Anyone living in New York City is familiar with the stereotypical "finance bro"— the young guy with a job on Wall Street who acts as if he never left his frat house.

According to former entry-level employees who spoke to Business Insider, you won't find many of these people at Bridgewater Associates, the world's largest hedge fund.

If we're talking about personality stereotypes, said one person, then you're more likely to find an entry-level employee who's "nerdy" and introverted.

And there's a much higher chance they don't have the finance background of many of their Wall Street counterparts.

Hedge funds have always been somewhat removed from the world of Wall Street banks, but Bridgewater is in a league of its own. Nestled in the woods of Westport, Connecticut, the firm operates on a system of "radical transparency" established by its founder, Ray Dalio. Over the past 40 years, Dalio has established a set of investment and management principles that constitute the machinery of his 1,700-person firm with $150 billion in assets under management.

Dalio's management and life insights are known simply as the "Principles," and every employee must become familiar with all 210. "Pain + Reflection = Progress" are words to live by at Bridgewater, and all employees learn to "probe" each other, which entails questioning each other's logic in a stoic, unfiltered way. Most meetings are recorded digitally on an audio or video file, and each week, one of these videos is used in a companywide email for training purposes.

Needless to say, this environment requires a certain type of personality, and Dalio doesn't limit his recruiting efforts to like minds from the financial world. On the company's website, college internships and jobs for new college graduates are broken down into management, investment, and technology associate roles, and it's made clear that none require a financial background.

"We look for individuals with extraordinary intellectual capacity and curiosity, as well as the ability to rapidly learn and apply new concepts," the job posting for an investment associate reads. "We seek diversified educational backgrounds for our team and therefore encourage applicants from all academic disciplines to join."

Financial experience would become more valuable for higher-level investment positions, but the general ethos applies to senior-level hires as well. For example, Dalio hired Silicon Valley veteran Jon Rubinstein as co-CEO earlier this year partially because Dalio valued Rubinstein's mentorship by Steve Jobs.

The site also includes a video testimonial from a senior employee, identified as Bob E., who says he studied botany before joining Bridgewater after graduation.

A former employee said that to them it felt like the more an entry-level candidate wanted a traditional finance career, the less likely they were to get a job at Bridgewater. This person said that as graduation approached, they felt at a loss for what to do next, thinking that only a "weird" company would accept them for their eclectic background.

Brian Kreiter, Bridgewater's head of client service and marketing and cohead of its core management team, told Business Insider he wouldn't go so far as to say that the company avoids young employees with traditional finance backgrounds, but that its approach allows for a much more diverse set of backgrounds than you may find elsewhere.

"We think of people in terms of the building blocks of their values, their abilities, and their skills," he said. This means that recruiters will be searching for the top students at elite colleges, even if that person studied art history or psychology. While this isn't unheard of — Steve Cohen's family office Point72 recruits some fresh graduates with liberal arts backgrounds if they are interested in learning about finance — Bridgewater takes it to the next level.

Bridgewater would not reveal how many people it hired 2015, but said that 10% were directly from campus recruiting, and that entry-level employees with nonfinance backgrounds are enrolled in a 15-month program where they learn in a classroom setting, typically for two three-hour sessions each week. Bridgewater's unusually large size and resources for a hedge fund allow it to invest so heavily in training and education.

"From a values perspective, we're trying to understand the way the world works — that's what our business is — and so we're really interested in people that have a sort of deep curiosity, people that have the patience to understand deep and complex systems," Kreiter said. "Now, whether those are biological systems, or economic systems, or political systems, it doesn't really matter. Somebody who has an interest in and an ability to understand that deeply is interesting to us."

If you have firsthand knowledge of what it's like to work at the world's largest hedge fund, reach out to rfeloni@businessinsider.com. We can offer anonymity.

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Bridgewater Associates, with $150 billion in assets under management, is not only the world's biggest hedge fund.

It's also a highly ambitious, 1,700-person management experiment. And to get a job there, you have to undergo an intensive examination of your psyche.

Ray Dalio founded Bridgewater in 1975 out of his apartment, and throughout the '80s he laid the foundation of a corporate culture based on "radical transparency." This culminated in "Principles," his manifesto of 210 management insights, first published in 2011, that all employees must read.

Employees are encouraged to regularly dissect each other's thinking to determine the root of decision-making, to rate each other's performance using a proprietary iPad app called "Dots," and to send an audio file to any person mentioned in a meeting — which isn't an outlandish practice internally, since all meetings, with few exceptions, are digitally recorded for either audio or video. "Pain + Reflection = Progress" is a phrase all employees are intimately familiar with.

Because it takes a certain type of person to thrive in such an environment, Bridgewater has been developing new ways to recruit talent, the company's head of client service and marketing and cohead of its core management team, Brian Kreiter, explained to Business Insider. One of the results is the current version of the set of personality surveys all candidates, with exceptions for those who are specially recruited, must take.

We'll take a look at what these surveys are, based on our conversations with Kreiter and former employees of varying levels. The candidate takes four surveys online, in a process that takes around two to four hours, and then another that takes place over the phone and lasts around one hour. Kreiter explained that they use this variety of tests because they find imperfections in each, but believe that when the results are combined, they prove to be a useful supplement to interviews.

Meyers-Briggs Type Indicator

You probably have some familiarity with the Myers-Briggs Type Indicator (MBTI), which assigns people one of 16 personality types based on how they measure themselves against four criteria — it's the test where you can find out if you're an ESTJ or an ISTP. According to statistics from a few years ago, around 80% of Fortune 500 companies use the test.

The MBTI is controversial because rather than being based on peer-reviewed research, it is based on the work of an early 20th century mother-daughter team, Katherine Cook Briggs and Isabel Briggs Myers. The duo used psychiatrist Carl Jung's book "Psychological Types" as their main inspiration.

Bridgewater uses it to get a general idea of how people see themselves, and how they view the world.

In a Business Insider story from 2014, we worked with Paul Tieger, coauthor of the popular personality type guide "Do What You Are," on definitions of the main components of the test. (Note: Tieger is not affiliated with the Myers-Briggs Foundation.)

• Interaction with the World— "Introverts (I) often like working alone or in small groups, prefer a more deliberate pace, and like to focus on one task at a time. Extroverts (E) are energized by people, enjoy a variety of tasks, a quick pace, and are good at multitasking."
• Absorption of Information— "Sensors (S) are realistic people who like to focus on the facts and details, and apply common sense and past experience to come up with practical solutions to problems. Intuitives (N) prefer to focus on possibilities and the big picture, easily see patterns, value innovation, and seek creative solutions to problems."
• Decision-making— "Thinkers (T) tend to make decisions using logical analysis, objectively weigh pros and cons, and value honesty, consistency, and fairness. Feelers (F) tend to be sensitive and cooperative, and decide based on their own personal values and how others will be affected by their actions."
• Organization— "Judgers (J) tend to be organized and prepared, like to make and stick to plans, and are comfortable following most rules. Perceivers (P) prefer to keep their options open, like to be able to act spontaneously and like to be flexible with making plans."

Bridgewater team dynamics

Candidates will then take three proprietary surveys online, tailored to Bridgewater's unique culture.

These measure how they work with a team, how they fit into a workplace, and how they either display or interact with leadership.

According to Dalio's theories, in the ideal workplace, there is a degree of transparency among colleagues that allows them to surface problems quickly and find solutions.

There is a constant quest for "truth," which could mean a junior-level employee confronting a senior-level employee.

For example, FBI director James Comey worked at Bridgewater from 2010 to 2013, and in a testimonial video that was once featured on the firm's website, he describes a situation in which a 25-year-old employee questioned the reasoning Comey had just displayed in a meeting.

"My initial reaction was 'What? You, kid, are asking me that question?'" Comey said in the video. "I was deputy attorney general of the United States; I was general counsel of a huge, huge company. No 25-year-old is going to ask me about my logic. Then I realized, 'I'm at Bridgewater.'"

Stratified Systems Theory

The phone interview survey is conducted with third-party contractors trained in Stratified Systems Theory (SST). It's the brainchild of the psychologist Elliott Jacques, who is best known for coining the term "mid-life crisis," but was also awarded a Joint Staff Certificate of Appreciation by then-General Colin Powell for his work with the United States military in developing organizational processes.

SST, which is explained in Jacques' textbook "Requisite Organization," posits that employees in a workforce fit into one of seven "organizational strata" based on the level of work complexity they can handle and how that fits into a hierarchy.

These are the seven strata, taken from "Requisite Organization."

• I— Shop and office floor. Overcome obstacles with practical judgment.
• II— First line manager. Diagnostic accumulation.
• III— Unit manager. Create alternative pathways.
• IV— General manager. Parallel process [and take] multiple paths.
• V— Business unit president. Judge downstream consequences.
• VI— Executive vice president. Oversee complex systems.
• VII— CEO and COO. Construct complex systems.

In Bridgewater's SST survey, the interviewer will ask a question and then listen to the candidate develop an answer, without interrupting. A source told us that an example question may be something like, "If you were the HR director for a company, how would you develop an employee referral program?"

The interviewer listens to the answer to see how narrowly or broadly the candidate thinks, and where they are in their development, regardless of positions they previously held.

Team Bridgewater

Upon hiring, candidates will then take a final proprietary personality survey that takes two or three hours and is an extension of the topics explored in the application process.

Finally, all of the test results are put into an algorithm to produce a "baseball card"— a profile that portrays the employee's personality, values, and abilities, along with a headshot.

