In one place. Why did you write it . Principles of everything i learned are in the book. I administer age of my life in which im transitioning from the second stage of my life, when one tries to be successful and others are dependent. The third stage of life is watching other people will be successful. Over these years, i have accumulated a bunch of principles to be successful and i wanted to pass them along. They were built at bridgewater and i want to pass them along. Somebody insual for your position, somebody managing investments and running the company of bridgewater, to write a book like this. How did you find the time . I have been writing these down for 20 years. That into a habit recommend to you or anybody else. Whenever i am faced with a decision, i think about the criteria for the decision and i write them down. The same things happen to us over and over again. If i am making mistakes and learning, it is a good exercise. Thetually, i put these into investment process. I have accumulated these. I did not feel good about putting the principles out generally. We got the financial crisis and got attention, some people gave us attention and i didnt want the attention. , thought it was not understood the principles of our company. Hat made them successful a put them on our website and they were downloaded 3 million times. People found them helpful and a time came when i thought i would gather all of these together and i have transitioned from the second phase to the third phase and i wanted to put it out. You can say, how long did it take to write the book . I say, i dont know. It took a lifetime of trial and error. Explanation,s the the higher principles. Ray i was hesitant to write that. I want people to look through the principles and say that they make sense. Host people read your story and find them interesting. They relate to your principles. What do you hope to accomplish . Will forme people their own principles, or principles work for them. Host is that the most important part . Ray the most important part. You have to have things that suit you, that you know, and that you can clearly communicate. What does it mean to be principled . Do you articulate your principles . Are you clear . Are you straight . Can you walk the talk . I hope people will encourage people to be more principled. Im encouraging other people to put up or principles. , but i wouldnames like them to put out the principles. Wouldnt you like to know what albert einsteins principles jobs . Steve if you had everybody right down there principles, wouldnt it be nice . Wouldnt it a nice to have everybodys recipe . Host you talk about systems, processes, as machines. Machines is an unusual word. Why machines . Bodyu think of the human and it is a gorgeous machine. It shows how the have a cause effect relationship and i think cosystem is a machine and i think we can think about how we make the machine work for us. I am talking about reality. There are things you knew to do in order to be successful. Most importantly, you have to know the best decisions and you have to have the kurds to make them. You look at the choices and you have to deal with reality. , itou view it as a machine and helped me. Whatever the term is that you are comfortable with when you realize that it is kind of a machine. Host bridgewater was a Consulting Firm when it was founded. The hedge fund has 1500 employees worldwide and 160 billion in assets. You have been working at this since 1975. How close is bridgewater to being the perfect machine . Ray . perfect is a development. It is a tough question to answer. Know i dont know, halfway there . I dont know how to answer the question. Improve . T is left to how could it be better . Ray it is like dna. Butre vessels for the dna, that continues. It is the next generation and the generation after that. It is causeandeffect relationships. Am not sure. The end of the first generation in bridgewaters lifespan . Ray yes. We are at the end and that is the beauty of it. I have watched the development bobhe people and you have and ray, hundreds of people. Afeel like a parent of 40yearold. Watching that transition is a beautiful thing. Watching them succeed is a beautiful thing. A perpetual motion machine. Host it is nice to hear somebody in your position talking about their company and employees as a family. Bridgewaterat differently and you have been sensitive to those comments and, perhaps, misperceptions. Ay bridgewater is meritocracy in which the goal is to have meaningful work and relationships through route of truthfulness. The idea of meritocracy, the best ideas when. The idea of meaningful work, you are on a mission together. Meaningful relationships, like an extended family, the power of being in it together. Of realize that the reward the relationship is just as great as the success of the business. Doing that with radical truthfulness. You can say what you believe and we can have processes in place and thoughtful disagreements to get past our disagreement. That transparency is the ability for people to see everything so that they dont have secondhand or third hand stories. Companies, at most allooks just ingenuous and the things that go on behind the people dont say what they really think. There is Office Politics and you dont know what the real story is because there is spin. Imagine if you could see everything. To know that people cant talk behind your back so that it is operated on firsthand basis, that is what bridgewater is. Meritocracy. In order to have that, you have to be honest with what is on the table. Most organizations, people are reluctant to be honest. Ok. You have to put honest thoughts able and not be offended. You have to have thoughtful this agreement. You respect the fact that somebody has disagreement and you are curious about that. You, ideally, come up with a better decision. It is not the disagreement is a source of fighting. Disagreement is a source of coming together. The third thing is that you have to get past disagreements, if they remain. They are still going to remain. In order to do that, you have some sort of process. Host there are a lot of things about bridgewater you will not find at other hedge funds. Idea designed to be an meritocracy. Ray i should explain. Host i have an idea. Go ahead. Ray there are two ways of making decisions. There is the boss having control. Autocratic. Or, there is democratic. One man, one vote. The best decisionmaking is believabilityweighted