I read ‘The Kite Runner’ several years ago and remember enjoying it a lot. Sadly, I never wrote anything about it so I can’t say why or compare it to this book. Certainly, ‘And The Mountains Echoed’ has much to recommend it. The prose is smooth and flowing. The sentences are short and evocative. The characters and settings are varied and rich. Details are well chosen and pithily expressed. However, it also had a sentimental quality most obvious in its extremely dramatic and shocking plot. Much of the dialogue also had this quality in a way that’s harder to pin down but permeated the whole text.
The story is woven together using nine perspectives, each contained in a chapter. These are: 1) A poor Afghan farmer (Saboor) taking his two children (Abdullah and Pari) to Kabul and telling them a story on the journey through the desert (1952) 2) The same farmer selling his daughter (Pari) to a wealthy, childless family (Wahdatis) where a relative (Nabi) works when they reach Kabul (1952) 3) Saboor’s second wife’s (Parwana) story of how she pushed her sister (Masooma) off a tree because she was jealous of her good looks and found out she was going to marry Saboor (1949) 4) Nabi’s story of working for Mr Wahdati and their long shared history 5) the story of two brothers (Idris and Timur) who are Afghans who emigrated to the US during the wars and used to live on the same street as Nabi and the Wahdatis. They come back to try and reclaim their property in Kabul (2003) 6) the story of Pari and Mrs Wahdati’s life in Paris after she leaves Mr Wahdati when he has a stroke (1974) 7) the story of a jihadi turned drug lord and his family who move to the village where Abdullah and Pari were born. The pair’s half brother attempts to reclaim his property from the gangster following time as a refugee in Pakistan (2009) 8) the story of the life of a Greek plastic surgeon (Markos) who lives in the Wahdati’s house when Nabi owns it (2010) 9) the story of Pari reconnecting with Abdullah in America and the relationship between her and Abdullah’s daughter (2010).
Some of the characters and the depth of emotional perception are really good. The brothers in chapter five, for example. However, I sometimes felt like the story was flitting around too much. The emphasis on the clever interconnections between the stories was too heavy and detracted from the quality of the individual stories themselves. For example, at the end of Chapter 5 the child who Idris agrees to help but then ends up ignoring seemingly thanks his brother, Timur, in the dedication to her book. This isn’t explored in any detail and is almost a throwaway whereas I felt it could have been interestingly expanded as another example of the brothers’ relationship, which was a highlight for me. Equally, Chapter 4, the story of Nabi, was really good partly because it didn’t have complicated interconnections that have to be worked out. In some ways I thought this aspect of the novel was overdone and not always successful. There are too many stories and they are too disparate. It’s like Hosseini is trying to do too much in one book. That said, the passing reference to ‘Abe’s Kabob House’ in Chapter 5, which is then explored in detail in Chapter 9, was really well done. I thought it spoke poignantly about the upheaval and change of migration and life as an immigrant and was very well handled.
Against the good writing, powerful characters and scenes, the book is somewhat overly dramatic. The whole thing is so stuffed full of tragedy and is so eventful it sometimes feels like watching a soap opera where something shocking has to happen every five minutes to keep the audience engaged. At times this felt facile, gratuitous and simplistic. Against this criticism, one of the main themes of the book is the turmoil and misery wrecked by the wars in Afghanistan so perhaps it is unfair to criticise the author’s attempts to place this in the foreground. Nonetheless, even the more domestic portions of the book that take place outside of Afghanistan can feel histrionic and overblown. The book is undoubtedly moving but sometimes it feels like the reader’s heartstrings are being pulled a little too hard a little too often!
This was an enjoyable, varied and readable book. I had a few issues with the structure and the intensity and frequency of its dramatic episodes but overall I would recommend it.
Sunday 30 September 2018
Thursday 13 September 2018
Ray Dalio - Principles: Life and Work
I was excited to read this book because of Dalio’s success with Bridgewater. His investment style could be broadly described as one of quantitative, macroeconomic trading, which is far from the long term, qualitative, bottom up, equities investment strategy I try to follow. I thought it would be a good opportunity to learn about how someone has had a lot of success with a very different style of investment to most of the books I read. In some senses this turned out to be true and in others rather less so! The publishers have done a good job in releasing this book, principles on ‘life and work’, before the second volume on ‘economics and investment’. Dalio is famous for his understanding of investment so most people would probably read the second volume over the first. That said, he’s sufficiently famous for his prowess as an investor that some punters, like me, will read this one anyway!