Every employee at Bridgewater can view the baseball card of every employee, present and past, with the intention of maintaining a high level of transparency among coworkers.

"The Bridgewater strategy is about constant improvement as an organization and what that requires is really just constant improvement of our people," Kreiter said. "There are people who are more interested in that kind of thing than others. And so those who express that desire, that affinity, we think have a more likely chance."

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Bridgewater isn't holding back.

"This series of videos that we've prepared for you are to give you a window into what it's like to be here, to scare you away if you're not the right kind of person, to potentially attract you if these ideas — if this way of being — is attractive for you," Greg Jensen, Bridgewater Associates co-CIO and 21-year veteran of the firm, said in a new video on Bridgewater's website, relaunched last week.

The video series reveals a surprisingly extensive amount of footage from within the company and even shows brief clips from recorded meetings, marking a big shift for the usually secretive hedge fund. Founder and co-CIO Ray Dalio even admits that its 18-month attrition rate is as high as 50% for new employees.

The relaunched site portrays Bridgewater in a new light: not scary and removed, but highly competitive and intriguingly unusual. The material has the feel of something a Silicon Valley giant like Facebook or Google, rather than a secretive hedge fund, would produce.

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Bridgewater is as well known for being the world's largest hedge fund — with $150 billion in assets and 1,700 employees — as it is for a unique culture that Dalio describes as being based on "radical truth" and "radical transparency."

Employees are encouraged to regularly dissect each other's thinking to determine the root of decision-making, to rate each other's performance using iPad apps, and to send an audio file to any person mentioned in a meeting — all meetings, with few exceptions, are digitally recorded with either audio or video. "Pain + Reflection = Progress" is a guiding phrase.

Dalio founded Bridgewater out of his apartment in 1975 and laid the foundation for its culture through the '80s, but it wasn't until he formalized his management approach in his guide, "Principles," made public in 2010, that the firm began regularly appearing in the media and facing scrutiny.

Critics have accused it of being "bizarre" and like a "cult;" in July, The New York Times published a story that highlighted a harassment claim by a former employee, including his allegation that the hedge fund was a "cauldron of fear and intimidation" (the employee later withdrew his complaint and moved to a new firm).

Dalio has consistently replied that his firm's culture is misunderstood, specifically calling that Times report a "distortion of reality."

The new recruiting material may be Bridgewater's biggest statement yet to defend how it operates.

A fund run by the world's biggest hedge fund firm wasn't supposed to be for outside investors.

Bridgewater's All Weather strategy started out as a way to manage billionaire founder Ray Dalio's personal trust, according to a video just published by the firm as part of a website revamp.

The fund was the first of the "risk parity" movement, a strategy since adopted by firms like AQR Capital and Neuberger Berman. Risk parity attempts to equalize the risks that investors take across asset classes and provide steady returns.

Dalio is worth $15.9 billion, according to Forbes.

"Never was there going to be a product called All Weather," Bob Prince, the firm's co-CIO, named simply "Bob" in the video, said.

Dalio proposed the idea for All Weather, which is supposed to perform well in all market environments, in 1988 or 1989, Prince added in the video.

"Ray asked the question, 'Gee, I wonder what kind of investment portfolio you would hold that would perform well across all environments,'" Prince said.

Dalio imagined four portfolios with an equal amount of risk in them that would do well in different environments. He looked at hundreds of years of history to see how that balanced portfolio would perform over time, and then ran a pilot, putting his own trust money in the fund to begin with.

The All Weather portfolio was launched in 1996.

"If I could pick one gift, All Weather would be that gift," Dalio said in the video. "It means that without giving up returns, you can have a portfolio that really is safe."

Dalio's trust assets remain in All Weather, and now it manages money for institutional investors like public pensions and endowments. Firmwide, Bridgewater Associates managed $152 billion as of last year, according to a regulatory filing.

The All Weather strategy invests using exchange-traded futures contracts, OTC derivatives, cash securities, and spot and forward contracts in the international currency market, according to the filing.

A 2012 Bridgewater paper goes into more detail on the strategy:

"It is predicated on the notion that asset classes react in understandable ways based on the relationship of their cash flows to the economic environment. By balancing assets based on these structural characteristics the impact of economic surprises can be minimized."

Bridgewater's All Weather strategy was up about 10% through the first half of this year, while Bridgewater's flagship hedge fund, Pure Alpha, fell about 12%.

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Every week, employees at the world's largest hedge fund spend at least an hour with "management principles training" lessons (MPTs), where they analyze recordings of meetings and answer questions about what they observed.

Bridgewater Associates founder Ray Dalio implemented this process around 10 years ago as a way to further instill his unique management insights into his growing firm, which now has $150 billion in assets under management and 1,700 employees in its Westport, Connecticut offices.

Dalio founded his hedge fund out of his apartment in 1975, and in the '80s developed a culture of "radical truth" and "radical transparency," codified in his 2010 guide "Principles," which all employees must read. In this environment, the majority of meetings are recorded, via an opt-in audio recorder or camera, and any time employees mention a colleague not present, they are supposed to send the recording to that person. Some of these recordings become MPTs, if they contain a "teachable moment." Others are sent to share an important, informative meeting with the entire company.

It's a unique process all job candidates know they'll be getting themselves into, since Bridgewater shows a couple of examples during its application process. To learn how they worked and have been received, Business Insider talked to several former junior- and senior-level employees. We are refraining from sharing any identifying details of these former employees so as not to jeopardize their standing with the company.

SEE ALSO: Bridgewater just released a series of videos that looks like something Facebook or Google would produce

Getting to know Ray

The lessons are intended to take an average of 15 minutes each workday, but one source remembers spending anywhere from two to four hours each week on the lessons. This person said that if you ever pitched spending a few hours each week on office culture and management strategy to executives at a traditional financial firm, where this source also worked, they would "laugh you out of the room," but that Wall Street could actually benefit from more time spent on the topics.

MPTs typically consist of audio, video, or text from a meeting and/or relevant document followed by a survey, and can be completed in as little time as five minutes or as long as more than an hour. They are released in batches with deadlines, and some are released outside of batches under special circumstances. There may not be a "correct" response to the survey questions, but employees see the aggregate results after they submit their answers.

Any employee is subject to be featured in an MPT, though the majority feature the senior management team and a notable amount star Dalio. Dalio appears in so many, in fact, that one former employee told us that even though their job didn't put them in regular contact with Dalio, they felt as though they got to know him personally through the lessons.

Here are a few examples of actual MPTs, based on descriptions from sources:

1. Question your superiors

A junior-level employee meets with his manager regarding a problem he submitted in the company's issue log. He explains to his boss that he's concerned about working with third-party consultants to Bridgewater because they are not immersed in the Bridgewater way of doing things and he feels there is a culture clash. The boss explains that he and members of senior management already discussed this issue and reached a decision, and that it's not this employee's concern, anyway. They move on.

In a followup, the boss' own supervisor chastises him for the way he handled the previous situation. An employee with a problem should not be shut down, the supervisor explains. The first reaction should be to find out, "Is there truth here?" and work with the employee to get at the root of his position. Then, it's your duty to explain your decision-making to that employee. The supervisor explains that it's a manager's responsibility to encourage employee feedback, since a manager can lose track of how their actions are affecting their team.

The source who shared this story with us said that the initial interaction between the manager and his employee, where a boss tells his underling to respect his decision and roll with it, would have been normal at any other company where the person had worked.

2. Admit your weaknesses

A senior-level employee meets with Dalio. There has been some tension between them, but the employee begins explaining the ways that they have failed recently, and how this is tied to bigger-picture personal weaknesses.

This employee's self-assessment is shown as a positive example of one of the harder aspects of "Principles" in action. As Dalio writes in his guide:

"I call the pain that comes from looking at yourself and others objectively 'growing pains,' because it is the pain that accompanies personal growth ... Remember that: Pain + Reflection = Progress.

"Much as you might wish this were not so, this is a reality that you should just accept and deal with. There is no getting around the fact that achieving success requires getting at the root causes of all important problems, and people’s mistakes and weaknesses are sometimes the root causes. So to be successful, you must be willing to look at your own behavior and the behavior of others as possible causes of problems."

The world's biggest hedge fund firm thinks that China is preparing for a bust.

Ray Dalio's Bridgewater says that China has experienced an "unsustainable buildup of credit," which is "typical of debt boom and busts," according to a private note to investors viewed by Business Insider.

"This rapid expansion in credit looks like it has created significant vulnerabilities in the Chinese financial system at a time when the economy is still near the front end of a material loss cycle," the note added.

That said, the $147 billion firm thinks that China will be able to make it through, largely because the country's debts are denominated in China's own currency.

In other words, Bridgewater is saying that it can print more money if need be to get out of a crisis.

"While we believe that China has the resources to manage even a severe bank loss cycle, in large part because the debts are denominated in China's own currency, how the loss cycle will unfold and how it will be managed will have significant impacts on the Chinese economy," the note said.

The letter was published last week by Bridgewater staffers, including Larry Cofsky and Matthew Karasz, and was in response to stress tests on China's banking system conducted earlier this summer. The giant hedge fund analyzed the stress-test findings and picked out a couple of key concerns in the banking sector: shadow banking and second-tier banks.

"One of the largest risks to the banking system is its exposure to off-balance sheet non-standard shadow banking products such as wealth management products and trusts," the note said.

