Ray Dalio's Bridgewater exit package could amount to billions of dollars
nytimes.com
nytimes.com
Selling the firm to the top employees, and offering them generous "seller financing" terms to do so over 10 years, actually seems like a good deal for them, and has the added benefit of clearly determining who actually believes in the company and its prospects over the long term. These are not regular "rank and file" employees, anyway-- the average net worth of these people is probably at least $30mm.
If I allow myself to be cynical, what this really sounds like to me was an attempt to use his regrettable comments (about China acting like a "strict parent" towards dissenters) as a bludgeon to extort him into giving away an extremely valuable asset to his top executives--who were basically betraying him by trying to force him out in the first place. If I were in his place, I would terminate all of those executives and promote younger, more loyal workers to replace them, and then sell the company to them after they prove themselves for a few years.
- Ray started to sell the ownership of Bridgewater in the mid 2010s, but retained a controlling interest in the company.
- He financed the buyout of his shares, providing liquidity to employees.
- There were struggles finding leadership that could competently carrying the fund forward.
- Current leadership has a vision of how the fund should operate going forward, and that vision conflicts with some of Ray's stated principles.
- As a result, leadership wants to buy him out entirely, but probably do not have the funds to do so. As a result, Ray is converting his ownership into non-voting preferred stock, conferring him dividend until the sooner of Bridgewater or Dalio's death.
All I can say is finally. The early stories of Bridgewater (pre 250 employees) from former employees with whom I have talked make Bridgewater seem like a truly special place to have worked at. Ray facilitated meetings across the org in a very personal, constructive way. Then AUM ballooned and they went to 2,000+ employees in a snap. Then they brought in consultants like IBM to scale their intimate management style and the last vestige of magic dissolved.
The fund was a zombie asset aggregator for a good 5-7 years. We'll see how it goes going forward.
I think the issue (poorly put in the article) is that the founders shares he has still gave him control, whilst the company was ‘owned’ by others, forcing them to do a secret deal giving him better returns than other shareholders.
Surely the workers and board should be loyal to the current shareholders and investors rather than the guy who started and ran the company previously (however successfully)
In what sense? Having voting control means he gets to pick the (majority of) the board.
> The board has a fiduciary duty with respect to the shareholders; that is, the board has financial and other responsibilities to keep the corporation running efficiently so the shareholders don't lose money."
https://www.cfainstitute.org/en/advocacy/issues/board-respon...
Maybe. Or maybe hard-working employees are the main reason for that success, and the figurehead at the top was just in the right place at the right time.
> He could do that, or he could sell the firm, or take it public, or anything else that his voting shares legally allow him to do.
In most developed economies a company owner cannot arbitrarily destroy their employees' careers. You have a responsibility to the people who've devoted a substantial chunk of their lives to you.
> Selling the firm to the top employees, and offering them generous "seller financing" terms to do so over 10 years, actually seems like a good deal for them, and has the added benefit of clearly determining who actually believes in the company and its prospects over the long term.
If you can't see how it's inherently inappropriate for a superior to pressure a subordinate to take on a large personal debt to buy an asset of questionable value from that superior, with the implication that their continued employment depends on this, then I don't know what to tell you. What's next, expecting them to "volunteer" to work unpaid hours to prove their commitment to the company?
Bahaha. Hilarious.
Also, you are quite mistaken about the legal duty owed to employees in any capitalist society. You absolutely can wind down a firm, especially if you give sufficient notice in advance to employees (i.e., "we will shut down in 1.5 years from today").
Not necessarily. In Germany for example the employees are entitled to set up a works council (under certain conditions), and that council has a right to negotiate for the worker's interests if a restructuring is proposed, including on the point of whether it happens at all, and if they can't reach agreement with management then they're entitled to independent arbitration.
That's doesn't sound like a good thing.
You're saying that Germany can actually tell the company "no, you're not shutting down"? That's just odd.
And there's the rub. If it's not clear who has control and two competing groups think they have control, the court will mediate, at least until things are sorted out (and might force e.g. a Texas Shootout).
In Germany, subject to certain conditions (the company being large enough, having enough employees with long enough tenure, etc.), you can't have 100% control of the company even if you've bought 100% of the shares. The employees are a recognised stakeholder and you have to reach consensus with them to make changes, the same as any other situation where you share control of a company with some other party.
That sounds terrible.
You invest $10M in a new company, most of it in equipment. Hire 10 people who then form a work council (work councils are possible over 5 employees).
3 months in you realize the business will flop, it was a bad idea, so you want to shut it down and sell all the assets and recoup what you can of your investment.
So the work council can say “no”? You're basically forced to run the business until it goes bankrupt?
Thats nuts.
I'm sure he had very hardworking employees and they were necessary for his success and the success of the company. But those employees had to be working on _something_. Deciding what that _something_ is (i.e. the company goal/strategy) and then coordinating the actions of hundreds of employees and motivating them towards that goal is what a leader/CEO does. Doing that successfully over many decades is not easy.
The next gen takes on loans, often provided by the company to buy out the founders or previous partners. There is nothing strange or in appropriate about that.
> In most developed economies a company owner cannot arbitrarily destroy their employees' careers. You have a responsibility to the people who've devoted a substantial chunk of their lives to you.
No ones career was destroyed unless you know something I don't. Can you cite what you are referring to here?
Most of the people taking over are long term employees who have been making 7+ figures a year for 15+ years now. They aren't been taken advantage of, these are incredibly savvy people.