The book started quite well for me with an interesting overview of Dalio’s life and career. What becomes clear very early on is that he has a lot of ideas and a very high capacity for work. He is also an inveterate speculator, which I view as a positive. He writes in Chapter 3, titled ‘My Abyss’, about how he lost all his money early on in his career. I enjoyed this as many people might want to airbrush this from their career. Dalio is upfront about this mistake and, more generally, writes persuasively about the value of making mistakes in gaining experience and improving. Anyone with any experience trading knows the following is true, “I believe that anyone who has made money in trading has had to experience horrendous pain at some point. Trading is like working with electricity; you can get an electric shock” (p18 quoting from Jack Schwager Hedge Fund Market Wizards). Losing all your money is a sign of some naivety and excessive risk taking but it seems like Dalio definitely learned his lesson. That said, this is the only major mistake that Dalio mentions in the book and the rest of it is notably devoid of serious problems that he must have encountered in growing his firm. It is remarkable how many investors only focus on their successes, at least publicly. Although I suppose it could be viewed as good marketing. When it comes to the nitty gritty of running a company, the book is long on wishy washy management principles and very short on practical, painful examples. This is in spite of the fact that Dalio consistently refers to problems and mistakes as the lifeblood of evolution. I expected him to mention far more of them rather than just talk about their value in general terms and this was a disappointment.
As well as making clear that he is a bona fide speculator, the early chapters also demonstrate Dalio’s love of quantitative data and systems. To Dalio, everything is a machine that has rules and moving parts that can be understood and programmed to work more efficiently. The economy is a machine, so is a company, so is your brain. I’m not sure I agree with this assessment but this is how Dalio sees the world and operates within it. He states his quantitative approach definitively writing, “theoretically...if there was a computer that could hold all of the world’s facts and if it was perfectly programmed to mathematically express all of the relationships between all of the world’s parts, the future could be perfectly foretold” (p39-40). This reminded me of Keynes’ thoughts about the future and speculation and how contrary they seem to Dalio’s. Keynes writes, ‘“We have, as a rule, only the vaguest idea of any but the most direct consequences of our acts. Thus the fact that our knowledge of the future is fluctuating, vague and uncertain, renders wealth a peculiarly unsuitable subject for the methods of classical economic theory….By ‘uncertain knowledge’....I do not mean merely to distinguish what is known for certain from what is only probable...The sense in which I am using the term is that in which the prospect of a European War is uncertain, or the price of copper and the rate of interest twenty years hence, or the obsolescence of a new invention, or the position of private wealth holders in the social system in 1970. About these matters there is no scientific basis on which to form any calculable probability whatever’ (my italics). Whereas Dalio seems to have faith in the ability to model provided the computing power is of sufficient force. Leaving aside the theoretical and focusing on today’s imperfect computer models Dalio states, as anyone with any practical experience of uncertainty knows, that even the most powerful quantitative analysis can only produce a range of probabilities rather than one specific and definite outcome. Dalio writes, ‘Truth be known, forecasts aren’t worth very much, and most people who make them don’t make money in the markets….This is because nothing is certain and when one overlays the probabilities of all the various things that affect the future in order to make a forecast, one gets a wide array of possibilities with varying probabilities, not one highly probable outcome’. I thoroughly agree with him on this even if, ultimately, I’m probably closer to Keynes philosophically. Dalio’s skill is clearly not just modelling; it is also knowing when and how to bet. A lot of Dalio’s work seems to centre on the use of empirical logs and tools to eliminate human bias and errors. Having been thoroughly convinced about the faultiness of the human brain’s decision making by books like Thinking Fast and Slow I thought this was an area where Dalio is insightful and valuable. Especially given the advancements in AI and machine learning happening at the moment. Section 5.11 on algorithms, beginning p257, is very good on this and is something I need to learn more about and make use of.
