut in coming months, though some are expected to be replaced eventually. The budget for the holiday party, which in the past has had elaborate decorations, such as Christmas trees hanging inverted from the ceiling, has been trimmed by 20% this year.

Stung by public disclosures early this year of internal tumult, Mr. Dalio changed a decades-old system of making all high-level deliberations and decisions known to every member of staff. Instead, he decided to let only around 10% have the full measure of what he calls “radical transparency.”
He wrote a new principle, not yet public, that says, “Expect those who receive the radical transparency to handle it responsibly and don’t give it to them if they can’t.”

When an employee challenged Mr. Dalio in an open meeting on whether the response was proportionate to the leaks, he replied that as the inventor of the firm’s management system, he determined it was....MORE