Others in the hedge fund industry have also sounded the alarm on wealth-management products in China, including Kyle Bass. He said in a note earlier this year that Chinese banks had used wealth-management products to accelerate loan growth and get around restrictions on lending.

China's second-tier banks are also an issue, according to Bridgewater:

"These banks look vulnerable to us; they are large (more than 30% of bank assets), growing rapidly with increasing reliance on wholesale funding, and they are responsible for much of the growth in opaque on-balance sheet assets as well as off-balance sheet wealth management products."

The note added that Bridgewater is "particularly concerned" about the risk of a funding squeeze at China's second-tier banks.

China has long been on Bridgewater's radar. Last year, amid a Chinese market rout, the firm advised investors to get out of China, saying there were "no safe places to invest."

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Bridgewater Associates — the world's largest hedge fund, with $150 billion in assets under management and 1,700 employees — says it is "bloated" and will "improve efficiencies" of its non-investment teams.

The firm made the announcement in a letter sent to clients on Thursday that was obtained by Business Insider.

Bridgewater's leadership team told its employees in a town hall Thursday that it would be laying off employees and overhauling its organizational structure and technologies in its Technology, Recruiting, Facilities, and Management Services team.

The team writes that this move is "coming at a time when our fundamentals are very strong" but that rapid growth of its non-investment units in the past five years has resulted in areas that "became bloated, inefficient, and bureaucratic."

"The new management leadership is now digging into the areas of inefficiency to improve them," the team writes. "Naturally that will involve some significant changes to people, processes, and technologies."

The leadership team notes that under normal conditions it would not be notifying its clients of this change but is doing so "because we have recently experienced distorted reporting in the media" and want to provide the "real story." This is a reference to earlier reports this year from The Wall Street Journal and The New York Times, which Bridgewater founder Ray Dalio publicly expressed issues with.

You can read the full letter below. It's signed by Dalio, co-CIO Bob Prince, co-CIO Greg Jensen, co-CEO Eileen Murray, president David McCormick, and co-CEO Jon Rubinstein.

"Dear —,

In a town hall meeting with employees today, we conveyed to the company that we will be conducting a renovation to improve efficiencies at Bridgewater, especially in the non-investment areas such as Technology, Recruiting, Facilities, and Management Services.

In the past, we made these sorts of internal changes privately and wouldn't have bothered telling you about them as you won't be directly affected. However, we decided to bring them to your attention because we have recently experienced distorted reporting in the media about what is happening at Bridgewater, so we want to provide you the real story.

To be clear, this renovation is coming at a time when our fundamentals are very strong: Our investment process is better than ever, our financial position is rock solid, our key employees who built the firm wouldn't want to work anywhere else, and our clients remain confident in us (as expressed in their collectively investing $22.5 billion in new money since 2015).  We are making these changes as a part of the ongoing process of constant improvement that has been the key to our success over the past 40 years.

Background 

As you know, about a decade ago, our assets under management were growing rapidly and Bridgewater's leadership faced a choice: to remain a boutique or become an institution. To institutionalize Bridgewater meant building out areas of the company that a boutique doesn't have or only modestly has, such as Security, Technology, HR, Facilities, Legal, etc. Building out those areas required us to hire a lot of people.

As a result, we grew dramatically. In 2003 Bridgewater had 150 employees; in 2011, when we began our management transition, we had 1,100; now we have 1,700. About 70% of this growth in headcount was in our non-investment areas. As one might expect, some of these areas became bloated, inefficient, and bureaucratic. As you know from dealing with us, we want to have pervasive excellence.   

To deal with this situation, earlier this year, we realigned our management team to help push through needed improvements.  These changes included Ray temporarily stepping back into active management of the firm as co-CEO, joining the existing senior management of Eileen Murray (co-CEO, who has been helping lead the company since 2009) and David McCormick (President, who has likewise been helping lead since 2009). We also brought in Jon Rubinstein as a co-CEO and made some other management changes. An added benefit of this shift was that it allowed Greg Jensen (who has been at Bridgewater 20 years) to devote his full attention to his role as co-CIO along with Ray and Bob Prince (who has been here for 30 years).  These shifts in management roles were consistent with our plan to figure out how to best transition the leadership of the company over 10 years. (We are now 5 years into that plan.)

The new management leadership is now digging into the areas of inefficiency to improve them. Naturally that will involve some significant changes to people, processes, and technologies. As mentioned, the vast majority of this renovation will be in the non-investment areas that have seen the most growth to make them more effective in supporting our investment and client service areas.

As always our evolutionary process will be imperfect, iterative, and transparent, and it will make us more efficient. 

What is of paramount importance is our sticking to the culture that has led to our excellent results. It is best summarized in the following sentence: We want meaningful work and meaningful relationships through radical truth and radical transparency. Transparently bringing problems to the surface and regarding them as intolerable might lead some people to wrongly conclude that we have more problems than organizations that don't transparently bring problems to the surface.  Our employees and our clients understand that this difference is essential to our success. It is also through this radical truth and transparency that they have learned to trust our integrity as well as our abilities.

As always, if you have any questions, let us know.

With appreciation for your understanding,

Ray, Bob, Greg, Eileen, David, and Jon"

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Around eight years ago, Bridgewater Associates founder Ray Dalio introduced Transcendental Meditation to his 735 employees.

Dalio had already established a unique, intense culture of "radical transparency" at Bridgewater that he likes to say is akin to being part of an "intellectual Navy SEALs," and he believed that Transcendental Meditation, or TM, would work as an effective counterbalance.

"I did it because it's the greatest gift I could give anyone — it brings about equanimity, creativity, and peace," Dalio told Business Insider in an email.

Since then, TM has popped into the mainstream, and Dalio has helped significantly. Over the last three years, the David Lynch Foundation TM center has taught almost 2,500 professionals — 1,150 in 2016 alone — and roughly 55% are from Wall Street.

The foundation was founded by the eponymous acclaimed director ("Twin Peaks,""Mulholland Drive") in 2005 to teach TM for free to underserved students, veterans with post-traumatic stress disorder, and victims of domestic abuse. Dalio has donated about $20 million to the DLF through the Dalio Foundation over the past decade, with funds specifically allocated to students in New York and San Francisco and veterans. The Dalio Foundation accounts for 20% of the DLF's funding.

Dalio began practicing TM in 1969 as a college student, after seeing that its founder, Maharishi Mahesh Yogi, taught it to the Beatles.

Dalio brought TM to his Bridgewater through the DLF's teachers, who still regularly visit.

Practitioners must learn TM from a certified teacher, who gives them one of many mantras, a meaningless "vibration sound," and assists them with perfecting the technique. Meditators sit still for 20 minutes and repeat this mantra in their head, letting thoughts float by and possibly "transcending," reaching a pleasant and invigorating state of "restful alertness." These teachers then regularly meet with the student to give personalized advice, because while the technique is easy in theory, it takes some practice.

The initial deal Dalio proposed to his company around 2008 was that any employee with a tenure of six months or longer could take a customized-for-Bridgewater course. The four-month program would cost $1,000 and, upon completion, Dalio would reimburse half the cost out of his own pocket.

After a few years, the course became popular, and many employees began regularly meditating twice a day. Dalio and his management team decided that it would be best to create a formal corporate reimbursement and training plan.

In the past eight years, around 500 employees have been trained. (Bridgewater's employee count ranged from roughly 735 to 1,700 employees in that time.)

Also in that time, Dalio has become easily the most vocal and influential proponent of TM in the finance community.

Though Bridgewater, which now has $150 billion in assets under management, became the world's largest hedge fund in 2005, it remained largely under the radar until 2011, when Dalio received mainstream press, including a full profile in The New Yorker. When the media asked him about his "secrets to success," he would laud TM.

As he's quoted as saying in the 2011 book "Transcendence," not coincidentally written by his son Paul's psychiatrist, Norman Rosenthal, TM is "the single biggest influence" in his life. It was Paul who convinced Rosenthal to revisit TM, which Rosenthal had learned years before, and to investigate it from a scientific standpoint. Rosenthal then went on to become possibly the highest profile doctor bringing to the public the wealth of peer-reviewed research on TM's proven ability to benefit people with high blood pressure and anxiety.

Dalio himself is far from a casual meditator using the technique as a way to take some quiet time — he seeks out moments of transcendence and has found them to have changed the way he interacts with life.

He told Rosenthal, in a passage from "Transcendence" now regularly cited in the TM community, that his decades of practicing TM have made him more "centered," in the sense of "being in a calm, clear-headed state so that when challenges come at you, you can deal with them like a ninja — in a calm, thoughtful way.

"When you're centered, your emotions are not hijacking you. You have the ability to think clearly, put things in their right place, and have good perspective."

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The world's biggest hedge fund isn't sure yet what to make of Donald Trump's election to the US presidency.

That's the big takeaway from an investor note that Bridgewater Associates founder Ray Dalio sent on Thursday, two days after Election Day.

"There is much more that we don't know than we do know," Dalio wrote in a client letter viewed by Business Insider. "Our guess is that the markets will increasingly focus on what he is likely to do and less on how sensible he sounds."

Dalio added that Trump's win meant there were "a significantly wider range of possible policies" to consider — adding a wrench into market predictions. "It would be a mistake to use the rhetoric of a campaign as much of a guide to what policies are likely," Dalio added. "We have entered an extremely ambiguous and interesting period of time."

The $150 billion firm is closely following several areas that would be affected by Trump, including regulatory reform and the Federal Reserve. Fed Chair Janet Yellen's term expires in February 2018, while a few other seats will open next year.

