• I'm the host of Business Insider's podcast "This Is Success," where I talk to people at the top of their industries about their careers.
• This year I interviewed fashion designer Alexander Wang, New York Stock Exchange president Stacey Cunningham, Bridgewater Associates founder Ray Dalio, Blackstone cofounder and CEO Stephen Schwarzman, "The Simpsons" star Yeardley Smith, and the late Oracle CEO Mark Hurd.
• A common theme was that even the most successful people have major setbacks and doubt their abilities, but remain persistent and both seek out help and give it to others.
• Click here for more BI Prime stories

As the host of Business Insider's podcast "This Is Success," I've had the opportunity to interview people who, if they're not already at the top of their industry, are shaking it up. And after about an hour of discussing their careers, I'll often walk away with an insight that I adapt into my own life.

This year, I spoke a celebrity fashion designer, voice actor, and some of the most influential people in business.

As 2019 comes to a close, I've collected my favorite lessons from each of the interviews.

SEE ALSO: The best books of 2019 on how we can rethink today's capitalism and improve the economy

Fashion designer Alexander Wang explained to me the importance of setting priorities to avoid burnout.

Alexander Wang started his label as a 20-year-old college dropout 15 years ago, and built it into one of the hottest in the industry, with fans like pop culture icon Kim Kardashian and supermodel Bella Hadid.

And so when Balenciaga announced in 2015 that Wang would no longer be their creative director, after just a three-year stint, it shocked the fashion world. Wang opened up about the experience in the podcast, saying that he had put himself into an unsustainable position. He had two full-time jobs, running his own label in New York and leading creative for Balenciaga in Paris.

"I would fly red-eye Sunday night, arrive in Paris, 8 a.m., go back to the hotel to change, get to work at like 9:30, work all day until like 9 p.m. — all week to Friday, and then take the red-eye back to New York and spend the weekend in New York," Wang said. He did that two weeks a month for three years, and during this period he also had a collaboration with H&M.

It got to a point where he had become so exhausted that he began to disconnect from his work, even though the Balenciaga role was otherwise a dream job. He decided that he had always cared more about his own label, and so it was a mutual decision that he leave Balenciaga to focus on building his own business. He said he was grateful for the experience, which taught him the importance of being honest with himself about what he wanted from life, and realizing that there is such thing as burnout

"At the end," he told us, "I want to know... when I look back after however many years, that I have a brand that I feel ownership over."

Read and listen to the full interview here »

NYSE president Stacey Cunningham told me there is value in every stage of your career, even the interludes.

Since becoming the head of the New York Stock Exchange, the largest exchange in the world, Cunningham has led an overhaul of the technology powering NYSE with the goal of maintaining its No. 1 spot.

She told us that she approaches her job today by utilizing different "lenses" she's accumulated over her career — most of which has been spent on the floor of the NYSE — which has included time as a trader, salesperson, and executive. She's even found value in her brief stint at culinary school.

"I decided in 2005 that it was time for me to move on, despite the fact that I love the trading floor and I still loved being there," Cunningham told us. "It just felt like it was the right moment and time for me to move on," noting that she was unhappy with how it felt like the NYSE was lagging behind in technology adoption. She decided to take a year off and go to culinary school.

"I wasn't sure what I wanted to do next and it gave me a little bit of time to take a step back, collect my thoughts, and decide what the next steps were for me and it did feel as if finance was the right place for me to be," she said.

Cunningham explained that she's not someone who maps out every move in her career, but heads to where she can be of most value. When it was time to head back to NYSE, she was going to help it address what made her leave it in the first place, and double down on tech.

Read and listen to the full interview here »

Bridgewater Associates founder and co-CIO Ray Dalio detailed the importance of being transparent with his team, in a productive way.

Ray Dalio started Bridgewater Associates out of his apartment in 1975 and went on to turn it into one of the largest and most successful hedge funds in history. Bridgewater is as known today for its long-term ability to beat the market as it is for its unusual culture of "radical transparency," where employees rate each other's performance in real time and most meetings are recorded.

