Engorged with new money, renewed confidence and one baton, Dalio looked again to change up the crew around him. This time around, he didn’t settle for Wall Street also-rans such as Murray and McCormick. He called Bill Gates, whom Dalio had met in philanthropic circles, and asked for a recommendation. Gates suggested Craig Mundie, Gates’s former deputy at Microsoft. Dalio and Mundie bonded immediately over their love of the sea. Dalio soon hired him as Bridgewater’s new vice-chairman. Mundie swiftly suggested a series of new consultants, among them the retired general Keith Alexander, former director of the National Security Agency. Often impressed by a man in uniform and concerned about prying eyes at Bridgewater, Dalio hired Alexander to take charge of security, at around $4 million per year.

The trio was rounded out by Larry Culp, who had just finished a successful 14-year tenure as CEO of conglomerate Danaher. Culp was brought in as adviser to the Bridgewater management committee, as a try-out for a long-term role.

The new faces wandering the Bridgewater campus represented an enduring paradox there. For all of Dalio’s talk about a grand, systematic structure of management, a person could be hired or fired based on the founder’s whim. Dalio got what he wanted. He was not only the face of the firm, but as had been amply demonstrated over the preceding years—no matter how it was spun publicly—he had veto-proof control over management decisions.

In 2015, inspired by the Chinese system, Dalio sought to recreate parts of it in Connecticut. Without telling clients or the public, he put out a call inside Bridgewater for young staffers who wanted to help reshape the firm in accordance with The Principles – his famed written rules that dictated there was no problem too small to investigate. This plum gig was one sure to provide a chance to impress Dalio. Those who stepped forward were assigned to a dizzying array of new enforcement bodies, with rather unsubtle names. The Principles Captains were those assessed to be the most knowledgeable about Dalio’s manifesto. These Principles Captains were fanned out across the firm and were meant to assess whether individuals were acting in a Principled fashion day-to-day. The Auditors monitored department heads whom Dalio didn’t manage individually. The Overseers had no easily definable responsibilities, save for reporting to Dalio on the goings-on of the other new groups. "The worst thing," said one employee, "is for an Overseer to find a problem before I find it."

The crown jewel of Dalio’s new creations was called the Politburo, its name borrowed from the decision-making body of China’s Communist Party and first coined by Russian Bolsheviks. The roughly two dozen members of Bridgewater’s Politburo were mostly in their 20s or 30s. They were handpicked by Dalio and given vast remits to conduct investigations across the firm. Though theoretically meant to adjudicate disputes, the Politburo often created new ones. The members would barge uninvited into meetings—or listen to recordings afterward—and rate their colleagues. The members caught, and squelched, dissent before it reached Dalio’s desk. It was a dream come true. Now the Bridgewater founder had eyes and ears everywhere.

Bridgewater CEO Greg Jensen, long Dalio’s No. 2 man, watched the sudden growth of these new apparatuses with alarm. They were yet another threat to his future.

With each new Dalio creation, the 40-year-old heir apparent fell further from the ultimate prize. Six years ago Dalio had announced Jensen as his successor, yet the Bridgewater founder was more involved than ever. To the outside world, it seemed that nothing had changed. Jensen was still CEO, and of all the experienced hires brought into the firm, none had lasted as long as him. His ultimate ascension, however, had clearly been diverted. Despite Jensen’s nearly two decades at Dalio’s side, the Bridgewater founder’s new committees represented a weaponization of The Principles— new weapons that only Dalio could effectively wield.

The pressure continued to build on Jensen as 2015 rolled on. Jensen’s computer monitor, which had a real-time view of Bridgewater’s investment performance, showed that after the strong start to the year from the Swiss franc success, the trend line had dipped down. The hedge fund’s manna was slowly being frittered away, a casualty yet again of Dalio’s latest predictions of trouble for the global economy. In March of that year, Dalio told clients he saw parallels to the late days of the Great Depression. "I’d like to remind you of the 1937 analog," he cowrote in a client note that found its way to the media. Stocks then collapsed more than 50% in a single year, Dalio observed, a little-veiled prediction that the same could happen again. It didn’t. Jensen’s monitor showed the effect of Dalio’s dour outlook, which kept the firm’s flagship fund betting persistently pessimistic trades. Bridge- water’s funds bled out slowly as the spring turned into summer, transforming what could have been a banner year into an ordinary one at best.