"The stakes here are high," Dalio wrote, noting that the selections would influence the Fed's stance on quantitative easing and monetary policy more generally.

On Tuesday, before the election results rolled in, Bridgewater told clients it expected markets to plummet should Trump win. Stocks did fall sharply, but they recovered just as fast, and the Dow Jones Industrial Average broke all-time highs earlier Thursday, even as tech stocks were crashing.

To be sure, Bridgewater didn't specify a time frame in its Tuesday predictions, and the firm's latest letter does not update those estimates.

Prosek Partners, Bridgewater's external public-relations firm, didn't immediately respond to a request for comment.

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Five years ago, Ray Dalio — founder of the world's largest hedge fund, Bridgewater Associates — declared Transcendental Meditation (TM) to be "the single biggest influence" on his life.

Over the past few years, TM has made its way into the mainstream, with celebrities like Jerry Seinfeld and Arianna Huffington proclaiming its benefits, and doctors around the United States recommending it to patients with anxiety and high blood pressure, given its approval by agencies like the American Heart Association.

The Department of Veterans Affairs also works with the David Lynch Foundation (DLF), one of the premiere TM organizations, to offer free lessons to military veterans undergoing treatment for PTSD.

And, following Dalio's lead, hundreds of investors and bankers on Wall Street are signing up for lessons at the DLF. That's where I headed in late September to learn more about TM. The foundation's executive director Bob Roth and one of its teachers, Mario Orsatti, agreed to teach me the technique and waive the $960 fee, as they had previously done with other journalists, so that I would have more context for my research.

It's important to note that you really can't learn the technique without the guidance of a teacher — sitting still with your eyes closed for 20 minutes in a state of "restful alertness" requires practice and personalized advice — but we've developed the below guide to give you a basic idea of how the technique works.

Maharishi Mahesh Yogi, TM's founder, was a young man with a physics degree when he traveled to the Indian Himalayas to study as a Hindu monk under Swami Brahmananda Saraswati, the leader of the monastery in Jyotir Math.

When the Maharishi — a title that means "seer" and is commonly used as shorthand — began his global tour of spreading TM in 1958, he made it clear that although he and his guru were Hindu monks and TM was rooted in the ancient Vedic scriptures, his practice was not tied to the Hindu faith.

Because of the caste he was born into, the Maharishi could not succeed Saraswati, but Saraswati entrusted him with the mission of spreading meditation around the world for the purpose of fostering peace. The Maharishi also immediately got to work partnering with universities to investigate meditation's effect on the brain and body, an effort that eventually received millions of dollars in federal funding through the National Institutes of Health. The technique is now more popular and accepted than it ever had been.

"I think where we are today is where Maharishi always wanted it to be," DLF director Bob Roth told me, "which is science-based, and evidence-based, and fits in with medicine and mainstream wellness programs."

SEE ALSO: Transcendental Meditation, which Bridgewater's Ray Dalio calls 'the single biggest influence' on his life, is taking over Wall Street

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Ray Dalio, the founder of Bridgewater Associates, the world's biggest hedge fund firm, says people should expect a major shift under President-elect Donald Trump.

"Regarding economics, if you haven’t read Ayn Rand lately, I suggest that you do as her books pretty well capture the mindset," he wrote in a LinkedIn post on Monday. "This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers."

The post continued:

"It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power. The shift from the past administration to this administration will probably be even more significant than the 1979-82 shift from the socialists to the capitalists in the UK, US, and Germany when Margaret Thatcher, Ronald Reagan, and Helmut Kohl came to power." 

Dalio also suggested that those interested in this shift read Thatcher’s “The Downing Street Years.”

Dalio described Trump as a "deal maker who negotiates hard, and doesn’t mind getting banged around or banging others around." He added that the president elect had picked a team of people who are "bold and hell-bent on playing hardball" to enact change in economics, foreign policy, education and environment policies. 

"It is increasingly obvious that we are about to experience a profound, president-led ideological shift that will have a big impact on both the US and the world," he said. 

Dalio also notes that Republicans in Congress have shifted farther to the right on economic issues in recent years.
"Trump’s views may differ in some important ways from the Congressional Republicans, but he’ll need Congressional support for many of his policies and he’s picking many of his nominees from the heart of the Republican Party," he wrote. "As the chart below shows, the Republican members of Congress have shifted significantly to the right on economic issues since Reagan." 

By comparison, Trump's cabinet is also very conservative economically. "Trump’s administration is the most conservative in recent American history, but only slightly more conservative than the average Republican congressman," Dalio wrote.

This isn't the first time Dalio and Bridgewater have opined on Trump. The day of the election, Bridgewater predicted markets around the world would tank if Trump won, according to an investor note viewed by Business Insider. Markets have since rallied, hitting all time highs. 

Then, in mid-November, Dalio said that "we are at one of those major reversals that last a decade." Building on that thesis on his note December 19, he said Trump's shift in policy could do more for the economy than is easily estimated through tax cuts and spending plans.

Trump's policies "could ignite animal spirits and attract productive capital," the billionaire investor said.

He added: 

"A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money."

SEE ALSO: Hedge funders charged in $1 billion fraud emailed about fleeing the US, prosecutors say

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Bridgewater Associates, the world's largest hedge fund, is building an artificial intelligence engine to automate the management of the company, according to a report in the Wall Street Journal.

Ray Dalio, Bridgewater's founder, wants the AI system to handle everything from the day-to-day management of investments down to organising staff's days and even hiring and firing, according to the report.

Bridgewater, which has $160 billion (£130 billion) under management, already has algorithms that inform the strategy of its "Pure Alpha" fund, measuring hundreds of economic data points. But the new AI system, referred to as the "Book of the Future" by Dalio and the Principles Operating System officially, would apply data science principles to management, picking up on internal data points such as personality tests and internal polls in meetings. Bridgewater has a number of internal apps employees can use for things like grading colleagues.

The project is being run by David Ferrucci, according to the Journal. Ferrucci was one of the leading developers on IBM's Watson project, one of the most advanced AI systems in the world that is better at detecting cancer in patients than human doctors.

Dalio hopes that the Principles Operating System will make three-quarters of management decisions within five years. One employee told the Journal that the project is "like trying to make Ray’s brain into a computer." Dalio runs Bridgewater according to what he called the "Principles," a set of rules that employees have to follow.

Dalio told Business Insider during a recent interview:

"Imagine what it would be like to have a GPS-like device that converts high-quality decision-making principles into formulas. It then processes data representing what is happening in the world and spits out recommended decisions. This is how our economic and investment thinking works. We are now doing the same things for management."

Artificial intelligence has become one of the hottest areas of technology in the last few years, led by cutting edge development projects such as Google's DeepMind.

Meanwhile, the barriers to entry for the kind of algorithmic trading that informs the "Pure Alpha" fund have come down (although there of course remains a premium on the unique trading strategy.) There have been a slew of so-called "robo advisors" popping up across the world. These online investment companies let people put their money into often automated trading strategies, such as the one offered by startup Scalable Capital.

Scalable, developed by former Goldman Sachs, Barclays, and McKinsey staff, is built around an investment algorithm that forecasts risks and then automatically optimises people's portfolios on the fly to limit losses.

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Ray Dalio is mad again at the media's coverage of his hedge fund, Bridgewater Associates — the world's largest with $160 billion in assets under management — and he's made his longest, angriest statement yet.

In Tuesday's editorial, first published on LinkedIn, Dalio links a Wall Street Journal story from December 22 with "the fake and distorted news epidemic."

In the Journal story, reporters Rob Copeland and Bradley Hope explored facets of Bridgewater's unique culture of "radical transparency" and focused on the development of the Principles Operating System, an effort to automate decision-making and conflict-resolution across the firm's 1,500 or so employees.

Dalio's "Principles," a collection of 210 lessons all employees must read, are manifested in Bridgewater's culture in a "management machine." At the company, most meetings are recorded to be made available to all employees, and employees rate each other's performance in proprietary iPad apps.

Dalio writes that he took particular offense to the way the Journal reporters characterized the firm as "a crazy, oppressive place run by a Dr. Frankenstein type character — even though the evidence shows it to be an idea-meritocracy which has, for several decades, succeeded in producing meaningful work, meaningful relationships, and unparalleled results through its radical truthfulness and radical transparency."

He accuses Copeland of disregarding corrections to fact-checks sent to Bridgewater, which he blames on a media-wide loosening of journalistic standards, seen not only in fringe "fake news" but "distorted news" in the mainstream media.

Speaking for the Journal, Dow Jones communications director Steve Severinghaus told us in an email, "The Wall Street Journal stands by its strong reporting about Bridgewater Associates. We have reviewed the efforts undertaken for this article and are confident that the same high journalistic standards that have served the publication and its readers well for more than 125 years were fully applied in this instance."

Dalio suggests that to combat the problem he perceives, the media industry should create "a self-regulatory organization that set standards and conveyed assessments of quality as is done in a number of other industries"

Last year, Dalio criticized Copeland and Hope's reporting in their article from February 5, and Dalio wrote a similar criticism of a New York Times story from July 28.

Bridgewater Associates has been the largest hedge fund since 2005, but did not enter the media's spotlight until 2011. Last year it received more mainstream coverage than it ever had. That coverage included a Wall Street Journal report on possible tensions at the top of Bridgewater, and a New York Times report on a sexual harassment claim that was later withdrawn.