But before he became a giant in his industry, Dalio had to figure out how to be a leader. By 1993, he was convinced that unfiltered truth should be the foundation for his office culture — but not everyone was on board. One day that winter, three senior executives called a meeting with Dalio and sent him a memo ahead of it. They said that while they thought he was great at his job, he was also, frankly, a jerk. They told him his words and behavior made employees feel "incompetent, unnecessary, humiliated, overwhelmed, belittled, oppressed, or otherwise bad."

He felt terrible, and wanted to find a balance between honesty and civility. He decided that transparency was key, but that he was going to set ground rules for how to handle disagreements or other points of contention, so that everyone was on the same page and did not have to let fights tear apart the company.

"When you're not getting along with somebody or you're having a disagreement, stop, put that aside for a moment, go to a higher level, and then say, 'How should we be with each other? What are our ground rules for operating, and why?'" Dalio told us. "Then go back into your disagreement, and follow those protocols about how you should be with each other."

Read and listen to the full interview here »

Blackstone cofounder and CEO Stephen Schwarzman showed me that when you want change to happen, you can't wait for others.

Schwarzman has never been afraid to speak his mind or move forward with his plan, well before he built Blackstone into one of the most influential investment firms in the world.

The most extreme example of this was when he was the head of mergers and acquisitions at Lehman Brothers in 1984, he helped lead a coup against the CEO. At that point, the board had lost faith in their CEO and were considering next moves. Schwarzman may not have been a board member, but he decided to take it upon himself and he asked a senior partner for permission to sell the firm. His plan worked, and the firm sold to American Express and the CEO was kicked out.

This approach has carried him throughout his life. When he was a student at Harvard Business School, for example, he met with the dean of the school and told him why he felt the curriculum needed to be updated. Whenever he wanted to meet with someone influential, he approached them without hesitation.

Schwarzman told us he's never considered himself arrogant, but felt that not only should he seek out advice from other people, he should give it, as well. "The biggest problem people in that position have is they don't have accurate and constant information, because sometimes people don't want to get them angry. I just give them information and usually some kind of solution. I think I'm doing a service. I don't think I'm doing anything odd."

Read and listen to the full interview here »

The late Oracle CEO Mark Hurd told me about the importance of becoming a mentor.

Oracle CEO Mark Hurd died in October, after taking a leave of absence for health reasons in September. We had an in-depth interview with him early this year, where we discussed his time at Oracle during a tumultuous period for the IT industry. He told us that one of the biggest things he wanted to impart at Oracle was a culture of mentorship.

He said that when he was coming up early in his career at the IT company NCR Corporation, "it was just an unspoken value in the company that if you could sit around and brag about all the great people you developed in the company who are now in senior positions, this was a merit badge. This was something you wore on your sleeve."

Hurd explained that over time, a culture of investing in your employees turned to one where employees were seen as mercenary hires. He wanted to reverse that trend, because when it's executed correctly, senior and junior members can learn from each other rather than senior employees seeing junior ones as either a roadblock or a nameless assistant.

Read and listen to the full interview here »

"The Simpsons" star Yeardley Smith taught me that while it's good to have big goals, they should not prevent me from appreciating what I already have.

Smith is the voice of the beloved character Lisa Simpson, and has been instrumental in making "The Simpsons" the longest running prime time show in American history, currently at 31 seasons. But for years, Smith didn't appreciate her success — she even kept her voice-acting Emmy from 1992 in a closet for a decade.

As a kid, she had dreams of being a Hollywood star, and right out of high school she was able to land a job on Broadway, an agent, and more acting roles into her 20s. When she got a voice acting gig for the variety show short that would become "The Simpsons," it seemed like a fun but temporary gig. And when that show would grow into a phenomenon, she was still able to enjoy the work while feeling like a failure.

"Part of being a control freak and also suffering from perfectionism is that you attach to these very rigid rules of what your success should look like, so it doesn't allow for what your success actually looks like," she said. "And if you can't bend like a reed in the river, then you become quite brittle, and two things happen."