decisionmaking. You think about it and, if you make a decision about a medical condition, you think about who are the best doctors. Consult the experts. This one knows more and that one knows last. You have a triangulation. That is believability decisionmaking. We have ways of assigning believability that we all agree are fair and we assess each other and you get a certain amount of leave ability points. Ofgine of the leave believability points. You have a certain amount of these believability weighted lead you to make a decision. I asked everybody and i take a weighted vote. When i have a weighted vote, i really do believe that it would be a better decision than i would individually make. Believabilityweighted decisionmaking. It is fantastic with independent thinkers. In order to be successful in the ,arkets or as an entrepreneur one has to be an independent thinker that makes decisions better than consensus decisions. The consensus is dilts into the price. Is built into the price. It is beta. To have aynamic is bunch of independent thinkers. How we do that is the key to our success and that is in the book. Gurus who management would applaud many of the practices advocated and explained articulately would also say that the construct is kind of utopian, if you will. You, in the to process of building bridgewater like a social experiment question mark ray experiment . Ray it is practical and the results show it. There is success that bridgewater has had. We have 40 years. This is not utopian. This is realistic. That is why i wrote the book. People can read the its and pieces. Bits and pieces. Is it good to have an idea meritocracy where the best ideas when out . What are the rules of the game . Isnt that better . The best answer is not going to be in your head. One of the great tragedies of mankind is that people have wrong opinions in their head that you could stress test and get to better opinions collectively. They have to have humility. Being wrong. Of because of that, i need andpendent decisionmakers i think this is practical, not utopian. Host much of what you talk about is implicit and explicit critiques of traditional management. What is wrong with the way most companies are run . Ray it is dishonest. It is dysfunctional. Meaning you dont know what the guy is really thinking. Doors goes on behind the and everybody is doing politics. Environment that encourages ownership or ess. Ightforwardn one people dont know what other people are really thinking, what is crazy and what is normal . Is it crazy to be truthful and transparent with each other . Isnt that more efficient and straightforward . Psychological barrier. Say it is because of how the brain is wired and there is a part of our brain. When there is a disagreement, it allows us to think it is a fight rather than a curiosity. It is also how we are raised. Right is of being fromded and learning mistakes doesnt have a place. And you doaminations badly. Life is not like that. Life is a matter of making mistakes and evolving past mistakes. Does nottional Company Value that process. Nobody talks about what people are really like. Why not . Host good question. I think it is a combination of some programming and in the environmental and educational system. Know that they greatest people are the people who make mistakes, learn from evolve. Ow, and i have met remarkable and successful people who have anden through the mistakes the learning comes from mistakes and it makes people more successful. Is key to our success passing along what has been the keys all greatsays that leaders make mistakes and what sets them apart is how they learn from them. He wishes they would write down those lessons. This is his way of showing what he learned while building bridgewater. Musk,ill gates, elon shakers, jeff dorsey. Reed hastings. I admire is mohammed muniz. He is the inventor of social enterprise and he knows how to make businesses out of philanthropy. Vision. These are visionaries who are shakers. It is very difficult in government. Host you met mario draghi. Ray i would put him on the list. Ben bernanke is a hero. The person who stood up at a sacrificed to and do the right thing. The political system has its challenges. Sounds like the unifying thread among these people is, on the one hand, ce and creativity. Role. Verybody has a everybody has their own nature and it takes a team. I like the fact that those people, for the good of whatever, can go from visualization to actualization. I can also tell you that those people with different natures and abilities. Big picture thinker needs a person who pays attention to details. The creative person who is not reliable needs the reliable person who is not creative. Companies got your imagination . Ray other companies would say there are comparisons. Netflix has earned my admiration. Jeff dorsey and twitter come in terms of radical transparency , hashe idea meritocracy earned my admiration. Host used systematized the and you putrocess it to work in financial markets. I do not know anybody who has tried to computerize the management process the way that you have. That youu think it is are out on your own . Ray it will happen. Ilearned that almost anything computerize into making decisions. About a decision and you what is thethink criteria. You write the criteria down and nto yourput it in to a brand neurons. Be decisionmaking can computerized. You deal with people and i realized that that can be in algorithms. Imagine the power of that. , itof that information knows what is happening. You have all of that information and criteria and it can bring to you all of that and it makes the decision. Right now, it works like a gps and that is the best. A computer making decisions like a gps makes a decision and you make better decisions. Will all companies eventually do this . Ray yes. You are not far from being able your smart phone and you can call and get advice on meritocratic decisionmaking by experts. Things are coming together at the same time, radical transparency and out the algorithmic decisionmaking. Data all overg the place. It gives you a profile so that the computer knows you. You take that and you put together with algorithms and they say, how do i deal with them in a way that is better than the human . That is where we are. Host you think about it and the outcome could be frightening. Ray there are good and bad sides to that. Miraculous. Better certainly make , if everybody is making those