By Sujeet Indap and Mary Childs The group of college seniors had gathered for a relaxed, celebratory dinner. Each of the roughly dozen students had survived a rigorous interview process to earn a coveted job offer from Bridgewater Associates, the wildly successful and wildly iconoclastic hedge fund based in Westport, Connecticut. The dinner was a chance for the new recruits to meet Bridgwater professionals and each other, as they decided whether to accept entry-level positions.Yet despite the variety of schools represented, the Bridgewater team was startled to learn that most of the kids were already acquainted with each other, having already met during their high school days. Two students had competed on the Teen Jeopardy television quiz show. Several others had met during Model United
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By Sujeet Indap and Mary Childs
The group of college seniors had gathered for a relaxed, celebratory dinner. Each of the roughly dozen students had survived a rigorous interview process to earn a coveted job offer from Bridgewater Associates, the wildly successful and wildly iconoclastic hedge fund based in Westport, Connecticut. The dinner was a chance for the new recruits to meet Bridgwater professionals and each other, as they decided whether to accept entry-level positions.
Yet despite the variety of schools represented, the Bridgewater team was startled to learn that most of the kids were already acquainted with each other, having already met during their high school days. Two students had competed on the Teen Jeopardy television quiz show. Several others had met during Model United Nations competitions.
“There was this web of connectivity among this group of students who fit the culture at Bridgewater and we were able to fortuitously tap,” said Robin Levine, a veteran of various management and operational roles at Bridgewater. “We thought, ‘What if we’re able to take the flip side and proactively find students based on the traits of this web?’ ”
Ms Levine, 37, and Jacqueline Loeb, 30, separately left Bridgewater in 2013 and have since together founded an online recruiting company, Scouted, which uses video interviews, written questions, and a machine-learning algorithm to match college seniors and recent graduates with employers seeking young talent.
Ms Levine had been with Bridgewater since 2001 and Ms Loeb since 2008. Both had joined out of Dartmouth College, though Ms Levine left for two years to attend Harvard Business School before returning. They had each served in different operational roles during a time of aggressive growth, when Bridgewater’s assets under management climbed from under $40bn to $150bn and its workforce rose to around 1,500 employees.
For most people in the asset management sector, a career change such as theirs would be unusual. But for those departing Bridgewater, such a gambit may be a natural leap.
The fund attributes its success in part to the blunt internal culture, known as “radical transparency”, evangelised by founder and co-chief investment officer Ray Dalio. In a shake-up last week, Mr Dalio stepped down from the co-CEO post, though he will remain co-CIO. In an example of its trademark directness, the fund said that co-CEO Jon Rubinstein was also departing after less than a year on the job because “they mutually agree that he is not a cultural fit”. (No euphemisms about “spending more time with his family” for Mr Dalio.)
Mr Dalio’s meditations on organizational theory are captured in a voluminous manifesto he has written that is simply titled “Principles”. At last count, the manifesto includes 210 said principles. Perhaps the most curious manifestation of the Bridgewater culture is its practice of recording or videotaping internal meetings and interactions, and widely sharing the videos within the firm as teaching points.
As one Bridgewater alum shared, speaking about why Bridgewater had become an incubator of entrepreneurism: “I wouldn’t have worked at any other hedge fund besides Bridgewater; Ray shaped a culture based on principles, to try to understand how the world works, how do you build an engine to understand the world, markets, talents, and test your ability to apply that understanding and create value. Jacqueline, Robin and a number of other Bridgewater alumni who have become entrepreneurs are highly conceptual, and systematically think about some aspect of how the world works and derive a meaningful opportunity from that.”
The unorthodox atmosphere at the firm has also sparked questions about a possible darker side. A now-departed employee registered a sexual harassment claim against Bridgewater with the Connecticut state human rights commission. The employee stated that Bridgewater was “a cauldron of fear and intimidation”, and that the firm had both discouraged him from pursuing his charges and had retaliated against him. In a related action, the US National Labor Relations Board filed a complaint against Bridgewater that challenged the legality of confidentiality agreements that employees are required to sign when they join.
The employee and Bridgewater ultimately reached a settlement. And in October, the NLRB and Bridgewater reached their own accord on the confidentiality agreement issue. Most of the details of that agreement remain private, at Bridgewater’s request.
Apart from his theories on organizations, Mr Dalio is also becoming known as a media critic, publishing his thoughts on LinkedIn. He took issue with how the New York Times depicted Bridgewater in the newspaper’s reporting on the harassment case, labelling its story a “distortion of reality”. Mr Dalio has condemned the Wall Street Journal‘s December story on the firm’s artificial intelligence initiative for containing “intentional distortions“. And just this week, the New York Times again published another story about Bridgewater’s work environment. Mr Dalio’s response this time was published by the paper.