In his early days as a commodity trader and consultant, he comes up with the idea of his ‘pure alpha’ fund through a combination of his love of speculation and his love of data. In researching his speculation he had come up with a huge number of strategies - ‘I had a large collection of uncorrelated return streams. In fact, I had something like a thousand of them’ (p58). He also had good, systematic data that recorded all of these systems and bets he had been trailing - ‘we had programmed and tested lots of fundamental trading rules’ (p58) in each asset class and they were trading lots of different asset classes. Combining this ability to come up with thousands of different types of trade, tracking and back testing them to see what was profitable, with his ‘eureka moment’ of realising that ‘having a few good uncorrelated return streams is better than having just one, and knowing how to combine return streams is even more effective than being able to choose good ones’ (p57) led to the creation of his fund management business.
On a less positive note, Dalio is seriously pleased with himself and never misses an opportunity for self-congratulation. A lot of this is dressed up in the most transparent form of false modesty, which makes it even worse. He makes a big song and dance about how relationships are the most important thing in the world before going on to list his wealth and influence according to Forbes and Time. He tells us about how much dating he was doing before he met his wife, compares his theory about uncorrelated income streams to Einstein’s theory of relativity and says he won’t talk much about his family before going on to boast about all of them at some length! He even states twice that Bridgewater is the most successful hedge fund ever and has made more money for his clients than anyone else in history. If this isn’t the writing of a very competitive and self satisfied person, then I don’t know what is. The whole concept for the book oozes self-importance!
Page 79 sees him talk about his ‘amazing achievements’ and about how most of what he does within the company ‘couldn’t be adequately delegated’. He feels like he is doing everything and needs help so sets up a management committee to monitor his performance. This all sounds fine and dandy until you learn later in the book that remuneration is very much Dalio’s domain and not the management committee’s. This sounds like getting a bunch of people who rely on your opinion of them to get rich to tell you how you’re doing. As I’ll try to explain later, this kind of duplicity applies to Dalio’s ideas of ‘radical transparency’ and ‘radical honesty’ in a similar way. It all sounds great and the ‘idea meritocracy’ sounds impressive until you realise it is, essentially, a Ray Dalio-ocracy where he makes the rules and chooses whether to enforce or suspend them at will.
Dalio thinks of himself as amongst history’s most incredible minds. For evidence of this, Dalio describes Bridgewater as ‘intellectual Navy SEALs; others describe it as going to a school of self-discovery run by someone like the Dalai Lama’ (p88). Not wanting to stop at comparing himself to the Dalai Lama, he also recounts a story where he meets the man himself. Apparently, he congratulated Dalio on his amazing understanding of humanity and asked him to join him in meeting but Dalio was too busy. The inference is very much that the Dalai Lama, too, has lots to learn from Dalio or that they are both ‘ninjas’ - a oddly fratty term Dalio uses to describe people who are very good at something. Pages 93-98, entitled ‘Learning what shapers are like’, are the most egregious example of his self satisfaction. Here he compares himself to just about any other great person you can think of. Martin Luther King, Steve Jobs, Bill Gates, Einstein, Freud, Darwin, Muhammad, Jesus, Newton, Franklin - it’s almost impossible to believe he isn’t being sarcastic! He tries to mitigate this a bit on p111 by writing, ‘I want to be clear that I don’t believe that those who are ‘heroes’ or ‘shapers’ are either better people or are on better paths. It’s perfectly sensible to not have any desire to go on such a journey. I believe that what’s most important is to know one’s own nature and operate consistently with it’. However, the whole tone of the book and even his decision to write it indicate that Dalio most certainly sees himself as better than almost everyone else! Section ‘H’ on p230 where he talks more about ‘shapers’ is a good example of this.
The problem is, like many skillful market operators, Dalio takes his skill at navigating the market to indicate that he is an amazing thinker in all areas - not just markets. In Chapter 5 he describes himself as a impartial economic doctor in self-aggrandising section called ‘helping policy members’. Later on at p108, while boasting about his close relationship with Wang Qishan, he declares ‘I feel i get closer to cracking the unifying code that unlocks the laws of the universe’ when the two of them talk!! Perhaps this level of self obsession is necessary to become as successful as Dalio. It certainly isn’t attractive and made me feel like Bridgewater is really a cult of personality rather than the utopian ‘idea meritocracy’ that Dalio would like us to believe that it is.
