MarketWatch’s famously ranty columnist Paul Farrell is out with a commentary that rips into hedge fund titan Ray Dalio’s “principles.”
Dalio is known for providing a handbook of “management principles” to Bridgewater Associates, which serve as a rule-book or life guide for the behemoth hedge fund’s 1,200 employees.
Farrell says Dalio’s secret sauce which has the main portfolio in his $122 billion AUM fund up about 25%, according to Bloomberg, is really kool-aid derived from the “high priestess” of capitalism, Ayn Rand.
Yes, Rand’s spirit is alive, in the vision of the iconic Ray Dalio, the perfect capitalist, 55th on the 2010 Forbes 400 with $5 billion, a guy who could easily be cast as Howard Roark, the ultimate individualist in “The Fountainhead.”
While he acknowledges that the “principles” would be useful for MBA students and those working in the finance industry or at hedge funds, he also says Dalio is like the reincarnate of Rand. And –
The truth is, America’s financial industry does fit perfectly in the Ayn Rand capitalism mould … they love money, know where and how to make it, how to get rich … they don’t care whether the market’s going up or going down … they get rich on the action, the trade, up or down they make money, they love high volatility … and yes, they are in denial of the real world outside their bubble.
Then he goes on to challenge Dalio’s “principles” and the belief that they will work beyond Bridgewater. They won’t work, he writes. Farrell says that Dalio’s “principles” are “unproven hypotheses” that only work in the bubble that is Bridgewater and not the outside world. (Farrell’s responses are in italics).
He doesn’t really give a reason why the principles won’t work in the outside world, but he does pose questions to challenge Dalio’s hypothesis. They are in italics below.
- Dalio: “In return, society rewards those who give it what it wants. That is why how much money people have earned is a rough measure of how much they gave society what it wanted.” [Ask yourself: Is it really true that society as a whole wants unregulated derivatives as much as Goldman Sachs’s executives?]
- Dalio: “Look at what caused people to make a lot of money and you will see that usually it is in proportion to their production of what the society wanted.” [Ask yourself: Is it true that a Lloyd Blankfein produces more of what society really wants than, for example, a Steve Jobs, Daniel Kahneman, Rod Stewart or Dalai Lama?]
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