Reuters/ Ruben Sprich
- Bridgewater rigged its "believability weighting" system to keep founder Ray Dalio on top, a new book says.
- The system signaled how much weight someone's opinion carried and was theoretically meant to help identify talent.
- After two underlings outranked him, Dalio was set as the baseline for believability, per "The Fund."
A new book said Ray Dalio was less than thrilled that other employees were scoring higher than him on Bridgewater's famous "believability weighting" scale, and that the hedge fund subsequently rigged the system to ensure his place at the top.
That's according to "The Fund: Ray Dalio, Bridgewater Associates, and the Unraveling of a Wall Street Legend," out Tuesday from New York Times finance reporter Rob Copeland.
Dalio brought on a consultant in 2009 as an advisor to Bridgewater's management committee and tasked him with creating a system for ranking employees, the book said. Dalio's idea was to have something like a baseball card for each employee — visible to everyone and ranking them on dozens of different attributes in an attempt to spell out their strengths and weaknesses, the book said.
Categories included things like determination, practical thinking, and visualization, according to the book, but one metric — believability, which was a combination of all of the ratings in each category — trumped them all. Bridgewater's believability weighting system, in theory, was supposed to help determine how much weight a person's opinion carried and to help identify hidden talent within the firm.
The consultant pushed back against the idea of mixing all of the ratings, the book said. According to the book, he told Dalio: "You can't average the numbers there … that's like taking your shoe size, adding it to your body temperature, and adding it to the time of day, and then dividing by three, and having it to the third decimal point, and thinking you have discovered something."
Dalio reportedly responded: "Believability cascades. You should have done this. I just did your job for you."
Bridgewater started experimenting with Dalio's believability weighting system with a prototype allowing staff to see each others' scores on a scale of 1-to-10, but Dalio wasn't pleased, the book said.
He'd recently been told two people at his hedge fund — one in investment research and the other in IT — were scoring higher on believability than he was, according to the book. On a phone call to the consultant, Dalio asked, "Why doesn't believability cascade?" the book said.
The consultant subsequently ordered a new rule to be programmed into the system software that would set Dalio as "the new baseline for believability in virtually all important categories," such that his score would be "numerically bulletproof to negative feedback," Copeland wrote.
"Regardless of how everyone else in the firm rated him, the system would work to keep him on top," the book said.
Bridgewater staffers were also subject to living by a strict code of conduct, developed by Dalio, known as The Principles. New hires received a 90-page printout of Dalio's golden rules and all Bridgewater staffers were tested on The Principles with an exam featuring questions like what percentage of their peers would steal, according to "The Fund."
In response to a request for comment from Insider on the book's assertions regarding the believability rating system, Bridgewater provided excerpts of letters that its lawyers sent to the book's publisher, St. Martin's Press.
In one excerpt, the company said Copeland "seems either confused on the role of 'believability' in the system or is intentionally mischaracterizing it. There is not one believability score comprised of averaging other categories. Each category has its own believability."
The company also addressed Copeland's assertions about Dalio's rating, writing: "The system was designed in a way that did not give Mr. Dalio (or anyone) any special privileges or powers." It also said the consultant's role in developing the system was "over-emphasized" in the book and that Dalio never overruled a rating. A lawyer for Dalio said that there was no "believability" baseline.
The company further wrote: "The data and processes used to calculate Mr. Dalio's rating were not different from those used to calculate ratings for other employees. The processes and ratings were always available for employees to review to assess their fairness."
In a LinkedIn post, Dalio said the book was "another one of those sensational and inaccurate tabloid books written to sell books to people who like gossip" and that Bridgewater "obviously is not and was not as he describes it," referring to Copeland.