Alongside the infuriating smugness, I also found the book hard to read because it is quite badly written. Dalio is not a wonderful writer and most of the analogies he uses are related to baseball or skiing. He brands anything that doesn’t agree with his interpretation as ‘backward’, there is endless talk of ‘triangulation’ and ‘getting in sync’, which quickly becomes wearisome and repetitive. The book is presented as principles (e.g. 10) with sub-principles (10.1) and further details (10.1.A). This would appear to point to some kind of logical development and connection between the ideas being set out, as is the case with geometric presentations in philosophical books like Spinoza’s Ethics. This is definitely not the case with Dalio’s book! In spite of the appearance of logic and cohesion, these are really just vaguely connected statements or ramblings. Some of the sub points are just phrases like ‘show candidates your warts’, something he doesn’t really do in this book, with no examples or significant elaboration. By the latter stages of the book, I realised that I was just reading a list of poorly written general reflections that I would never be able to remember because they’re not cohesive, logical or supported by good examples. For this reason, I found the book a struggle to read and hard to follow.
Bridgewater definitely struck me as culty on the evidence of this book. Like Dalio’s arrogance and seeming perception of himself as some kind of hero, perhaps this is what’s necessary to have the kind of success that Bridgewater and Dalio have enjoyed. Nonetheless, I would like to call BS on a couple of the principles at Bridgewater. This is not to say the system doesn’t or can’t work; evidence would point to the contrary! More that the reality of the ‘idea meritocracy’ seems quite different from Dalio’s perception and presentation of it in this book. Section D on p159 is a good example of the difference I perceive. Here Dalio tell us, ‘the biggest mistake people make is to not see themselves and others objectively’. This sounds OK, but who is to say what is objective and who makes the rules about how these judgements are arrived at? For Dalio, there seems to be an idea that data can be completely objective but, the more I read about Bridgewater, it seemed that what Dalio means when he says ‘objective’ or ‘higher level thinking’ is ‘my belief in what is objective’ or ‘my thinking’! Further examples can be drawn from the ideas of ‘radical honesty’ and ‘radical transparency’, which are the key pillars of the ‘idea meritocracy’. In the idea meritocracy, the best ideas are supposed to be valued above the person who presents them’s rank in the hierarchy. However, when talking about the future, it’s sometimes hard to judge whose ideas are best as many outcomes are plausible and possible. When this happens, Dalio employs the idea of ‘believability’, which essentially means the person’s track record. As such, people with high believability will hold higher positions in the hierarchy meaning that the idea meritocracy essentially functions in a similar way to a traditional hierarchy! Dalio says he has never gone against the ‘believability weighted opinion’ when making decisions and this immediately made me think, ‘Dalio must have a very heavy believability weighting!’. Equally, radical transparency sounds interesting and good. All meetings are recorded and decisions about the company aren’t confined to a small management group. However, later on we learn that remuneration - probably the single most important and divisive issue in any company - is not subject to radical transparency (p334). Indeed, the only advice Dalio offers on pay is to ‘pay north of fair’ and ‘pay for time’. Given how important this issue is in running a company, I was disappointed that there was such little discussion of this. My conclusion is that Dalio makes most big decisions on pay in a radically non-transparent and individual manner! By the same token, talk of secret auditing (p513) and public executions (p514) seemed more akin to a dictatorship than a society governed by radical transparency!
I think Dalio’s principles are a bit like a religious text. It seems to provide an external, objective reference point for how things are decided and governed. However, inevitably, these principles can be interpreted and acted upon in a huge number of different ways so they end up being a tool to justify and vindicate the decisions of the leaders. Simply look at the incredibly disparate societies and communities the Bible has been used to support! Everything is in the interpretation and Dalio himself seems to recognise this in 6.4.B (p390), which in essence states that principles can mean lots of different things to different people but his interpretation of the principles is the correct one! So much for the idea meritocracy, unless everyone agrees that his ideas are the best - which they may well be when it comes to investment! On p391 Dalio argues that sometimes the idea meritocracy has to be suspended for the good of the organisation and, in the very next principle, that one should be wary of someone who seeks to suspend the idea meritocracy for the good of the organisation. This kind of contradictory thinking makes it seem like the principles are, like almost all principles, open to a large amount of interpretation and modification depending on what the most powerful people in a hierarchy want. In this way, Dalio’s way of operating sounds pretty much the same as most successful fund managers’; my way or the highway!
