Thinking About...Hedge Funds

Thirteen summers ago, I packed up my college dorm room only to unpack in another rather Spartan apartment near my graduate school of choice. Meanwhile, the roommate with whom I exchanged goodbyes headed off to Westport, Connecticut to work at a financial company called Bridgewater Associates. We’ve stayed in touch as our lives have developed and as our families have grown. This weekend I picked up the New Yorker and saw an article about Bridgewater. It got me thinking about “the world’s biggest hedge fund” where my college roommate works and its corporate culture.

Radical Transparency

I’ll be the first to admit that the economic theory behind Bridgewater’s model (and even the article’s explanations of it for that matter) is above my pay grade. What intrigued me, however, was the business ethos that founder Ray Dalio has instilled at Bridgewater. He calls it a culture of “radical transparency.” Dalio justifies his insistence on this transparency: “I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.”

Therefore, within Bridgewater’s corporate culture employees’ ideas are constantly and ruthlessly poked and prodded, challenged and confronted (usually, says the New Yorker piece, in the form of older and more senior managers bullying younger associates). The probing, says Dalio, reduces inefficiencies and prevents bad decisions from being made. The purpose is to weed out ego barriers and emotional reactions so that the business will function more like a machine.

Lovers, Not Thinkers

What happens, of course, in this ruthlessly analytical environment is people get hurt. A quarter of Bridgewater hires are gone within two years. Others adapt, make their peace, and learn to live within the culture. Some thrive in it. While no one can argue with the success Bridgewater’s ethos brings to hedge fund annual returns, its effect on human flourishing is questionable. Dalio’s approach demonstrates the failure of an exclusively naturalistic (even mechanistic) view of systems—especially human systems. A business, a family, and a church are not merely machines aimed at efficient outputs, stripped of emotional baggage.

Dalio’s principled approach fails to rightly assess people as not only ‘thinkers’ but also (and even primarily) ‘feelers’ or, as Jamie Smith argues, ‘lovers’: “Human persons are not primarily or for the most part thinkers…Instead, human persons are—fundamentally and primordially—lovers.” This means that in life we as much ‘feel’ our way through life (relying on our gut) as we ‘think’ our way through it. Interestingly enough, certain assessments attribute Bridgewater’s success more to Dalio’s gut-feeling ability to gauge macro-economic trends than to the power of the mechanistic model. As one former employee puts it: “Bridgewater really is Ray. The key decisions they have made—where they have really made their money—is Ray. Most of what really matters is Ray.”

Real Transparency

Equipped with a more soundly Biblical understanding of persons as lovers (not just thinkers), we’re poised to re-evaluate the ideal of transparency on which Dalio puts so much emphasis. Transparency becomes more terrifying because what’s exposed is not just that our minds are wrong and our thinking misdirected, but that our hearts are wrong and our love misdirected. The fix for that problem isn’t better analysis or better substantiated argumentation. The fix is a new heart.

That is why, in the end, it’s only the Church that can cultivate a culture of real, radical transparency, built upon real, radical grace. This is transparency that doesn’t depend on one’s own investment ideas and theories being proved right through vigorous testing, but that depends on Christ’s having been proved right through the ultimate testing of the cross.