Business Insider's editor in chief, Henry Blodget, recently conducted an extensive interview with Dalio, discussing issues Dalio explored in Tuesday's editorial as well as more facets of Bridgewater's culture. That interview will be published on Business Insider this week.

We have included the full text of this morning's editorial from Dalio below, and you can see the original post on LinkedIn.

"While I just recently read The Wall Street Journal's article about Bridgewater and was surprised by its intentional distortions, I have been reflecting for quite a while on the destructive effects that fake and distorted media are having on our society's well-being.

"To me, fake and distorted media are essentially the same problem in different degrees. My own experience, which I will share later in this piece, is just one small case within an epidemic. While Bridgewater will survive this case—and even if we didn't, the world would be just fine—it is questionable whether the world will be just fine if this fake and distorted media epidemic is not arrested. As Martin Baron, the Washington Post's Executive Editor, said in reflecting on the problem, 'If you have a society where people can't agree on the basic facts, how do you have a functioning democracy?' Distorted pictures lead us to make bad decisions. In my opinion, if people don't correct such inaccuracies and don't fight against this problem, continued distortions in the media will prevent the public's accurate understanding of what is happening, which will threaten our society's well-being. We in the financial community now openly talk about fake or distorted media being used to manipulate market prices to the harm of many, and similar conversations are taking place in most areas.

"This is not just a fringe media problem; it is a mainstream media problem. And while it is widely recognized, there is no discussion underway about how to rectify it. The Associated Press said that only 6 percent of Americans surveyed have 'a lot of trust' in the media. A recent Gallup study showed that Americans' trust in the media has dropped to an all-time low, with only 32 percent of those surveyed saying that they have either a 'fair' or 'great deal' of trust in the media. That compares with 55 percent having such confidence in 1999 and 72 percent in 1976. The dramatically decreased trustworthiness has even plagued icons of journalistic trust such as The Wall Street Journal and The New York Times, as sensationalism and commercialism have superseded accuracy and journalistic integrity as primary objectives.‎ Many, if not most, 'journalists' are trying to write the story that they want to write and fit the facts to it rather than accumulating facts to accurately report pictures of what is true. To be clear, I am not saying that this is the case for all people in the news media as there are a number of true journalists who do seek to convey accurate information; I'm just saying that they are a rapidly shrinking percentage of the total and the poll numbers reflect that.

"The failure to rectify this problem is due to there not being any systemic checks on the news media's quality. The news media is unique in being the only industry that operates without quality controls or checks on its power. It has so much unchecked power that even the most powerful people and companies are afraid to speak out against it for fear of recrimination. In fact, I presume that I will be widely attacked in the media for what I am saying here. Nonetheless I am compelled to say what many people express privately, which is that 1) the quality of news media is declining in general, 2) those in the news media have an enormous amount of power, 3) the news industry is unique in not having its standards of behavior specified and overseen, and 4) this confluence of realities is dangerous.

"While we all treasure our free press which is the reason that those in this industry are not overseen, the accelerating loss of faith in the media appears to be coming to a head and will probably lead to a backlash. I worry that if the industry doesn't fix its problems, other forces will cause the pendulum to swing in the opposite direction, which will lead to some of the cherished press freedoms being lost. That too could undermine the public's ability to know what is true. There is no getting around the fact that we need a responsible news media, and the powers that be need to start talking about how to bring that about. Personally, I hope that prominent media organizations will explore ways of self-regulating the quality of what they are producing, or at least create ratings in the way the Motion Picture Association of America provides its movie ratings.If the industry created a self-regulatory organization that set standards and conveyed assessments of quality as is done in a number of other industries, it would be much better than most of the other alternatives. In any case, it's not my place to determine how this problem is resolved as much as to speak up about the problem and encourage discussion of it.

"A Case in Point

"I have mixed feelings about describing our most recent experience with The Wall Street Journal because many people might misconstrue my doing this as me simply complaining about an article that I didn't like. While I certainly don't want to let the inaccuracies about Bridgewater stand, my more pressing motivation is to give you a window into how media is often made because I believe that those of you who haven't seen it from the inside will find it eye-opening. It probably will be a little bit like watching sausage being made for the first time.

"About six weeks before the Wall Street Journal story by Rob Copeland and Bradley Hope came out, we were contacted by Copeland, who was 'fact-checking' and seeking information about Bridgewater. Many of the things he was asking about were downright wrong, so we were presented with the choice of either cooperating with him or allowing the incorrect information to go out. Because we've had a history of Copeland and Hope writing misleading stories about Bridgewater even when we cooperated with them, we were inclined to not engage with them because we expected that they might again distort whatever we said. Copeland however insisted that they wanted to 'reset the relationship' to present an accurate picture of the firm. He offered to enter into an agreement in which we would provide him with information that he didn't already have in order to give him a fuller picture but only on the condition that he would not use that information unless we mutually agreed that his presentation of it in the article was accurate. We understand that the culture behind our exceptional success over the last 40 years is both unusual and commonly misunderstood, so we decided to enter into that agreement with him. As explained below, he broke the agreement by presenting distorted pictures of what we told him even after he asked us to 'fact check' his assertions and we replied in writing that they were inaccurate.

"Copeland and Hope allege that Bridgewater is an oppressive environment based on very few conversations—as they put it, on interviews with 'more than a dozen past and present Bridgewater employees and others close to the firm.' We have about 1,500 people who work at Bridgewater, most of whom love it rather than feel oppressed, so the picture they gleaned from these dozen people was clearly not representative. Bridgewater obviously could not have been as successful for as long as it has been without a culture that values its employees and fosters excellence; Copeland wasn't seeking to understand that. We explained to him in writing that 'You are painting a one-sided negative picture of the work environment. The problem is that people who are happy with their experience and respecting our rules are not allowed to speak with the media so you end up hearing disproportionately from disgruntled people. It becomes a gross exaggeration and none of the joy of the Bridgewater experience gets represented.' We offered to provide Copeland an extensive list of employees and former employees who could freely speak with him. He did not take us up on that offer.

"We also offered to put Copeland in contact with three prominent organizational psychologists and researchers who, out of their own curiosity, had studied our culture in depth and conveyed their highly-regarded analyses in three different books. These researchers were on site at Bridgewater and had access to anyone they wanted to speak with when they did their studies. Copeland and Hope never even walked though Bridgewater speaking to its people, yet they also chose not to speak with these experts. If you are interested in reading a few much more informed assessments of Bridgewater, we suggest that you read 'An Everyone Culture' by Robert Kegan and Lisa Lahey, 'Originals' by Adam Grant, and/or 'Learn or Die' by Edward Hess or read the quotations from these books that are included here.

"Copeland asked us about our culture of radical transparency, so we explained the logic behind it. We directed him to Principles, which describes it in depth. We agreed that Bridgewater is a challenging place to work, that the characterization of the firm being like 'an intellectual Navy Seals' is apt, and that it isn't for everyone. We made clear that nobody doubts that our unique culture has worked remarkably well for 40 years, and that no company could produce the results we have without there being deep and meaningful relationships among the people who work there. We tried to explain how the culture works and how it has produced our unique results, and we tried to provide him with facts that substantiated that assertion. For example, in our most recent anonymous annual survey, 89 percent of employees agreed that 'running Bridgewater according to the culture and principles is key to Bridgewater's success' and 94 percent agreed that 'the culture helps my personal evolution.' Similarly, 89 percent of our clients said that they were satisfied or very satisfied with Bridgewater, 95 percent said that 'Bridgewater's investment insights are uniquely valuable,' and 95 percent said that 'Bridgewater's personnel are honest and direct with me, even when we disagree.'

"We also explained the logic behind radical transparency in conversations and in the following written statement: 'If you agree that a real idea-meritocracy is an extremely powerful thing, it should not be a great leap for you to see that giving people the right to see things for themselves is better than forcing them to rely on information that is processed for them by others. Radical transparency forces issues to the surface—most importantly (and most uncomfortably) the problems that people are dealing with and how they're dealing with them—and it allows the organization to draw on the talents and insights of all of its members to solve them. Eventually, for people who get used to it, living in a culture of radical transparency is more comfortable than living in the fog of not knowing what's going on. And it is incredibly effective. But, to be clear, like most great things it also has drawbacks. Its biggest drawback is that it is initially very difficult for most people to deal with uncomfortable realities.' Copeland and Hope chose to not use any of that. Rather than seeking to understand how the culture and radical transparency work or referring to such facts in their article, they chose instead to push the story that they wanted to write.

"We discussed turnover rates at Bridgewater and showed them the statistics that make clear that in the first year or two turnover is unusually high and in subsequent years it is unusually low. This pattern is a result of Bridgewater's culture and its having tough and unique standards. The company is not for everyone but for those who it is for, there is nothing like it. The numbers substantiate this—21 percent leave in the first year and another 10 percent leave in the second year, but the turnover rates of those in years three, four, and five are exceptionally low, at only six percent, four percent, and three percent respectively. Copeland and Hope chose to focus only on the relatively high early turnover saying 'Bridgewater says about one-fifth of new hires leave. The pressure is such that those who stay are seen crying in bathrooms.' They omitted the longer-term high retention rates and the satisfaction levels behind them.

