Raymond Dalio, founder of investment company Bridgewater Associates, has an abundance of qualifications. Institutional Investor ranked him fourth on their 2017 hedge fund managers list. In their 2018 list of the world’s billionaires, Forbes ranked Dalio as the 67th-richest person in the world.
Ray Dalio and co-chief investment officers Bob Prince and Greg Jensen have controlled Bridgewater Associates for years. However, in the coming months, the firm will restructure itself as a partnership. Doing so will give top executives significantly more say in how the fund is run. The new partnership model was announced on June 28, 2018. By switching to a partnership model, other senior executives will have an economic stake in the business and a vote in how it is run.
As of June 2018, Dalio has a net worth of $17.4 billion. Here is how he became rich.
Dalio launched his career at age 12 when his desire for spending money drove him to work as a caddie. The people for whom he worked often discussed stock trading, so he started to invest. One of his profits included buying shares in Northeast Airlines for $300, which tripled when the airline merged with another company. Lessons he learned from his first attempts stayed with him for the rest of his life, namely that he had to be an independent thinker, that overconfidence could be costly, that he would benefit by stress-testing his opinions with experts, and that he had to constantly improve. The Beatles inspired him to meditate, which improved Ray’s decision-making.
In 1971, Dalio transferred to Harvard Business School, where he clerked on the floor of the New York Stock Exchange. It was his introduction to the currency markets that launched his interests. In between, he interned for the director of commodities for Merrill Lynch, where he pursued his interest in trading in commodities. This was considered obscure at the time. Two years later, trading commodities futures became fashionable, so Dalio was hired as director of commodities at Dominick & Dominick LLC in 1974. He later moved on to Shearson Hayden Stone, where he worked as a futures trader and broker. After Ray was fired by Shearson Hayden Stone, he started his own investment management firm, Bridgewater Associates, which he headquartered in Westport, Connecticut.
The 1980s and Onward
Bridgewater took off in the 1980s. By 2011, the firm would become the largest hedge fund in the world. In 2016, Bridgewater listed its sixth straight year as first on the Institutional Investor’s Alpha 15th annual hedge fund 100 ranking. The company managed approximately $150 billion for its largely influential clients who were based all over the globe. In 2007, Ray had become famous for predicting the global financial crisis. He explained his model for the economic crisis in an essay called “How the Economic Machine Works: A Template for Understanding What Is Happening Now.” From 2011 on, Dalio publicized his techniques and principles in writings and in speech. Two of his most notable works were “Principles,” which outlined his basic life and management principles, and a 15-minute YouTube clip that explained “How the Economic Machine Works.”
Bridgewater Associates earned a $300 million profit in 2017 despite mediocre percentage returns, and Bridgewater’s Pure Alpha fund returned 1.2% in 2017.
The Bottom Line
Dalio wrote a 132-page volume explaining and transmitting the principles of his successful career. If you could reduce it to one factor, it would be truth. Dalio considers it crucial to accept and successfully deal with life’s vagaries. Integrity is liberating. He prizes relationships, and wrote that listening to others to find out what is true would dissolve misinformation. Accurate analysis of events, observed Dalio, helped him improve. He concluded that it was those who used reality as a compass to their goals who succeeded. Money, Dalio concluded in his Principles, was never his aim. He appreciated making the Forbes 400 list, but he considered it more important to run an interesting life, engage in meaningful work, and form meaningful relationships.