All this criticism might make it seem like I got nothing out of this book and that was not the case. He is very good on using algorithms to help investment and some parts of management and he writes persuasively about how the power and speed of the subconscious mind make it imperative to learn and analyse systematically before making decisions. His belief that people often get bogged down in details and his adherence to the 80:20 principle and general principles struck me as true. He also counsels that knowing when not to bet is as important as knowing what bets to make (P253 5.6b), which I felt is important and true. In short, there is quite a lot of decent advice about investment in the book. Although little of it is ground breaking or particularly well exemplified. Unfortunately, what good stuff there is is wrapped up in a lot of self aggrandizing crap and meaningless waffle.
One thing Dalio definitely understands is the importance of matching your nature to what you do. I feel this is the single most important thing in becoming a good investor; trying to understand yourself and match your style to your strengths while making every effort to compensate for your weaknesses. Dalio understands this very deeply. He writes, ‘the happiest people discover their nature and match their life to it’ (p124) which I would wholeheartedly agree with. He also writes at length about the opportunity to learn from mistakes, which is also crucial. I think what Dalio has done in creating Bridgewater is to design a company that matches his nature extremely closely. This is a hard thing to do and I think he is exceptional in having done it to the extent he has. He also clearly has a gift for market speculation. However, rather than creating a new, broadly applicable way of thinking about managing a company, which is what Dalio thinks he has done, I’d say he has really just designed an environment that suits his nature very well. Lots of the book is couched in terms of, ‘I have had so much success, now my main goal is to pass it on to others’ but I would argue that very little of what he writes is easy to apply generally. The principles are vague, subject to modification and interpretation and are never fleshed out with really tricky practical examples. The problems he does talk about are largely trivial and the ones that people might really be interested in, for example the sexual harassment case brought against his CIO, are never mentioned. This is really disappointing given how much Dalio talks about learning from mistakes and difficult situations.
All in all, I didn’t get much from his book. The sections on Dalio’s life and career were probably the best bits as they’re not presented in the ‘principles’ style used later in the book. These sections also contained more factual information and fewer wishy washy aphorisms. As well as having a frustrating structure, the book isn’t well written and this made it a slog to read. However, given his track record, I’ll probably still read ‘Investment and Economic Principles’ when it comes out in the hope of getting more practical tips for making money! Hopefully with lots more concrete examples of his experiences in the markets.
The book started quite well for me with an interesting overview of Dalio’s life and career. What becomes clear very early on is that he has a lot of ideas and a very high capacity for work. He is also an inveterate speculator, which I view as a positive. He writes in Chapter 3, titled ‘My Abyss’, about how he lost all his money early on in his career. I enjoyed this as many people might want to airbrush this from their career. Dalio is upfront about this mistake and, more generally, writes persuasively about the value of making mistakes in gaining experience and improving. Anyone with any experience trading knows the following is true, “I believe that anyone who has made money in trading has had to experience horrendous pain at some point. Trading is like working with electricity; you can get an electric shock” (p18 quoting from Jack Schwager Hedge Fund Market Wizards). Losing all your money is a sign of some naivety and excessive risk taking but it seems like Dalio definitely learned his lesson. That said, this is the only major mistake that Dalio mentions in the book and the rest of it is notably devoid of serious problems that he must have encountered in growing his firm. It is remarkable how many investors only focus on their successes, at least publicly. Although I suppose it could be viewed as good marketing. When it comes to the nitty gritty of running a company, the book is long on wishy washy management principles and very short on practical, painful examples. This is in spite of the fact that Dalio consistently refers to problems and mistakes as the lifeblood of evolution. I expected him to mention far more of them rather than just talk about their value in general terms and this was a disappointment.