My point is that even if he's the "owner" (actually not true, he just retains voting control through super-voting shares, which is a whole other rant) he wouldn't (under most developed economies' laws) generally have free rein to arbitrarily do what he wants with the company when that negatively affects the employees. He can probably retire and sell it to the highest bidder, that seems eminently reasonable, but he'd be unlikely to be allowed to arbitrarily downscale or wind up a business that was operating profitably. So the idea that he's somehow doing the employees a favour by keeping the business running at all is pretty lopsided.
Then why don't/didn't they start a company where they are more in control?
Why do people use "mm"?
It's used in other business contexts too. If you've ever paid for online ads, you'll know that CPM means cost per mille, the price of 1000 ad impressions.
I would say tech probably has worse median outcomes but better right tail outcomes than finance.
It's basically just a textual explanation of Markowitz optimization, known since the 50s.
To me it's as interesting as a trader telling you his secret is "to buy low and sell high".
The book is highly recommended even if you don't implement half of what he's suggesting as it's based on hard-won experience. His Principles tweets are largely expounding on what's in the Principles book if you don't want to buy it, with some regurgitation which I felt was kind of marketing driven to promote book sales. Definitely worth the read.
From mid 2017:
https://www.bloomberg.com/news/features/2017-08-10/bridgewat...
> Since the beginning of 2012, Bridgewater’s Pure Alpha II has posted an annualized return of 2.5 percent, according to a document reviewed by Bloomberg Markets, a far cry from its historic average of 12 percent. It’s down 2.8 percent this year through July. (A smaller Bridgewater hedge fund, Pure Alpha Major Markets, has fared better, as has the company’s long-only product.)
That said, Bridgewater hasn't done that great for awhile.
Why?
I tend to find it okay to compare Sharpes so long that the returns exhibit a somewhat close distribution.
I would expect both the S&P and an equity market neutral L/S to have normally distributed returns.
He thus set the standard for future generations of partners, and the result was the creation of an enduring global firm* run by the current partnership group.
Dalio's approach means that the firm is set up to prioritise his personal wealth, not investor and existing partner outcomes. Future partners and investors can read into that as they will, but it doesn't seem sustainable.
*like it or not.
said who?
What relationship are you claiming he had with the firm as I can't really find anything about him and Bridgewater at all.
He kept employees in the dark, in short they are saying he is a hypocrite, and he is a fake social media influencer who says one thing in public and does the opposite in private.
Or rather, wouldn't it be more rational to strive for the line to stay even? Such that we can save all the tumult, the upticks in suicide, the poverty.
I think that is the point. If it crashes it'll inevitably go back up is the expected behavior. It isn't always true, Japanese market is still lower than 1989. Measured in dollars most international markets have gone sideways for 25 years.
This is not even remotely true if you include dividends.
Why is it obviously impossible? It just requires technology to improve at such a rate so that we can extract 10% more value every year from the same amount of labor (minus inflation).
If technology improves by 10%, we can still see a 10% increase in wealth even if labor and natural resources remain steady.
If technology improves by a whole lot, we could theoretically even see an increase in wealth amidst decreasing labor and natural resources.
Nothing against boomers by the way, just stating some random potentially not factual things.
People state this like some law of nature.
https://www.marketplace.org/shows/marketplace-morning-report...
His first is still free.
If you say everything will be fine, we might have a year of adjustments before the markets work this out - well, you won't get your air time on cnbc.
I agree with that retort. It undercuts a "whataboutism" fallacy because its not saying the United States has similar facets to China as a deflection, its about whether an action of an individual is disqualified due to those overlapping realities.
A statement is whataboutism if it introduces irrelevant information in order to assert a moral equivalence. If the question is, "Are you concerned about China's human rights record?" (as distinct from, say, "Which of these countries has the better human rights record?"), then the United States is not the subject and pivoting the conversation over to the United States is whataboutism.
> In a CNBC interview in the fall of 2021, Mr. Dalio dismissed concerns about China’s human rights track record, likening the country’s government to a “strict parent.” (Bridgewater manages billions of dollars for companies partly owned by the Chinese government.)
> “Should I not invest in the United States because of our own human rights leadership?” he asked.
Can you honestly tell me that referring to, say, the genocide of the Uighur people, as merely "strict parenting" is an honest and good faith engagement in the discussion with no elements of deflection and no attempt to minimize and dismiss the problem?
If you have a different view on what he was responding to at all, then I could see why you would say that.
Bridgewater is a publicly traded company which manages public institutional resources and funds.
Why should it continue to pay out to the founder after they've departed? Has Mr. Ray not already received numerous remarkably healthy payouts along the way?
I don't understand how this makes any sense, what am I missing?
Edit: thank you @jmillikin, super helpful.
This makes a tremendous difference. Had not heard of Bridgewater until today.
https://www.google.com/search?q=is+Bridgewater+publicly+trad...
Card:
> Is Bridgewater Associates a public company?
> Bridgewater Associates is a public company headquartered in Connecticut with an estimated 1,500 employees.
F google, got it dead wrong.
> Bridgewater is a publicly traded company
> Why should it continue to pay out to the founder after they've departed?
> Has Mr. Ray not already received numerous remarkably healthy payouts
> along the way?
A public company is one that is publicly traded. In other words anyone can buy shares in it which means you become a part owner.
You can read more here: https://en.wikipedia.org/wiki/Public_company
If this is the case, why did you feel a need to respond here?
You have no clue what you are talking about, but made many wild statements based on "is Bridgewater a public company"?
To borrow a bridgewaterism... Everyone is entitled to an opinion, just some are worth a lot less. (meritocracy)