While Ms Loeb and Ms Levine decline to comment on specific Bridgewater matters, the Scouted marketing materials plainly tout their years of experience there. When asked if the salacious Bridgewater headlines may taint their enterprise, they told us, “The most frequent comments we receive based on our Bridgewater background is that Bridgewater people are known to be smart and analytical, and hopefully that is reinforced when people meet with us!”
Scouted’s philosophy on recruiting explicitly draws on several Bridgewater tenets. The pair organized Scouted on the idea that structured, data-driven thinking is the best way to solve ambiguous problem.
“You have this institutional elitism where the access to talent is systematically skewed,” said Ms Loeb. “For a company, this makes it expensive and inefficient for finding great and diverse talent.”
“It took a lot of time and energy at Bridgewater to find really great talent – and there we were at a firm that had a great brand, cared a lot about young talent, and had almost unlimited resources. Campus recruiting was so offline and fragmented, it was more efficient to find the 100 best kids at Dartmouth, Harvard or Brown than to look more broadly even though Bridgewater didn’t care about where talent came from. They just wanted access to people that fit. But we would still get a lot of econ majors. And that’s fine: econ majors can be great. But how could we find those more creative, lateral thinkers?”
The two say that Bridgewater thought of teams as “collections of values, abilities, and skills”. The conceit of Scouted is to then “nudge” companies into understanding the underlying personal traits a position requires, and also to nudge applicants into understanding what they fundamentally desire in a job and what they can offer an employer. The consequence is that both employers and employees obsess less about superficial factors like the brand name of a school or company and more about the intrinsic fit between a job opportunity and candidate.
“A client will be hiring for a sales role, will say, `I need someone who is really hardworking, and really smart, and a great-problem solver.’ And they give you a laundry list of everything that is important. But if you ask them to force-rank those items, nine times out of ten it is different from where they started. A lot of times the raw horsepower, the intellectual ability, is far second to having high EQ and strong diligent follow-up,” offered Ms Levine.
“A lot of hiring is done through intuition – or at least that’s how many hiring managers make decisions. But often, that intuition is premised on logic. We’re bringing that logic to the forefront of the process and systemizing it to reduce bias and up the odds that you’re hiring the right person. We have about 15-20 core attributes that we’ve derived from a combination of expert research and common sense; we use these as the foundation of our evaluation process. We learned from our Bridgewater experiences that there’s no such thing as a single silver bullet to understand complex systems. We take this lesson, along with elements of portfolio theory, and apply that concept to our assessment algorithm by using multiple indicators to build confidence in our understanding of a candidate.”
The indicators that Scouted is trying to capture, besides the typical cognitive abilities, are subtle characteristics that companies increasingly are seeking. These include grit, tenacity and emotional intelligence.
While it collects traditional data points from CVs and test scores to feed into its algorithm, video interviews are a critical element to initial screening of key applicant attributes. Candidates answer on camera how and why they made a difficult personal decision, or how they would spend an ideal Saturday. In another query that Scouted calls the “Peter Thiel question,” applicants are asked for some principle the candidates believe to be true that few else do.
The data collected are fed into the algorithm that generates not just job matches but also the key strengths and weaknesses of each candidate. (The candidates are also asked to self-rank their traits.)
Scouted then shares the matches with students and employers in batches every few weeks, rather than instantaneously, which it believes leads to more thoughtful decision-making by both sides. Employers also get access to an online dashboard with candidate’s summaries and interview videos.
The result, Ms Levine and Ms Loeb claim, are searches that are six times as effective as traditional recruiting methods — a company can find a new employee among a pool of 15 candidates recommended by Scouted rather than the average of 90 it takes through traditional means according to benchmarks from Jobvite.
Ms Levine and Ms Loeb have so far relied upon their savings to fund Scouted. But they now have recently closed a “pre-seed” fundraising round from early-stage investors as well as individuals from their Bridgewater network.
Ultimately, Scouted is attempting to connect candidates and companies that otherwise would not have found each other. One success story is Samantha H, who, after graduating from a large, public university in the Midwest, worked for three years at a large well-known asset manager in New York. But she grew out of that position and wanted a more entrepreneurial job. After little traction through traditional channels, she turned to Scouted—which she found through a friend who had himself found a job through Scouted—and eventually landed a general management position at a fashion start-up.