As well as making clear that he is a bona fide speculator, the early chapters also demonstrate Dalio’s love of quantitative data and systems. To Dalio, everything is a machine that has rules and moving parts that can be understood and programmed to work more efficiently. The economy is a machine, so is a company, so is your brain. I’m not sure I agree with this assessment but this is how Dalio sees the world and operates within it. He states his quantitative approach definitively writing, “theoretically...if there was a computer that could hold all of the world’s facts and if it was perfectly programmed to mathematically express all of the relationships between all of the world’s parts, the future could be perfectly foretold” (p39-40). This reminded me of Keynes’ thoughts about the future and speculation and how contrary they seem to Dalio’s. Keynes writes, ‘“We have, as a rule, only the vaguest idea of any but the most direct consequences of our acts. Thus the fact that our knowledge of the future is fluctuating, vague and uncertain, renders wealth a peculiarly unsuitable subject for the methods of classical economic theory….By ‘uncertain knowledge’....I do not mean merely to distinguish what is known for certain from what is only probable...The sense in which I am using the term is that in which the prospect of a European War is uncertain, or the price of copper and the rate of interest twenty years hence, or the obsolescence of a new invention, or the position of private wealth holders in the social system in 1970. About these matters there is no scientific basis on which to form any calculable probability whatever’ (my italics). Whereas Dalio seems to have faith in the ability to model provided the computing power is of sufficient force. Leaving aside the theoretical and focusing on today’s imperfect computer models Dalio states, as anyone with any practical experience of uncertainty knows, that even the most powerful quantitative analysis can only produce a range of probabilities rather than one specific and definite outcome. Dalio writes, ‘Truth be known, forecasts aren’t worth very much, and most people who make them don’t make money in the markets….This is because nothing is certain and when one overlays the probabilities of all the various things that affect the future in order to make a forecast, one gets a wide array of possibilities with varying probabilities, not one highly probable outcome’. I thoroughly agree with him on this even if, ultimately, I’m probably closer to Keynes philosophically. Dalio’s skill is clearly not just modelling; it is also knowing when and how to bet. A lot of Dalio’s work seems to centre on the use of empirical logs and tools to eliminate human bias and errors. Having been thoroughly convinced about the faultiness of the human brain’s decision making by books like Thinking Fast and Slow I thought this was an area where Dalio is insightful and valuable. Especially given the advancements in AI and machine learning happening at the moment. Section 5.11 on algorithms, beginning p257, is very good on this and is something I need to learn more about and make use of.
In his early days as a commodity trader and consultant, he comes up with the idea of his ‘pure alpha’ fund through a combination of his love of speculation and his love of data. In researching his speculation he had come up with a huge number of strategies - ‘I had a large collection of uncorrelated return streams. In fact, I had something like a thousand of them’ (p58). He also had good, systematic data that recorded all of these systems and bets he had been trailing - ‘we had programmed and tested lots of fundamental trading rules’ (p58) in each asset class and they were trading lots of different asset classes. Combining this ability to come up with thousands of different types of trade, tracking and back testing them to see what was profitable, with his ‘eureka moment’ of realising that ‘having a few good uncorrelated return streams is better than having just one, and knowing how to combine return streams is even more effective than being able to choose good ones’ (p57) led to the creation of his fund management business.
On a less positive note, Dalio is seriously pleased with himself and never misses an opportunity for self-congratulation. A lot of this is dressed up in the most transparent form of false modesty, which makes it even worse. He makes a big song and dance about how relationships are the most important thing in the world before going on to list his wealth and influence according to Forbes and Time. He tells us about how much dating he was doing before he met his wife, compares his theory about uncorrelated income streams to Einstein’s theory of relativity and says he won’t talk much about his family before going on to boast about all of them at some length! He even states twice that Bridgewater is the most successful hedge fund ever and has made more money for his clients than anyone else in history. If this isn’t the writing of a very competitive and self satisfied person, then I don’t know what is. The whole concept for the book oozes self-importance!
Page 79 sees him talk about his ‘amazing achievements’ and about how most of what he does within the company ‘couldn’t be adequately delegated’. He feels like he is doing everything and needs help so sets up a management committee to monitor his performance. This all sounds fine and dandy until you learn later in the book that remuneration is very much Dalio’s domain and not the management committee’s. This sounds like getting a bunch of people who rely on your opinion of them to get rich to tell you how you’re doing. As I’ll try to explain later, this kind of duplicity applies to Dalio’s ideas of ‘radical transparency’ and ‘radical honesty’ in a similar way. It all sounds great and the ‘idea meritocracy’ sounds impressive until you realise it is, essentially, a Ray Dalio-ocracy where he makes the rules and chooses whether to enforce or suspend them at will.
