12/13/2011 12:48:00 PM

Is Ray Dalio the Steve Jobs of Investing?

From aiCIO Magazine's Winter 2011 Issue: Bridgewater Associates’ founder is institutional investing’s True Innovator. Kip McDaniel reports. 

To see this article in digital magazine format, click here. 

Business as  usual ends at the gates of Ray Dalio’s Bridgewater Associates. Inside the $125 billion hedge fund’s Westport, Connecticut-based headquarters, radically different behavior at an individual and corporate level rarely ceases to astonish. Cameras rest in every cranny; almost all meetings are recorded. Meetings are nasty, brutish, and long. One individual casts a long shadow over every decision, large or small. The question of the day is—always—What Would Ray Do? 

This question is now asked outside Westport as well. Dalio has willed into existence an asset manager that has changed the industry, radically altering the way assets are managed for the world’s most sophisticated institutional investors. From client service to asset allocation to economic research to client communication to returning capital, Bridgewater has set a new bar. It is a safe bet to assume that the asset managers that dominate the institutional scene going forward are going to resemble Bridgewater more than the behemoth asset-gatherers that have reigned since the passage of the Employee Retirement Income Security Act—ERISA—almost four decades ago. 

It is all too reminiscent of another company on the opposite end of America—Apple. We now have an overabundance of analysis on the impact that Apple and its recently departed prime mover Steve Jobs had on the industries they touched. To most, he was an innovator. To others, a prophet. To others still, he was but a driven and secretive executive intent on shielding his firm from outside eyes and willing to crush anyone who threatened Apple’s secrets. 

The similarities are profound. From management style to product development to their founder’s legacies, Apple and Bridgewater mirror each other. Thus, it must be asked: Is Ray Dalio—philosopher, market savant, outdoorsman, and billionaire—the Steve Jobs of investing?  

 

More than Bill Gates or Mark Zuckerberg, Jobs sits at the zenith of the Silicon Valley creation myth: A drug-experimenting college dropout starts a company in his parents’ garage with a tech-savvy, but financially ignorant, friend. They create not just a product, but a market that no one saw coming. They outgrow the garage, and each other. The college dropout becomes rich, famous, and obdurate, high on his own myth.  

But what makes the Jobs’ arc so complete is what happened after the myth. Before he was 30, he had been pushed out of the company he cofounded. Smarting from his fall, he started another computer company—NeXT—whose failure was as profound as Apple’s early success had been phenomenal. Failure begat opportunity, however, and Jobs pumped his considerable wealth and talent into a small animation studio called Pixar. A Toy Story later, he was again altering the foundation of a technology-based industry. Meanwhile, Apple was floundering: Called home, Jobs would return to Apple, create the iMac, the iPod, the iTunes store, and the iPhone. In the process, he had taken the Silicon Valley myth to another level: that of the redeemer, the iconoclast who could do no wrong. 

What remains to understand is what Jobs means. To some, he is the greatest American innovator since Benjamin Franklin. To others, he is a bully and a thief, poaching others’ ideas. In a November article in The New Yorker, Malcolm Gladwell dismissed him as a tweaker. Citing the theories of economists Ralf Meizenzahl and Joel Mokyr, Gladwell wrote: 

In 1779, Samuel Crompton, a retiring genius from Lancashire, invented the spinning mule, which made possible the mechanization of cotton manufacturing. Yet England’s real advantage was that it had Henry Stones, of Horwich, who added metal rollers to the mule; and James Hargreaves, of Tottington, who figured out how to smooth the acceleration and deceleration of the spinning wheel; and William Kelly, of Glasgow, who worked out how to add water power to the draw stroke; and John Kennedy, of Manchester, who adapted the wheel to turn out fine counts; and, finally, Richard Roberts, also of Manchester, a master of precision machine tooling—and the tweaker’s tweaker. He creating the “automatic” spinning mule: an exacting, high-speed, reliable rethinking of Crompton’s original creation. Such men, the economists argue, provided the ‘micro inventions necessary to make macro inventions highly products and remunerative.’ Was Steve Jobs a Samuel Crompton or was he a Richard Roberts? 

Gladwell comes down firmly on the side of Roberts, the man who added the finishing touch to Crompton’s genius. Jobs saw it differently: While having no problem purloining other’s ideas, he was also insistent that “real artists ship.” In other words, anyone can have an idea. It takes a Jobs—or a Dalio—to implement it.