CEO David McCormick and Founder Ray Dalio On Phases of Life and Bridgewater’s Leadership Transition

Okay. I'm in the phase of transitioning from the second phase to the third phase. So I guess I'll explain what that means. I think there's basically three big phases in life. The first is when you're dependent on others and you're learning, you're basically going to school, you have parents who are taking care of you and so on. Then in the second phase, you're working and others become dependent on you, and you're trying to be successful. Then in the third phase, you're free. As Joseph Campbell said in his book 'A Hero with a Thousand Faces', you're free to live and free to die. In those transitions between them, they have their own characteristics and they're very different. And they're instinctual. So I feel the desire to transition well, which means I'm no longer motivated by being successful myself as much as I'm excited about helping other people be successful. I just watched with my grandkids 'Empire Strikes Back', and there are the mentors, and that's the joy because they're of a certain age. That's how I feel.

Well, the greatest reward is seeing the people that you care about do well independently of you. So if I think about Bridgewater, I feel like a father of a 45-year-old. I sort of raised Bridgewater to some extent. But what do you want of your 45-year-old? You want them to be good without you. So that notion of 'how can I help? Do you want to go have a beer?' Seeking the advice, doing that, and savoring life. The challenges of that are interesting because the people I'm transitioning with, my sort of extended family, sometimes don't understand that desire of mine. They think that I might want to control, and they don't understand that there's no desire for control. It's instinctual to transition. So one of the challenges is to let them do it their way. Our arrangement is pretty much along the lines of: if you don't want me to do it, I'm not going to do it. But my doing it is going to be my doing it in my way. It's tough love. If we can do that and it's appreciated by both of us, then we can appreciate the relationship. So sometimes there's a little bit of a problem in terms of realizing why is it being done, particularly when my style is to do it with that tough love.

Well, it was evolutionary. I don't know how many years ago, it could be decades ago, not literally but almost, that I wanted to transition. And the challenges of those transitions... I really did want to transition then, and I really did want it sincerely to go well without me. And it didn't go well at first. I have a basic principle: if you haven't done something three times before successfully, don't assume you know how to do it. So we didn't transition, and transitioning's a difficult thing. That didn't work out the first time. Then I had to get back in for a year. I could just as readily ask you the questions as you could ask me the questions. But it was that notion, that sense of responsibility for the family existing at the same time, trying to give as much leeway without worrying that trouble would happen. I think it's probably like the parent who doesn't want to control, they just want the best things for them. And if it's at that stage where it's not clear who the guidance is and who's running the place and is it all gonna be okay, that meant that I had to do it. So it was a transition. When we did that, and then we evolved past that and got to this stage, and I started to see how it's good, and also it's your business not my business, that all became better. Also, certain things evolve. Having a grandson starts to change one's perspective. I could see beyond myself, seeing the grandson made me realize the multi-generation. I know I'm not gonna be here for all that, and I could also see beyond that. And then there was just something natural about it. I think there are phases in life. I don't know how much they're psychological, I don't know how much they're physiological. There was a wonderful book given to me by Barbara, 'Memoirs of Hadrian'. It was about the Emperor Hadrian, and it captured his thinking. There's a naturalness that comes from saying, 'Yeah, you know, winning a battle, I can go in there, I could fight, I could win a battle again. But what am I doing? I'm just putting another battle.' So that's not the best. The best is to evolve beyond it and to help others win the battle. So I think it's the confluence of all of those things that kind of evolves. Gradual would be a better term for it.

Well, for me, my personal objective is to squeeze the most out of life, evolve, and then contribute to evolution, and then pass away. And I realized that I'm not even going to leave a footprint in the sand. I'm totally insignificant. And it won't matter. For me, feeling good about that whole thing, feeling that I evolved the most I could, I squeezed the most life out. And I really do believe I got the most out of life that anybody can get out of life, of all the various things I've gotten. And then I want to make sure that I've contributed the most and then passed along those things that are valued. Those things of value are, I think most importantly, ways of being that work well for me. They don't have to be for others. So those are the kind of principles. When I wrote my book and I wanted to pass it along, I also imagine that my grandson and grandchildren will read it when I'm not around. How you are is the most important thing. It's not the money I'll pass along. I'll pass along the money, I'll pass along other things. But you're born with nothing, you end with nothing, and I didn't have anything. So that notion of, for anybody who wants it, there it is in a book. And then passing it along in the ways that one could pass it along for people to take or leave.