Dalio thinks of himself as amongst history’s most incredible minds. For evidence of this, Dalio describes Bridgewater as ‘intellectual Navy SEALs; others describe it as going to a school of self-discovery run by someone like the Dalai Lama’ (p88). Not wanting to stop at comparing himself to the Dalai Lama, he also recounts a story where he meets the man himself. Apparently, he congratulated Dalio on his amazing understanding of humanity and asked him to join him in meeting but Dalio was too busy. The inference is very much that the Dalai Lama, too, has lots to learn from Dalio or that they are both ‘ninjas’ - a oddly fratty term Dalio uses to describe people who are very good at something. Pages 93-98, entitled ‘Learning what shapers are like’, are the most egregious example of his self satisfaction. Here he compares himself to just about any other great person you can think of. Martin Luther King, Steve Jobs, Bill Gates, Einstein, Freud, Darwin, Muhammad, Jesus, Newton, Franklin - it’s almost impossible to believe he isn’t being sarcastic! He tries to mitigate this a bit on p111 by writing, ‘I want to be clear that I don’t believe that those who are ‘heroes’ or ‘shapers’ are either better people or are on better paths. It’s perfectly sensible to not have any desire to go on such a journey. I believe that what’s most important is to know one’s own nature and operate consistently with it’. However, the whole tone of the book and even his decision to write it indicate that Dalio most certainly sees himself as better than almost everyone else! Section ‘H’ on p230 where he talks more about ‘shapers’ is a good example of this.
The problem is, like many skillful market operators, Dalio takes his skill at navigating the market to indicate that he is an amazing thinker in all areas - not just markets. In Chapter 5 he describes himself as a impartial economic doctor in self-aggrandising section called ‘helping policy members’. Later on at p108, while boasting about his close relationship with Wang Qishan, he declares ‘I feel i get closer to cracking the unifying code that unlocks the laws of the universe’ when the two of them talk!! Perhaps this level of self obsession is necessary to become as successful as Dalio. It certainly isn’t attractive and made me feel like Bridgewater is really a cult of personality rather than the utopian ‘idea meritocracy’ that Dalio would like us to believe that it is.
Alongside the infuriating smugness, I also found the book hard to read because it is quite badly written. Dalio is not a wonderful writer and most of the analogies he uses are related to baseball or skiing. He brands anything that doesn’t agree with his interpretation as ‘backward’, there is endless talk of ‘triangulation’ and ‘getting in sync’, which quickly becomes wearisome and repetitive. The book is presented as principles (e.g. 10) with sub-principles (10.1) and further details (10.1.A). This would appear to point to some kind of logical development and connection between the ideas being set out, as is the case with geometric presentations in philosophical books like Spinoza’s Ethics. This is definitely not the case with Dalio’s book! In spite of the appearance of logic and cohesion, these are really just vaguely connected statements or ramblings. Some of the sub points are just phrases like ‘show candidates your warts’, something he doesn’t really do in this book, with no examples or significant elaboration. By the latter stages of the book, I realised that I was just reading a list of poorly written general reflections that I would never be able to remember because they’re not cohesive, logical or supported by good examples. For this reason, I found the book a struggle to read and hard to follow.
Bridgewater definitely struck me as culty on the evidence of this book. Like Dalio’s arrogance and seeming perception of himself as some kind of hero, perhaps this is what’s necessary to have the kind of success that Bridgewater and Dalio have enjoyed. Nonetheless, I would like to call BS on a couple of the principles at Bridgewater. This is not to say the system doesn’t or can’t work; evidence would point to the contrary! More that the reality of the ‘idea meritocracy’ seems quite different from Dalio’s perception and presentation of it in this book. Section D on p159 is a good example of the difference I perceive. Here Dalio tell us, ‘the biggest mistake people make is to not see themselves and others objectively’. This sounds OK, but who is to say what is objective and who makes the rules about how these judgements are arrived at? For Dalio, there seems to be an idea that data can be completely objective but, the more I read about Bridgewater, it seemed that what Dalio means when he says ‘objective’ or ‘higher level thinking’ is ‘my belief in what is objective’ or ‘my thinking’! Further examples can be drawn from the ideas of ‘radical honesty’ and ‘radical transparency’, which are the key pillars of the ‘idea meritocracy’. In the idea meritocracy, the best ideas are supposed to be valued above the person who presents them’s rank in the hierarchy. However, when talking about the future, it’s sometimes hard to judge whose ideas are best as many outcomes are plausible and possible. When this happens, Dalio employs the idea of ‘believability’, which essentially means the person’s track record. As such, people with high believability will hold higher positions in the hierarchy meaning that the idea meritocracy essentially functions in a similar way to a traditional hierarchy! Dalio says he has never gone against the ‘believability weighted opinion’ when making decisions and this immediately made me think, ‘Dalio must have a very heavy believability weighting!’. Equally, radical transparency sounds interesting and good. All meetings are recorded and decisions about the company aren’t confined to a small management group. However, later on we learn that remuneration - probably the single most important and divisive issue in any company - is not subject to radical transparency (p334). Indeed, the only advice Dalio offers on pay is to ‘pay north of fair’ and ‘pay for time’. Given how important this issue is in running a company, I was disappointed that there was such little discussion of this. My conclusion is that Dalio makes most big decisions on pay in a radically non-transparent and individual manner! By the same token, talk of secret auditing (p513) and public executions (p514) seemed more akin to a dictatorship than a society governed by radical transparency!