"When Copeland asked about how radical transparency works, he suggested that we were disingenuous because we didn't pursue it totally. We explained our approach: 'Don't get me wrong: radical transparency isn't the same as total transparency. It just means much more transparency than is typical. We do keep some things confidential, such as illnesses or deeply personal problems, sensitive details about intellectual property or security issues, the timing of a major trade, and at least for the short term, matters that are likely to be distorted, sensationalized, and harmfully misunderstood if leaked to the press.' And we pointed him to the relevant principles. Copeland and Hope chose to ignore those explanations and write 'he decided to let only 10 percent have the full measure of what he calls radical transparency.' After he passed that by us, we replied that 'It is incorrect that only 10 percent get radical transparency. Here's the fact. Everyone can see most everything, but only the top 150 or so people get to see the most sensitive type of stuff which, in most companies would be limited to only the top 5 or 10 people.' The authors chose to go with their mischaracterizations, even though doing so was misleading.

"Similarly, their representations regarding our 'secret project' to systemize our criteria for management decision making were both sensationalistic and misleading. We explained that what we are doing in systematizing management decision making is the same thing we have been doing for 30 years in systemizing our investment decision making, which is to collectively agree on good principles for making decisions and to express them in computer code. This allows us to input the relevant data and for the computer to process it according to our mutually agreed-upon criteria. We explained that we are doing this because we have learned that this principled and systemized decision making process allows us to get above our emotional attachments to our own conclusions and focus instead on deciding what our decision making criteria should be, which ultimately leads to better decisions because computers can process these criteria in much better ways than humans can. For example, by collecting data on people, we can learn what they are like, what jobs they are best suited for, and how they would most effectively work together. People also learn a lot about themselves, which helps them and their personal development. We are collecting and building these criteria collectively, yet the writers chose to characterize all this as being 'like trying to make Ray's brain into a computer' because that fit better with their desire to paint a picture of Bridgewater being a crazy, oppressive place run by a Dr. Frankenstein type character — even though the evidence shows it to be an idea-meritocracy which has, for several decades, succeeded in producing meaningful work, meaningful relationships, and unparalleled results through its radical truthfulness and radical transparency.

"Copeland and Hope mischaracterized several other things (e.g., my thinking on Jim Comey, a man whom I admire). In each case, I explained to them that they were mischaracterizing and they chose not to convey anything that didn't fit with the story they wanted to write. I won't delve into more examples because we are past the point of diminishing returns.

"So there you are. You now have a window into how some media is being made, and you're left facing the dilemma I described in the first part of this piece. There is no established party to assess the accuracies of what is being said, and you are left to wrestle with questions of what is true based on the scant evidence you have in front of you. I suggest that rather than worry about what's true about Bridgewater, which probably won't have an effect on your life, you worry instead about the systemic risks arising from fake and distorted media."

UPDATE: This story has been updated with a comment from the Wall Street Journal.

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Ray Dalio, the head of the hedge fund Bridgewater Associates, is cooling off on his opinion of President Donald Trump.

Dalio, who had been hopeful about a Trump presidency and some of his economic policies, seems to have struck a less optimistic tone, according to a letter obtained by Bloomberg.

In the letter, Dalio warned that there was a high level of uncertainty in the market and told clients to avoid investing too heavily in a particular asset, according to the Bloomberg report.

"While there is a lot of potential to improve fiscal policies and make beneficial structural reforms (to enhance the business friendly environment, reduce regulatory inefficiencies, etc.), there is also significant risk that his populist policies could hurt the world economy (and worse)," Dalio said in the letter.

It's a quick turnaround for Dalio after the head of the world's largest hedge fund said in a note after the election that Trump's policies could be beneficial to business and the US.

"A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money,"Dalio wrote in December.

Dalio seems to have since cooled on Trump amid some of the trade policies coming from the Trump White House including a proposed 20% border tax, strained relations with Mexico's president over NAFTA and a border wall, and attacks on China and Germany over their currencies.

"Nationalism, protectionism and militarism increase global tensions and the risks of conflict," Dalio's letter said, according to Bloomberg. "For these reasons, while we remain open-minded, we are increasingly concerned about the emerging policies of the Trump administration."

You can read the full Bloomberg post here»

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• Bob Prince, co-CIO of the world's largest hedge fund, correlates its long-term investment success with its unusual and demanding culture.
• Bridgewater employees rate each other's performance, and their profiles are considered for "believability-weighted decision-making."
• He explains how the firm recovered from a rough losing period in 2016 to become the most profitable hedge fund in 2016.

Bridgewater Associates is as well known for being the world's largest hedge fund, with $150 billion in assets under management, as it is for its quirky culture of "radical transparency."

At the firm's Westport, Connecticut, office, the 1,500 employees abide by Bridgewater founder, chairman, co-CEO, and co-CIO Ray Dalio's "Principles," a collection of lessons on success and management that serves as a sort of constitution. Most meetings are recorded on camera or audio so that they may be scrutinized later if necessary, and employees constantly measure each other's performance using an iPad app called Dots.

It's a demanding environment, and 30% of new employees leave within their first two years. But many who remain choose to embrace the Bridgewater way of life.

From a performance side, Bridgewater took the title of "world's largest hedge fund" in 2005 and has remained there.

In February, London-based LCH Investments released its annual "Most Successful Money Managers" list. At the top was Dalio, whose firm, according to LCH, made $4.9 billion in net gains in 2016 and $49.4 billion in net gains since its inception in 1975 through its two actively managed funds, Pure Alpha and Optimal Portfolio. (Its passively managed fund, All Weather, was not considered.)

An obvious question about the company is how — or if — Bridgewater's culture contributes to its success on the investment side. For the firm's co-CIO, Bob Prince, there's a clear correlation. He's been with Bridgewater since 1986, before it even had assets under management, and to him, the firm's "idea meritocracy" and its way of partnering with clients has allowed it to become a consistently successful giant.

Prince spoke with Business Insider after the LCH rankings came out to discuss how he views the relationship between performance and culture. We discussed his 30-year career at Bridgewater, how and why employees measure each other's attributes, how the firm bounced back from a losing period last year, and why he thinks the culture has adapted since the days of six employees but never truly changed.

This interview has been edited for length and clarity.

Richard Feloni: How do you link performance to Bridgewater's unique culture?

Bob Prince: Culture is just how we interact. At the very basic level, is it better to be honest with each other, or not honest with each other? Is it better to talk behind your back, or to talk in person? Do we want the best ideas to win, or should the boss get his or her way? Should we be insulting and yell at each other, or should we have calm conversations?

There's sort of a qualitative way to talk about it, but then I could very directly link it to performance in a very linear way.

Feloni: How would you describe the general benefits of the culture?

Prince: If I just take it from a qualitative standpoint, it's who do you want to spend your life with and what do you want to do? It just comes down to quality relationships. Long-term quality relationships are both intrinsically gratifying and productive. The fact that I've worked with Ray as a partner for 30 years means we're best friends, you know? That friendship has really evolved, from that shared mission and being in the trenches together, learning things about each other, and learning things about the world.

And I work with Karen Karniol-Tambor, who's fantastic. She started here as a 22- or 21-year-old, 10 years ago. At first, it was like, wow, she's really smart, but she knows nothing. She was a government major or something. But she was super engaging — really forthright.

She's been my research partner for 10 years, and what I told her at the start was, "You're not my assistant; you're my alter ego. Whatever I do, you do." I shared things with her, and I put my work in front of her. She's 23 years old, and I'm just throwing it in front of her. By her just seeing that, she can then connect the dots and then, over time, she's become an important leader in our research area.

What happens is both gratifying and fun, but also, like super productive. We had a conversation this morning, for example, about how to approach some particular topic, and it just flowed. Ray refers to it as playing jazz together. It's like back and forth, back and forth — she's constantly disagreeing with me, but I can explain where she's wrong, and then she can explain why I'm wrong again, and it takes, like, 30 seconds to sort it out, and we get to a great answer.

It's an idea meritocracy. It really just comes back to how important are quality relationships to you, what does it mean to have a quality relationship, and how do you achieve it. That's what it comes down to.

Feloni: And then how does this relate to making money?

Prince: It does almost algebraically, is the answer.

If you generated $49 billion of returns for your clients, what is that? Well, it's a product of two things. You've got a certain amount of assets under management multiplied by a certain amount of return. So if you don't add any clients, you're not going to add any value to clients. And if you don't have positive returns, you're not going to add value, and you're then not going to have any clients.

So if I just break those two things down, the first thing you need is clients. And so the culture for us totally extends to the relationship with them. In fact, typically what will happen, going all the way back, is we develop a quality relationship with somebody before they hire us. We're engaging with them in a sharing of ideas — "If we were in your shoes, this is how we would think about it. If we applied our principles for investment management to your situation, this is how we would think about it." We're operating as a partner with them, and therefore for them to have us manage their money is just a natural extension of that.

But we don't act as hired guns. I'd say it's 35% making money in the markets, and it's 65% a quality of exchange of ideas.

If you think about it, that's totally logical because if you're managing 0.5% of their portfolio but you're helping them think better about 99.5% of the portfolio, the second thing is obviously of more value than the first. So the relationship itself is actually kind of superseding any particular returns that you're generating in the markets. The two things really reinforce one another because if you have that kind of quality relationship, then they trust you more and they're likely to give you more funds to manage.

We have about 300 clients in total, but it's not as if we have 3,000 clients. We are able to know them all personally, and they're partners. I think our average client has been with us 11 years. We've lost almost no clients through history. I think our turnover is 1%, even during losing periods. We had a losing period last year, and clients added.

