Why Is Ray Dalio One of Time’s Most Influential People?

by Wall Street Job Report on April 19, 2012

Along with financial policeman Preet Bharara, Bridgewater Associates hedge fund king Ray Dalio popped up on Time’s World’s Most Influential People 2012 list.

Here’s what Paul Volcker had to say about him:

For many hedge funds, success is elusive; the larger the fund, the more difficult it is to maintain outstanding performance. Bridgewater’s Ray Dalio, who manages $120 billion in investor money, has defied the odds over a quarter-century.

That in itself may not qualify Ray, 62, to sit among the influential. What matters more is that he has strong and a bit unorthodox convictions about the workings of the economic machine. The judgments that have emerged have been prescient. Ray was, for example, one of the first to recognize the risks of the excessive indebtedness and leveraging of the U.S. and some European economies. I have seen the respect Ray commands and the influence of the Bridgewater research. His strong support for Federal Reserve actions during the financial crisis, considered dangerous by some, is a case in point.

His curious and active mind is reflected in the fact that, while he does have an oceangoing ship, his “yacht” is equipped for deep-sea exploration. At home, Ray and his wife Barbara help make sure that both our national and his family heritage of jazz is well maintained. In other words, it is a full life.

MIT’s and AlphaSimplex Group’s Andrew Lo also made the list:

If Adam Smith had a mind meld with Charles Darwin, Andrew Lo might result. A professor at MIT’s Sloan School of Management, Lo is known for his multidisciplinary approach to finance, using everything from statistical analysis to neuroscience to better understand the markets. One of his most important ideas involves the “adaptive markets” theory.

For a long time, many economists believed in the “rational markets” theory, which posited that all available information was reflected in a stock’s price and investors were rational — and so, therefore, were prices (yeah, right). Lo, 52, believes markets are less like rule-based physics and more like messy biological systems. Market participants aren’t coldly rational creatures but squirmy, evolving species interacting with one another in a primordial sludge of money.

By tracking the data trails left by this Darwinian process, we might be able to get a better picture of how markets really work. The U.S. Treasury buys it; Lo helped set up the new Office of Financial Research, which aims to provide better data and insights about the industry. “Policymakers are always looking for the financial-system equivalent of the MRI,” said Treasury Secretary Tim Geithner at the launch of the OFR last year. Digging in the financial dirt may be the way to get it.

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