decisions. Algorithm. Rite an algorithmee on the and the criteria. Host you have built a machine that works for 1500. Otherplicable is it to organizations . Otherapplicable to companies . Governments . Ray it is a category of having idea meritocracy. Host there is that and a systematic way of supporting it. The first. Ve to want should be able to embrace this. The second part is the bigger question. Ray it is the first part that is the bigger question can you be honest with each other and can you accept reality . Host lets say you can. Meritocracy and it is a need for that that led to the development of these tools. You have to have the idea for a way. And you will find a host i get it. It has to be organic. In. Can not drop it ray we are going to give these tools to others. To makeiguring out how that for companies to just pass that along. I would love these tools to be used. Int are you talking about companies . Mentionont want to but there are big companies. Sense. Ive us a ge . Ray Silicon Valley type companies. Valley, buton particularly Silicon Valley. There is a notion that there is a power in crowdsourcing ideaionmaking and it is meritocratic. We have developed so many tools and we are passing that on. Traditional organizations are challenged by that, but i see that in other traditional organizations. I will not mention specific companies. It would not be fair. You see others becoming less traditional and they are using tools and data to understand their people and to help people work together. The question is if they do that transparently and honestly. For ridgell not be water. I dont know exactly what we are going to do. We will get those things out there. Far away are we from seeing the first evidence of that . Ray i think we are pretty close. Host many Successful Companies survive when the founder moves on. Ray wants to make sure that does not happen at bridgewater. You are concerned with succession and the future. You are concerned. Why is it important . Ray if you are not worried, you need to worry. If you are worried, you dont knew to worry. Have been going through a 10 year transition process and it has taken about seven years. Concern is the wrong word. What i am is going from one generation to another. You have people who have worked with all of these people for so many years and it is now theres and it has been trial and error. Post it has been challenging. Ray we knew it would be challenging and it would be naive not to think it was challenging. Owner makes the transition to the next think aboutnd you so Many Organizations and people would tell you that it would be a new experience. To. S like everything idea challengingto be and have problems and mistakes. Host are you there yet . Ray absolutely. Of what we have gone through. 100 sure ofr everything. I couldnt tell you if you would lio, but iith ray da have never been more comfortable. I am not leaving the investment part. Economics. Stments, that is my game. My objective is to not the needed and to watch others be successful without me and i get to play my game and i dont want to be needed and i am not needed. Host how do you know you have the right leadership in place . Fellow ur what happens if one of them leaves . Beauty. T is the there is always back up and duplication and a board that is overlooking this. There are many things in place from him we started the journey and i would say you could company andith any you ask if you have a team. It is probabilities. We have evolved. I think that all organizations go through this, particularly when you found a company and it is important to work out. Host you are still going to be around . Maybe a father bad analogy like a father with the kids. The kids are 40 years old. I am happy to be a mentor. Success is when others do not need me. I know about life and work is in the book and everything i know about economics and investments will be in the next. Nothing ithere is know that is of value that is not in those books. I feel good about this transition. I dont think anybody has paid more attention to transition and been more transparent than we have. Organizations have leaders that are not talking about transition and are not transparent and do not like the rules . I worry about them and not us. Book will next contain the bridgewater investment principles. It sounds like you are going to give away the recipe to kentucky fried chicken. Why do it . Ray these are my economic principles. This is like a 30 minute video i give on how the economic machine works. Basically, most of all of the important things i think are in that video. Host this will be similar. Ray a more complete version. We dont have the precision of the calculations or anything like that. Away you are not giving the algorithm . Ray im giving way to concepts. Host bridgewater was one of the few hedge funds that made money during the crisis and that turned ray into somewhat of a guru. You talk about your dialogue with mario draghi and do you want to do more of that . Ray yes. How good or bad of a job are they doing right now . Large, there is fiscal policy and monetary policy. If we take monetary policy, they have done a remarkable job and we have had a significant beautiful deleveraging. The Debt Service Burden has gone grownnd the economy has and we did not have inflation problems. They did that understanding mechanics and the engineering. Helpfulthat it will be and i think they have done a beautiful job. You look at the shorter term and we have a situation where we dont have too much inflation and too little growth. We dont have a debt bubble. We have something reasonable. This is different. We have a political situation that is difficult and we have a wealth gap and an opportunity obligationsave big coming forward. Careon, health obligations. That will be a burden. A gradual problem. The way those who run monetary policies have done this, it is run well. Politicized. Host that is more favorable than most people who view fiscal policy. Ray you see the hesitancy in me not giving compliments, but the political environment is difficult and politics is dysfunctional. This as a deal with different question. You take individuals and you put them in their jobs and ask how they are doing, all things considered, and that is a problem. You. I think that the political system is a challenging situation. Host if you were advising the president , what would you tell him to do . The most important thing is to understand wh