When you're looking at a market, the basic essence of a market is the price reflects the consensus. The only way you can add value in a market is to be an independent thinker. You have to be able to deviate from the consensus, but you have to be able to think differently and then be right about it. It's easy to think differently, but it can't be 50-50. You have to be right more than you're wrong. That means you need quality people, and if you have independent thinkers, they by definition disagree with one another. And so you need to have ways, processes in place that independent thinking people can work effectively together.

Feloni: How do you get them to work well together?

Prince: There are two things that are really essential.

Number one is you've got to get people in the right positions on the field. Think of it like a basketball team.

In a basketball game, there's radical transparency, right? Because you've got five players on the court in little short uniforms, and you've got a scoreboard, and you've got 20,000 people watching, and then you've got instant replays, and you've got a post-game interview. If you lose the game, A, it's crystal clear that you lost the game, and B, it's crystal clear why, and we can pin it to the players on the court and the coach who put him there and so forth.

On a team, you may see that a three-point shooter might think they're a rebounder, or that rebounder might think they're a three-point shooter, but it becomes evident that they're not. But if you just switch positions, maybe everything's great.

The first thing that you have to do to put a team together is you have to know what everybody's like. What are their strengths? What are their weaknesses? And the real challenge when you have a company is that it's not as visible as being 7 feet tall versus 5-foot-11. But truly, some people are more creative than others. Some people are more analytical than others. Some people are better at communicating. You have big differences in people — they're just not as evident as on a basketball team.

You have to find a way of figuring out what people are like, and a big part of that is each person really has to want to know what they're like. Because if I'm not open to an objective assessment of what I'm like, it breaks down the whole system. My defensiveness is going to break down that process.

The second main thing that has to happen is that you have to have an idea meritocracy, a way that you can resolve differences and have the best ideas win. If the summer intern has a better idea than Ray, we're going to go with what the summer intern says.

Feloni: Is that just an extreme example, though? That wouldn't actually happen, would it?

Prince: No, literally! And it has to be. Otherwise, you'll fail. Think about it: In the markets, the markets are a pure meritocracy. When we put a trade on the bond market, there's no branding that goes on that trade. You're right or you're wrong. The markets are the ultimate meritocracy, and if your organization isn't a meritocracy, you're just going to be fooling yourself, or you're going to bang your head into a wall. [Prince told us later that an intern came up with "the idea of creating a culture handbook which had cases for people to read to understand the culture, which we did," and that his and Dalio's fellow co-CIO, Greg Jensen, started as an intern in 1995.]

To do this, we have a thing that we refer to as "believability-weighted decision-making," which is based on how different people are more or less believable in different areas. And therefore, if we need to determine what is the best idea in a discussion, we can consider the believability of the people making that choice. And so in a sense, I need to stand down on certain decisions because I'm less believable on particular things. But on the other hand, I should get more weight on other things.

If you think about it, you've got dictatorship on one side, and you've got democracy on the other side — believability-weighted decision-making is probably the optimal way to do it, if you could just figure that out.

There's a proverb: "As iron sharpens iron, so one person sharpens another." So you need to hold one another accountable, and you need to be clear-cut. Principle number one is "trust in truth." The net of it is that you end up with what is really a community of people where people actually care about and trust each other because you're honest and straightforward.

Feloni: Can you explain how you manage through a losing period, both with clients and employees?

Prince: Trust in truth. What we do is, number one, is that when anybody hires us, the first thing that we do is we show them the range of returns that's going to occur, which includes losing periods. And it's what we call a cone chart. The cone chart has an upward slope to it. We expect to have an upward slope over time but certainly expect there to be a range — pluses and minuses along the way.

And so, for example, back in 1991, when we first started Pure Alpha, we basically plotted the cone chart out, 10 years and more, and then what happens is that cone chart is just an empty cone because it's all expectations. And now every quarter, you just plot the dot to show where you are in the cone. And then if you have a losing period, the question is not was it a winning or a losing period — the question is: Are we inside the cone? Because if we're inside the cone and the cone is sloping up, then over time I could figure it's going to work out OK. But we basically say, look, if we break outside the bottom of the cone, we have deviated from what we're conveying to you, and you should fire us.

I remember back when we first started doing this in the early '90s, one of our sales guys said, "Man, you've got to be crazy to do this cone, because if you have a losing period you're going to get fired. You can't talk your way out of it." And we're like, well, that's what it is. Here we are 25 years later, and we're in the middle of the cone.

What happens is if you go through a losing period, A, you've already told everybody there's going to be losing periods; B, I say, well, when I look at it, I have a checklist of items to see if they fall out of our range of expectations. It's not what we wished would happen — we wish we could make money every day, but I can assure them that no, it's not outside the range.

What's very important is that the client needs to know that you are paying attention, have a great sense of what's happening, and that you're learning something. One of our basic principles is that the way you improve is largely by learning from mistakes, and this applies both to individual employees and our investment process. When you go through a losing period, it shines a light on a vulnerability in the process. That gives you the opportunity to deal with it and improve.

And so last year, when we had that losing skid there, we had a lot of those kinds of conversations with clients — some very in-depth reports, some very in-depth conference calls where we really went through what's going on in the markets, what's consistent with what we expect, what's inconsistent with what we expect, what are we learning, what are we improving. So they're really going along with us on that.

Feloni: So there wasn't anything very unexpected last year, then? It fell within the range?

Prince: Totally.

Feloni: How has the culture changed over the 30 years you've been there?

Prince: If I go back to 1986, when I started, it was a single-digit number of people, and we had no assets under management. We basically sold our research and did risk-management consulting for companies. But I'd say the core mission and the values have never changed. What has changed is that it's gone from implicit to explicit.

Over time, what Ray has done is distill that culture into words. We would have a back-and-forth about it — debate it, discuss it. And then those things become explicit. It's been very beneficial to me because even though I know Ray well, you could still not know where the guy's coming from. But when he lays it out and explains how he's thinking, it helps me understand him and also helps me think better.

I personally have much greater discipline and fluidity in how I think about things than I would have had if those things weren't expressed explicitly. And then the systematization [like iPad apps] carried that further.

Feloni: Has the culture been affected by Ray having a spotlight shone on him in the last six years or so?

Prince: Ray's not trying to get a spotlight shone on him! [laughs]

Feloni: But he has had to react to it. How does that play into the balance of everything?

Prince: Yeah. What matters to us is the quality of the relationships we have with clients and the quality of the relationships we have inside the company. And those two things reinforce each other. That's what matters. An article doesn't contribute at all to the quality of client relationships, so we never cared about whether we're in the newspaper or not in the newspaper.

And then what happened then as we got bigger and kind of more noticed, we got pulled into that world of mass media. At that point, we had to then decide: Do we participate, or do we not participate? We decided it's better to participate and explain ourselves than to take a chance of being mischaracterized.

So the only reason that we're really engaging in that way is just a matter of trying to create clarity around the accuracy of what we do here. But it doesn't have any impact on the actual nuts and bolts of our client relationships, because those people are practically like family.

Correction: An earlier version of this article stated that the idea for printing Dalio's "Principles" as a handbook came from an intern, but the handbook in question was a separate collection of case studies on the culture.

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With $150 billion in assets under management, Bridgewater Associates isn't just the world's largest hedge fund. It's also a company with a quirky and intense culture unique to any industry.

Its policies of "radical truth" and "radical transparency" are based on a collection of lessons, known as "Principles," written by its founder, chairman, co-CIO, and co-CEO Ray Dalio. At Bridgewater's Westport, Connecticut offices, its 1,500 employees rate each other's performance using an iPad app. Most meetings are recorded, via an opt-in audio recorder or camera, to possibly be scrutinized later.

It's an intense, unusual place that's not for everyone — 30% of employees leave within their first two years — and Dalio told Business Insider last year that he often found it misrepresented by outsiders. "It can sound mean, crazy, or like a cult to people who don't know what it's really like," he said.

But in a recent interview with BI, Bridgewater co-CIO Bob Prince, who's been with the firm since 1986, used the metaphor of a basketball game to explain the company's approach.

He said:

"In a basketball game, there's radical transparency, right? Because you've got five players on the court in little short uniforms, and you've got a scoreboard, and you've got 20,000 people watching, and then you've got instant replays, and you've got a post-game interview. If you lose the game, A, it's crystal clear that you lost the game, and B, it's crystal clear why, and we can pin it to the players on the court and the coach who put him there and so forth.

"On a team, you may see that a three-point shooter might think they're a rebounder, or that rebounder might think they're a three-point shooter, but it becomes evident that they're not. But if you just switch positions, maybe everything's great.

"The first thing that you have to do to put a team together is you have to know what everybody's like. What are their strengths? What are their weaknesses? And the real challenge when you have a company is that it's not as visible as being 7 feet tall versus 5-foot-11. But truly, some people are more creative than others. Some people are more analytical than others. Some people are better at communicating. You have big differences in people — they're just not as evident as on a basketball team.

"You have to find a way of figuring out what people are like, and a big part of that is each person really has to want to know what they're like. Because if I'm not open to an objective assessment of what I'm like, it breaks down the whole system. My defensiveness is going to break down that process."

Therefore, the way Prince sees it, managers and employees shouldn't be withholding judgment of each other in the office, in the same way they wouldn't on the court. And because someone's build and style of play may be more obvious than someone's thought process and skills, the latter set requires this "radical truth" to unveil it.

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There are two basic power structures, says Bridgewater Associates co-CIO Bob Prince: democracy, with one equal vote per person, and dictatorship, where all decisions come from the top.

At Bridgewater, the world's largest hedge fund, there's a third option.