Dalio stuck to the course. As he told it, danger was in the air. This belief was seemingly confirmed in July, when the Chinese stock market sank, shaving a third of the value off the Shanghai exchange’s main index. The dive, in a country that Dalio thought he knew well, left him shaken. "Our views about China have changed," Dalio cowrote in a new note to clients. "There are now no safe places to invest." He raised the possibility of another D-process. "Even those who haven’t lost money in stocks will be affected psychologically by events, and those effects will have a depressive effect on economic activity." That note, too, made it to the press, where it was picked up broadly as a calamitous sign for Beijing.

Dalio’s remarks were no different from what he’d been saying about the U.S. and other Western economies for decades. In China, however, they were received differently. Criticism of the economy amounted to criticism of the state, and it couldn’t be tolerated from a foreigner—especially one who promoted himself as a well-connected expert on the nation. Representatives from the Chinese agency SAFE and the conglomerate CITIC called up Bridgewater, warning that they were under pressure to distance themselves from the world’s largest hedge fund. Dalio worked the phones, telling high-level government officials in China that he was still a great admirer of the country’s leaders. Bridgewater’s technology team noticed an unusual slowdown in the company’s computer networks and suspected that Chinese hackers might be aiming a cyberattack at the firm in revenge.

It took just a day for Dalio to instruct his public relations team to re- lease a statement backtracking on his earlier note—"While the report to Bridgewater clients is a private communication which they want to continue to try to keep private, Ray Dalio and Bridgewater believe that too much has been made of the shift in their thinking and want to clarify their thinking," it read, in part—but the damage was done. Bridgewater’s comeback year was rapidly headed off track.

The China incident left Dalio visibly shaken and angry. Unable or unwilling to accept that his own words had set off the brouhaha, he ranted in meeting after meeting that the media had ignored his long patronage of China and miscast him as just another trader looking to make a quick buck off a foreign country’s struggles. Dalio began again to refer to himself as an economic doctor and said he was merely offering his reasoned diagnosis, based on the facts. No one at Bridgewater would have dared remind him that a doctor doesn’t bet on the outcome of a patient’s health, as Bridgewater’s funds often did by going long or short on the Chinese yuan.

Around Thanksgiving 2015, Dalio called in his newest high-level hire, Culp, along with the rest of Bridgewater’s top brass, including Jensen, seeking to hear a plan for how Culp would use Dalio’s new set of Principles-based committees to set the firm straight. But Culp delivered a different message altogether: he told Dalio that too many people at Bridgewater had nebulous responsibilities and titles and spent all day listening to tapes of others, looking to spring a trap. Culp told Dalio to slash, not to build. Put one person in charge and give him or her some space. Dalio had been doing the exact opposite for the better part of a decade.

Dalio offered a response for his newest hire: The problem was clearly Culp. Culp was not capable of understanding the advanced nature of Bridgewater’s management system. "You’re not conceptual enough."

Dalio fired Culp, stood up, and left the room.

As the others present silently absorbed the firm’s latest hanging, Culp sat flabbergasted. He’d presented his honest take to a man who claimed to prize frank feedback and had instead been abruptly shown the door.

Culp would later become CEO of General Electric. He has never publicly confirmed that he even worked at Bridgewater, let alone discussed the experience. The hedge fund is not listed on his official General Electric biography, and neither he nor representatives for General Electric responded to requests for comment.

From THE FUND: Ray Dalio, Bridgewater Associates, and the Unraveling of a Wall Street Legend by Rob Copeland. Copyright © 2023 by the author and reprinted by permission of St. Martin’s Publishing Group.