Bridgewater’s bosses are fight­ing over some­thing

The Pak Banker - - OPINION - Matt Levine

ONE video shows Mr. Dalio stand­ing at a dry-erase board and demon­strat­ing how the marker ink won't fully rub out with an eraser, ac­cord­ing to peo­ple fa­mil­iar with the video. Mr. Dalio prods Bridgewater em­ploy­ees at length about why they bought the dry-erase board, why it doesn't work and how the bad de­ci­sion could have been avoided, those peo­ple say. The an­i­mat­ing con­flict of the story is that there's "an un­prece­dented show­down" at Bridgewater, a power strug­gle be­tween founder/guru Ray Dalio and co-Chief Ex­ec­u­tive Of­fi­cer Greg Jensen. They are locked in a mor­tal bat­tle over ... umm ... some­thing?

"The ques­tion here about Greg is whether he said things about me on tape in our meet­ings that he did not dis­cuss with me be­fore," Mr. Dalio said in a writ­ten state­ment to The Wall Street Jour­nal. And the con­se­quences could be ... noth­ing? Dalio and Jensen "have called for votes on each other's con­duct." But "the po­ten­tial im­pact of the votes isn't clear." It's just ... a vote? "The vote re­sults and each per­son's in­di­vid­ual votes will be made avail­able to the rest of Bridgewater."

I joked on Twit­ter that I never un­der­stood how Bridgewater gets any in­vest­ing done, but of course there's a com­puter that does the in­vest­ing. ("Af­ter hon­ing ideas through de­bate and dis­cus­sion, Bridgewater em­ploy­ees write trad­ing al­go­rithms that buy and sell in­vest- ments au­to­mat­i­cally, with some over­sight.") One styl­ized model for think­ing about Bridgewater is that it is run by the com­puter with ab­so­lute logic and ef­fi­ciency; in this model, the com­puter's main prob­lem is keep­ing the 1,500 hu­man em­ploy­ees busy so that they don't in­ter­fere with its per­fect ra­tio­nal­ity. This model might pre­dict that the com­puter would cre­ate a se­ries of dis­trac­tions for the hu­mans; the dis­trac­tions would keep the hu­mans busy, but if you ex­am­ined them closely, there would be tell­tale signs that the in­tel­li­gence that de­signed them was not com­pletely hu­man. "In an iPad app called 'Dot Col­lec­tor,' em­ploy­ees weigh in on the di­rec­tion of con­ver­sa­tions while they are hap­pen­ing." "Any meet­ing of at least three peo­ple is ex­pected to hold at least one poll." "One for­mer Bridgewater em­ployee re­calls de­bat­ing with other em­ploy­ees for as long as an hour whether a mis­used apos­tro­phe in one of Mr. Dalio's re­search re­ports was in­ten­tional or not." Good ones, com­puter!

The show­down at the top feels a bit like that too. The way power strug­gles at in­vest­ing firms usu­ally work is, there's some non-trans­par­ent process by which some­one wins and some­one loses, and then the loser is ei­ther kicked out or sub­jected to some sort of sym­bolic loss of sta­tus. The sym­bolic loss of sta­tus that I of­ten think about is this one, from power strug­gle at Pimco:

Af­ter the fo­rum, Gross de­vised a seat­ing plan for a meet­ing of port­fo­lio man­agers, rel­e­gat­ing Balls, Ivas­cyn and Mather to the rows of the con­fer­ence room in­stead of at the main ta­ble. The ar­range­ment was per­ceived as a snub, ac­cord­ing to a per­son fa­mil­iar with the mat­ter.

Balls, Ivas­cyn and Mather got their re­venge, and Gross was gone a few weeks later. But imag­ine con­test­ing power at a tril­lion-dol­lar in­vest­ing firm that way, with seat­ing ar­range­ments. Ac­tu­ally, I bet you can imag­ine it pretty eas­ily. "Next to comp, seat­ing is the most im­por­tant is­sue on the Street." Hu­man be­ings care deeply about their sta­tus, and there are lots of in­di­ca­tors of sta­tus -- like seat­ing ar­range­ments -- that are both in­stantly leg­i­ble to hu­mans and weirdly dif­fi­cult to parse log­i­cally.

Th­ese fuzzy, ir­ra­tional, hu­man sta­tus mark­ers are of course a com­plete mys­tery to the com­puter that is, in my fan­ci­ful model, run­ning Bridgewater, as are the vague pro­cesses by which win­ners and losers are typ­i­cally de­cided. But the com­puter can cre­ate its own pro­cesses, and its own sym­bolic sta­tus ad­just­ments. Like that vote. Peo­ple vote, and if you lose the vote you lose one unit­less unit of sta­tus. The sym­bol­ism is pure: You are ad­judged to have lost the show­down, and you know it, and the win­ner knows it, and ev­ery­one else knows it, but that's it. You should change your be­hav­ior, I guess, but you don't have to leave. You don't even have to sit some­where else.

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