The fund calls it "believability-weighted decision making," and assigns certain votes more pull than others. It's "probably the optimal way to do it,"Prince told Business Insider.

Bridgewater, with $150 billion in assets under management, is as well known for its size as it is for its unusual culture of "radical truth" and "radical transparency." Founder, chairman, co-CEO, and co-CIO Ray Dalio's handbook of "Principles" is required reading for all 1,500 employees, and the collection of management and life lessons serves as a sort of constitution for the Westport, Connecticut-based firm.

One of the most obvious manifestations of this culture is the way employees rate each other's performance, which in turn affects decision-making.

Every employee has a company-issued iPad loaded with proprietary apps. One of them, called "Dots," contains a directory of employees and options to weigh in on various elements of each person's work life, categorized in values, abilities, skills, and track record.

There are more than 100 attributes in total, but the collections of attributes are customized to roles in the company, in the sense that an investor's performance would not be measured according to the same traits that would be used to measure a recruiter's performance.

Employees are free to use Dots whenever they'd like, when they want to praise or criticize a colleague for a particular action.

The chart below includes some of the attributes found in Dots.

When an employee enters a rating for a coworker, they are asked to measure the attribute on a scale from 1-10, with seven considered average. They then enter a brief statement to add context. These number and statement combos — known as "dots"— are associated with the name of the person who input them, are public, and are permanent. Prince told us that he has about 11,000 dots assigned to his name.

Prince explained that employees are not expected to strive for 10s in every category as a student would attempt to get straight As; rather, they are expected to have clear strengths and competency for other traits, the same way a basketball team is composed of players with complementary talents.

The numerical value of these Dots is considered along with performance reviews, surveys, tests, and ongoing feedback and averaged into public "baseball card" profiles for every employee. The profiles get their name from the list of attributes and corresponding ratings, the same way a baseball card would list something like a player's batting average accompanied by a brief description of their career.

These are then brought into play in meetings where decisions are being made. Using their iPads, colleagues will vote on certain choices, and in the system of believability-weighted decision making, each vote will have a weight depending on the individual's baseball card and the nature of the question.

"A person's believability is constantly relevant," Prince said. "In a meeting, it is relevant to things like how you self-regulate your own engagement in a discussion, how the person running the meeting manages the discussion, and in actual decisions. At all times a person should be assessing their own believability so that they can function well as part of a team."

The baseball card approach fits into a system where most meetings are recorded via opt-in audio recorders or cameras, and where some of these recordings are included in weekly "management principles training" (MPT) lessons. The culture of radical truth and radical transparency that Dalio has created is demanding and not for everyone, and that's why 30% of employees leave within their first two years.

While a culture where everything's on the table turns out to be intolerable for some, those who stay are committing to operate within such a system. As one former employee told us last year in a conversation about MPT lessons, "Ultimately, if you're signing up for Bridgewater, you're saying I'm signing up to be proven wrong sometimes and I'm willing to work to look at that."

In an interview with Business Insider CEO Henry Blodget in December, Dalio said that the aim of this radical truth and transparency is an "an idea meritocracy, and it has just worked unbelievably well."

"I would like it to be that everybody knows that person's knowledge on the subject, and we can draw upon those differences and actually have the more knowledgeable people have more weight in the decision making," Dalio said. He added that the process isn't perfect, but that finding a path to the best answers is "what I work to solve."

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Ray Dalio, who oversees the world's biggest hedge fund firm, is stepping down from management amid a company-wide shake-up.

Dalio will stop managing Bridgewater Associates by mid-April, according to a client note Wednesday reviewed by Business Insider. Dalio said in the note that he had "temporarily stepped back into management" 10 months ago to help transition Greg Jensen's co-CEO role.

Dalio will remain co-chief investment officer along with Bob Prince and Jensen. Dalio wrote that he expected "to remain a professional investor at Bridgewater until I die or until those running Bridgewater don't want me anymore."

Bridgewater is the world's biggest hedge fund firm, managing about $103 billion in its hedge funds as of midyear 2016, according to the HFI Billion Dollar Club ranking.

Bridgewater's culture is known for being unusual and difficult. In its world of "radical transparency" and "radical truth,"employees rate one another's performance in real time on proprietary iPad apps, and nearly all meetings are recorded to be available for scrutiny. The company reports that 30% of employees leave within their first two years.

A slew of other changes were also announced in the client note:

• "David McCormick will be stepping up to join Eileen Murray in the co-CEO role."
• Jon Rubinstein is leaving Bridgewater after 10 months (he was previously also co-CEO) because he did not fit into Bridgewater's culture, Dalio wrote. Rubinstein, who previously worked for Apple's Steve Jobs, will continue to advise the firm.
• "Osman Nalbantoglu (who has been at Bridgewater for nine years) continues to run our portfolio implementation and trading/execution areas, and eight of our key investment research associates will step up into senior researcher roles."
• "Carsten Stendevad, the former CEO of the large Danish pension fund ATP, is joining Bridgewater as part of our new 'Bridgewater Senior Fellowship Program,' which will bring highly distinguished individuals into Bridgewater for a year to explore what our culture is like and lend their expertise and insights to our organization."
• "John Megrue joined me as a co-chairman on January 1st. John has been a leader in the private equity industry for over 30 years and is currently chairman of Apax Partners US."

Bridgewater has now posted the full memo to clients on LinkedIn.

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Billionaire Ray Dalio just went off on the New York Times again – this time at one of the newspaper's own events.

"I'd like to talk about the ridiculous New York Times article," Dalio told moderator and Times' editor Charles Duhigg in response to his question about how he handles criticism. Dalio is the founder of Westport, Conn.-based Bridgewater Associates, the world's biggest hedge fund with about $103 billion in assets. 

Dalio was referring to an article that the Times ran earlier this week that detailed a case in which Dalio fired at least one staffer via a company-wide email and an instance where the company had employees review a video challenging whether a senior executive had lied.

Asked about his opinion that the story had been "miscovered," Dalio said: "Worse than that, it was intentionally done."

"There are journalists, writers who are intended to be, let's call them investigative reporting," Dalio added later in the talk. "And they're supposed to come out with things that they think are scandalous. And as a result of doing that, they kind of weave together things in ways that are meant to be, like, they say, good news that doesn't sell. So it's meant to be that way. So in the interactions that I've had with 'em, there has not been a desire to get at truth."

Dalio didn't specifically dispute any facts in the Times article, and a spokeswoman for the paper said it stands by its story.

Criticizing the media has become something of a passion for Dalio. In early January, he wrote a 2,700-word post on LinkedIn about a Wall Street Journal story about Bridgewater, and last year wrote a separate LinkedIn post that called a different New York Times report "a distortion of reality."

Last week, when the company announced that it was changing up its management team, he published the memo announcing the change on LinkedIn. Dalio wrote that he had made that decision because "our communications often find their way into the media in distorted ways."

The news reports about Dalio all dig into Bridgewater's unique and highly scrutinized culture — which includes the recording of nearly all staff conversations to make them available to other employees in a policy he calls radical transparency. Dalio addressed this at the conference and compared the practice to nudist camps.

"Ninety-nine percent of the meetings are taped for everybody to see," Dalio said.

"Not everyone wants to stand naked in front of everybody," he later added. "It's a little bit like going into a nudist camp for the first time. I don't know if you've ever gone into a nudist camp, but in other words, you first walk into a nudist camp and it's very awkward... If you can stand naked in front of other people and have them stand naked in front of you, you can have actually better relationships and be more productive."

Bridgewater manages about $103 billion in hedge fund assets as of midyear 2016, according to the HFI Billion Dollar Club ranking.

You can watch a recording of Dalio's comments here.

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Bridgewater Associates, the world's largest hedge fund, on Wednesday published a 61-page research paper on populism, which it considers the most important issue in the world today.

"Populism has surged in recent years and is currently at its highest level since the late 1930s," founder and chairman Ray Dalio and his coauthors wrote in the note.

The authors say they consider today's strain of the ideology to be "much less extreme" than it was before the start of World War II in 1939. But at the World Economic Forum in Davos, Switzerland, in January, Dalio said populism's tendency to turn into extremism scared him.

"This is the first year that populism is the most important issue globally," he said.

Wednesday's client note looks at the history of populist movements in the United States, Europe, Russia, Japan, and South America, drawing insights from each.

In a LinkedIn post linking to the full report, Dalio said:

"Given the extent of it now, over the next year populism will certainly play a greater role in shaping economic policies. In fact, we believe that populism's role in shaping economic conditions will probably be more powerful than classic monetary and fiscal policies (as well as a big influence on fiscal policies).

"It will also be important in driving international relations. Exactly how important we can't yet say. We will learn a lot more over the next year or so as those populists now in office will signal how classically populist they will be and a number of elections will determine how many more populists enter office."

Bridgewater is the world's biggest hedge fund firm and managed about $103 billion in hedge funds as of mid-2016, according to the HFI Billion Dollar Club ranking.

The firm has generated close to $50 billion in net gains since its inception, according to London-based LCH Investments. Dalio personally earned $1.4 billion last year, making him one of the top-earning hedge fund managers. Bridgewater's main fund, Pure Alpha, returned 2.4% in 2016, losing to the S&P 500, which gained 9.5%.

Bridgewater sends research notes every day to clients. On the day of the 2016 US election, Bridgewater told its investors that stock markets worldwide would tank if Donald Trump won, Business Insider reported. Stock markets have since rallied to historic highs.

You can find the full report on Bridgewater's site »

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