Well, for me, it was mostly honestly like have fun, have an adventure, and do with great people. My friends have always been important, relationships have always been important. So I come back to this meaningful work and meaningful relationships. And then the game was important, and adventure was important to go to places and meet all different people in all different environments. So I had a pull to adventure. And I wanted to do it with people I had a blast with. I didn't have a pull to big money. I never had a pull to big money. I wanted to make sure I had enough money to take care of my family and to be able to be independent. And then I wanted to be creative. I like visualizing things and building them out. I think that's cool. I like that. And I wanted to do that with other people. And then things happen, and one thing leads to another. Even now, I don't look back and look at successful in the way a lot of people think I must be looking at being successful, or even the way they look at me as being successful meaning making a lot of money or whatever. It's been more like I just love the game, and I love the freedom, and I like the exploration of being able to go all over the world with interesting people. Those would be the things that have been my pull. And each step leads to something else. It's kind of like I described in the book: go in the jungle. Imagine yourself at the edge of a jungle. You could be safe on one side of the jungle, or you can go into the jungle to get to the other side to be successful. But because it's risky when you go into the jungle, you take on the risk. All sorts of things can happen in the jungle. So what do you do? For me, I needed to have the best life possible. I couldn't play safe. That was my instinct. And then I go into the jungle. Of course, I have to go into the jungle. That means risk and return. But then I find myself going into the jungle with people I care about, and we're fighting the animals and succeeding. And I find I don't want to get to the other side of the jungle to that success because I'm loving being with them, fighting on that kind of mission. And then I'm evolving past that. So that's what it was like.

No, because while there would be things I learn and change along the way, if I think about that as being part of the process... The surprise, you know, you climb up and then you come to a new world that's a new surprise. Would I have wanted to not climb or would I have wanted to not have the surprise? No, I would have wanted to still climb and have the surprise. So even the falling down and all of that was just all part of the adventure. It's almost like if you could get life perfectly, would you want to have life perfectly? I don't think I would, because it puts everything else in perspective when it's imperfect.

Well, as you said, I started counting it when I was 12. I started a little bit before that, but 12 was when I bought my first stock. The environment at the time was the 60s, a real excitement bubble kind of environment. Through all my years ever since, I've never seen a bubble or an environment in which everybody, every time you got a haircut, the barber was talking stocks. Everybody was talking stocks. So when I would caddy, they were, and I got hooked. I loved the game, and I thought it was going to be a very easy game because you open a newspaper and there are all these stocks, and I just had to pick one that would go up and I would be good. So I thought it was an easy game, and I got hooked on it for a totally stupid reason. I thought a company was cheap, under five dollars per share, and I figured I could buy more shares. That's the only reason I bought it, because it was the only company I heard of for less than five dollars a share. It tripled because it was about to go bankrupt and somebody luckily acquired it, and I was hooked. I figured this is a great way to make money. Anyway, I loved it. So fast forward, I started trading commodities because it was more leverage, I could borrow more money. A friend I went to college with who was older than me traded commodities a little bit, so I did that. That led me, when I was in school, to Harvard Business School. In the summers, I was in the commodities division. Then I graduated in 1973, which was the year of the oil shock, and commodities were hot, and the stock market was down a lot. I was hired as director of commodities at a brokerage firm, a successful brokerage firm that became unsuccessful because of the bear market in stocks. Then I went to Shearson Hayden Stone. That broke. I was very sort of independent and kind of rowdy. I had a boss, and I sort of got drunk on New Year's Eve with the boss, and we were pushing each other around. I decked him, he went down, black eye, totaled his car, his wife chewed him out. He didn't fire me. But anyway, I then found that clients of Shearson liked the advice I would give, and they'd pay me money. I was in a two-bedroom brownstone apartment, my roommate moved out, and I took over the apartment. A guy I played rugby with would help me. I started playing the markets, and the clients would pay me money. I started to do that. And wow, it was free, and I love doing it. I'm very much more of an independent thinker, which you have to be in the markets. Then fast forward.

Yeah, last time I had a boss was something like 27. And then I had the ups and downs, and my big crash in 1981 and 1982, expecting the depression that never came and having to let everybody go and be alone. And then thinking, 'Oh gee, am I going to get a job?' I mean honestly, the horror for me was, 'Am I really going to put on a tie and get on a commuter thing and go to Wall Street and do that?' I don't think that's gonna be. So I pushed through it. But I learned fear of being wrong then. I learned my humility and so on and so forth. And then that changed.

That's it. If I can give it to anybody, I want them to have the audacity, the zest, the adventurousness, coupled with the fear of being wrong. That notion. So the decision-making process, I say decision making is a two-step process: first take in and stress test what you're thinking, and then make your decision with a lot of diversification because you're still going to be wrong even when you do it the best possible way. And that's the key to success: triangulating well with people who will stress test you.

But as soon as you realize that it is in those things together that you've got the power, you genuinely realize it, then you don't want it any other way. It's like the guys who do incredibly risky things. The guy who climbed El Capitan solo, I got to meet him. People who tightrope walk across the Twin Towers, what they learn is to be extraordinarily risk-averse. So you can do anything if you practice and are risk-averse. You can do the riskiest things in the safest way. Once you've got that aligned, that gives you the confidence because the risk-reward trade-off is a bad trade-off otherwise. Either you're not getting the most out of life because it's too risky, or you're crashing and doing things that are intolerably bad. But you can have it both, you can have it all, if you know how to do those things together.