I think Dalio’s principles are a bit like a religious text. It seems to provide an external, objective reference point for how things are decided and governed. However, inevitably, these principles can be interpreted and acted upon in a huge number of different ways so they end up being a tool to justify and vindicate the decisions of the leaders. Simply look at the incredibly disparate societies and communities the Bible has been used to support! Everything is in the interpretation and Dalio himself seems to recognise this in 6.4.B (p390), which in essence states that principles can mean lots of different things to different people but his interpretation of the principles is the correct one! So much for the idea meritocracy, unless everyone agrees that his ideas are the best - which they may well be when it comes to investment! On p391 Dalio argues that sometimes the idea meritocracy has to be suspended for the good of the organisation and, in the very next principle, that one should be wary of someone who seeks to suspend the idea meritocracy for the good of the organisation. This kind of contradictory thinking makes it seem like the principles are, like almost all principles, open to a large amount of interpretation and modification depending on what the most powerful people in a hierarchy want. In this way, Dalio’s way of operating sounds pretty much the same as most successful fund managers’; my way or the highway!
All this criticism might make it seem like I got nothing out of this book and that was not the case. He is very good on using algorithms to help investment and some parts of management and he writes persuasively about how the power and speed of the subconscious mind make it imperative to learn and analyse systematically before making decisions. His belief that people often get bogged down in details and his adherence to the 80:20 principle and general principles struck me as true. He also counsels that knowing when not to bet is as important as knowing what bets to make (P253 5.6b), which I felt is important and true. In short, there is quite a lot of decent advice about investment in the book. Although little of it is ground breaking or particularly well exemplified. Unfortunately, what good stuff there is is wrapped up in a lot of self aggrandizing crap and meaningless waffle.
One thing Dalio definitely understands is the importance of matching your nature to what you do. I feel this is the single most important thing in becoming a good investor; trying to understand yourself and match your style to your strengths while making every effort to compensate for your weaknesses. Dalio understands this very deeply. He writes, ‘the happiest people discover their nature and match their life to it’ (p124) which I would wholeheartedly agree with. He also writes at length about the opportunity to learn from mistakes, which is also crucial. I think what Dalio has done in creating Bridgewater is to design a company that matches his nature extremely closely. This is a hard thing to do and I think he is exceptional in having done it to the extent he has. He also clearly has a gift for market speculation. However, rather than creating a new, broadly applicable way of thinking about managing a company, which is what Dalio thinks he has done, I’d say he has really just designed an environment that suits his nature very well. Lots of the book is couched in terms of, ‘I have had so much success, now my main goal is to pass it on to others’ but I would argue that very little of what he writes is easy to apply generally. The principles are vague, subject to modification and interpretation and are never fleshed out with really tricky practical examples. The problems he does talk about are largely trivial and the ones that people might really be interested in, for example the sexual harassment case brought against his CIO, are never mentioned. This is really disappointing given how much Dalio talks about learning from mistakes and difficult situations.
All in all, I didn’t get much from his book. The sections on Dalio’s life and career were probably the best bits as they’re not presented in the ‘principles’ style used later in the book. These sections also contained more factual information and fewer wishy washy aphorisms. As well as having a frustrating structure, the book isn’t well written and this made it a slog to read. However, given his track record, I’ll probably still read ‘Investment and Economic Principles’ when it comes out in the hope of getting more practical tips for making money! Hopefully with lots more concrete examples of his experiences in the markets.
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