“After three years in finance and wanting to move out to a start-up, I had a really hard time getting connected,” Samantha said. “Coming from a large financial institution, it just wasn’t that easy. The job I’m at now I never even thought there was a way for me to get here. Getting asked questions by Scouted that went beyond just my resume is a really big difference”.
Scouted so far has placed about 130 positions. Their clients so far are typically private equity firms and hedge funds as well as buzzy startups like Casper, Oscar (co-founded by a Bridgewater alum), and Code Academy. Like any matching service, there are more sellers than buyers with Scouted currently having 2,500 active candidates
The company is now up to six full-time employees with its most recent hire, a marketing executive from LinkedIn.
So far, the company’s challenges with large employers have been their risk aversion and inertia. “We are still at a nascent stage having only placed candidates for a year. There are a lot of big companies that buy in at the conceptual level, but want someone else to take the first bullet. Plus there is still an emotional attachment to keeping recruiting at alma maters”, says Ms Levine.
Even companies that have embraced innovation are still trying to balance old and new hiring methodologies.
“There’s no one tool we’re looking to put into play that’s going to make a hiring decision for us,” says Mike Desmarais, head of global recruiting at Goldman Sachs, which has been early adopter of video interviews, hackathons, and machine-learning that it blends with traditional human evaluation.
Like online dating, the marketplace is crowded with software companies searching for the most efficient way to link applicants and open positions. Planted and Wayup represent two well-known start-up competitors of Scouted. For any of these upstarts to stand out and prosper, they will need large companies to migrate their traditional methods to new, technological-based ones. While Scouted is currently fulfilling ad hoc searches, it wants to be hired as a recurring Software-as-a-service (SaaS) vendor embedded in companies’ talent departments.
But big business can be both slow to embrace change and also have the resources to build their own in-house recruiting products tailored to their own preferences. Wall Street investment banks demonstrate this hybrid approach. Goldman Sachs now conducts all first-round interviews through video using an outside vendor, HireVue. Deutsche Bank has an online behavioural test run by the vendor Koru.
The social network
A key element of Scouted’s successful placements so-far has been the deep involvement of the founders in candidate searches along with their reliance on the Bridgewater network. One of the interesting things we learned was how many non-investing start-ups have been spawned from Bridgewater. These included:
- Entrypoint VR(virtual reality)
- Incandescent(management consulting)
- Climb Credit(online student loans)
- Talentism– (management consulting)
- Clara– (online mortgages)
- Imagen Technologies(Healthcare AI)
- Domino Data Lab– (analytics)
- Hubble– (contact lens)
- Hillflint– (hipster college sweaters)
One Bridgewater alum, Ben Spector, explained why his firm Atalaya Capital has hired multiple junior investment professionals through Scouted.
“Scouted really seems to spend time on what makes people good at the job over time: what are the important strengths that you don’t learn in a week, or learn in two weeks, but that are the things that differentiate people over a year, or two, or three,” said Ben Spector, who has hired multiple junior investment professionals at private credit fund Atalaya Capital and who was a colleague of the founders at Bridgewater.
Those are the traits, he said, “that make people successful much more than ‘can you build a DCF model in Excel,’ which can be taught in three weeks”.
While the intense involvement of Ms Levine and Ms Loeb has been instrumental in Scouted’s early successes, the question has become whether the algorithm is powerful enough for Scouted to become more than a niche headhunting service.
“When you’re young, often your own limiting factor is not your inherent capabilities, but your understanding of how you navigate that world,” Ms Loeb said. “So we’re trying to better equip our candidates so they understand how to put their best foot forward. We’re almost like a translating engine: how do we communicate a candidate’s story to a company in a way a company can digest it in their language? How do we communicate that company to a candidate so a candidate can digest it in their language? We want to use technology where it makes sense and use people where it makes sense.”
“This is really hard to do well and hard to copy. If it was easy to do, if we could perfectly replicate ourselves within a year, then everyone would be doing it already. Where we are now, is that in the last year we have built out the technology so that the culling and matching is done by the algorithm and humans are only needed to check the results”.
The algorithm can now process and match 240 candidates in 24 hours. Initially it took the pair three months to process 80 candidates manually.
Still, Ms Levine says, “Talking to candidates at the decision phase is one of the points where human interaction has a high ROI”.
It’s also in those interactions where Bridgewater’s “radical transparency” seems to manifest itself the most.
“For every job posting, we’ll have why Scouted thinks this job is awesome, and we’ll be very honest. We’ll say, ‘look this is a finance job, but if you’re a spreadsheet junkie and you want to spend all of your time in front of a computer crunching numbers, this is not the job for you. This position is about relationship management and this is about people. If that’s your jam, go for it.’”