Well, yeah. I think it's like, look, we're partners, right? So if we're partners, how do I want us to be partners? So it goes from one to many, and then trying to extend it to many. So I want to be radically truthful and transparent with you, no BS. That's what it is. If I think it's bad and you think it's bad, it's okay. If we disagree, that's okay. We can hammer it out, and we can get somebody else to judge who's right and who's wrong. We can find a way of getting through it, which is one of those fundamental things I think is necessary for all great relationships. And I believe that if I didn't operate that way as it's growing, for the other person who's just following, that's going to pursue resentments. They can't speak up, they're going to have bad thoughts, and I won't even discuss it with them. They're going to be alienated, they won't get to think for themselves. So what would I want? A bureaucracy that's going to be following me? I'm insecure about being wrong, and besides, they have to be able to fight with me. So it just became the necessity to extend that with scale. That's when radical truthfulness, radical transparency, and writing down principles happened. By being able to tape everything and listen and have everybody listen to it, that radical transparency can mean that there's no spin. And it put me in the position of saying, 'Okay, well, here's why.' So I would take the time, pain plus reflection equals progress. In those circumstances, real circumstances, not the BS kind of things where you make the world like it really isn't. You have to work yourself with doing the right thing and weighing the pros and cons and doing that openly. Discussing it with people required me to write down the principles one by one. So we now have something like 600 tapes of people watching those things in action, so there's no BS. People do it, and that got people engaged. So it was the needing to be that way with each other so that there could be trust, so that they could be on the same mission, so there could be that same understanding. That's how it evolved.

I would get drunk more. I would be more politically incorrect probably. The parties were probably better. I have no doubt about that. But at the core, pretty much the same. Pissing people off in the same way and having them like me in the same way. The family thing, the extended family thing, always the same. I tried to stretch it as far as I could.

Yeah, you're exactly right. 10 years ago, I said I think it'll probably take three years but could take 10 years because if you haven't done something before, don't assume that you know how to do it. You have to assume there'll be mistakes along the way. I hadn't transitioned before. So here we are. Fast forward to today. I feel like I'm the father of a 45-year-old who I want to be really good without me. I am transitioning, and I think we're really in good shape in terms of everybody understanding their responsibilities and what our relationship should be. I don't want to do anything that others don't want me to do. But if they want me to do something to be of help, I'll be of help. That's like the mentor. That's what it should be. And we've made it here. We're lucky to have remarkable people: you, Bob who's been here for 34 years or so, Greg, and so many others. That's the family. But it's now a multi-generation family because there's a generation after them that has grown up and that is the culture. They really are close. This meaningful work and meaningful relationships thing is a reality to them. The idea meritocracy that we can fight these things out, the culture is believed, it's imbued in the way it should be, including get rid of whatever they want. So they know that they own it and that they can innovate and move and abandon anything they want to abandon. But they're good people, meaningful work and meaningful relationships. And then we have to have that same entrepreneurial spirit in this institution. We have to have that same entrepreneurial, creative, bet on yourselves. Don't bet on the institution. Always sort out who is good and who is bad at doing what. It's like a team. I was asked, 'Is Bridgewater a team or a family?' Well, it's got to have elements of both. It's like a family that we love you, but you can become, you have to be cut from the team because it's got to be the most effective part of that team. So that notion of knowing good and bad and being able to thrash it out and do that in an entrepreneurial environment is now up to those people. The success will come from that balance that you talked about. You said it's tough for you to get your kids to know not to be so aggressive but not to be timid, but to simultaneously be smart and be aggressive and then be very fearful of being wrong and to triangulate well so that you can walk that tightrope successfully. Seek out the innovators, seek out what you don't have. That will be the test. I'm seeing that, and I see a lot of that. But that'll be the test. That's the thing I wish I could give most to people.

Yes, that would be the thing. But no, I don't worry more about that than I worried about many things along the way about Bridgewater. But that is the thing, because if you've got what it takes as a team, you can adapt to anything. All I've always wanted to do was have an equal shot at competing. When I started, there were these giant firms and big banks with asset management, and there was just me and my two-bedroom apartment. All I wanted was an opportunity. When you get down to it, whether it was me there or you think of a lot of other entrepreneurs, Steve Jobs or Elon Musk, in each their own way, that ascent is the power that destroys the behemoth successful institution that it's unimaginable can be destroyed. These David and Goliath stories, it is that.

I think I... I wish that somehow I made it easier on other people. I wish that I made it easier on other people. I think I could have made it easier on other people by emphasizing and exploring the things that I did wrong better, and also making clear that whatever they did wrong, it's not them, it's just the evolutionary process. If I was to do it again, I would do it better in that way.

Be audacious and humble at the same time. Love your mistakes. Recognize you're going to make them, and that in them are the learnings if you treat them correctly. Recognize that meaningful work and meaningful relationships are the best things in life. They will make you not only successful but reward you in all ways, not just financially, but reward you in the ways that you can hug each other, you're around the people you want, and you can be on your adventure and your dream together. I think those would be the most important things.

I should stop writing books.