At this point in her career, she's embraced what she's accomplished and tries new things not to fulfill a childhood dream but because she thinks it will be fun, whether that's starting a podcast or writing a children's book.

She told us she wants her internal struggle to serve as an example. "I only tell that story as a cautionary tale, not for anybody to feel sorry for me, but if there's anybody out there who's even thinking that they would go down that road, please, please, please don't, because you'll miss so much," she added.

Read and listen to the full interview here »

• If you're starting a business in 2020, one of the best ways to learn the ins and outs of entrepreneurship is to read advice from those who have gone before you.
  
• We asked founders, business owners, and executives which books they recommend to anyone starting a business. 
• "The E-Myth" by Michael E. Gerber is one of the most frequently mentioned business books.
• Tim Ferriss, the angel investor and New York Times best-selling author of "The 4-Hour Workweek," is a popular author among entrepreneurs.
• Click here for more BI Prime content.

If you're starting a business in 2020, one of the best ways to learn the ins and outs of entrepreneurship is to read advice from those who have gone before you. 

Whether you need to know how to pitch, get funding, or create an effective company culture, there's a book written by experts who have spent much of their lives helping businesses thrive. To find the best reads out there, we asked founders, business owners, and executives which books they recommend to anyone starting a business.

One of the most frequently mentioned books is "The E-Myth" by Michael E. Gerber, which was originally published in 1986 but remains a timeless staple in business literature. Tim Ferriss, the angel investor and New York Times best-selling author of "The 4-Hour Workweek," is also a popular author among entrepreneurs.

Here are 15 books to read if you're launching a company, want to hone your leadership skills, or need help reaching the next milestone of your business.

SEE ALSO: Successful founders match their funding to their revenue. Here are 12 options to consider, from early days to venture.

DON'T MISS: A Mastercard exec gives 6 signals she looks for in a killer business pitch and the questions she asks that often catch entrepreneurs off guard

'The E-Myth: Why Most Small Businesses Don't Work and What To Do About It' by Michael E. Gerber

Though it was originally published in 1986, the New York Times best seller "The E-Myth" is one book you'll hear about frequently in today's entrepreneurial world. Its relevance withstands economic changes, thanks to Gerber's expertise in business consulting — Inc. magazine has called him the No. 1 small-business guru.

Ginger Siegel, the North America small-business lead at Mastercard, recommends the book for teaching entrepreneurs that there is more to business than pursuing a passion — in fact, understanding numbers and spreadsheets is very necessary. "Even if you went into the business and love baking cookies or love consulting, you have to know the other side," she told Business Insider. 

Ken Lineberger, the cofounder and CEO of Waters Edge Wineries, a winery franchise based in California, said the book is eye-opening for both new and veteran business owners. "It really changes your paradigm about how you see your role in the business as an owner and how you see your employees," he said. 

Buy the book on Amazon

'Profitable Partnerships: Improve Your Franchise Relationships and Change Your Life' by Greg Nathan

As the CEO of a franchise business, Lineberger said it's common for franchisees to rely heavily on corporate leadership during startup, but once they are running smoothly, they stop seeing value in the relationship. "It doesn't matter if you're McDonald's or Subway or Water's Edge, you go through this evolution as a franchisee where you can start to resent the corporate mothership if you don't get back on track," he said.

That's why he makes "Profitable Partnerships" required reading for all of his franchisees. "I want them to know how to correct it and how do you value the relationship from both sides of it," he said.

Buy the book on Amazon

'The 4-Hour Workweek' by Tim Ferriss

Ferriss' book is a popular choice in self-help, particularly for career success and time management. He puts practicality behind the saying, "Work smarter, not harder," by explaining how he cut his hours from 80 to four per week and earned more money.

Daina Trout, the cofounder and CEO of Health-Ade Kombucha, said the book showed her that the higher up you get in a business, the better it does. It helped her "to push away from being a technician and into a manager, and then to push away from being a manager to a leader," she said.

Buy the book on Amazon

'Shoe Dog: A Memoir by the Creator of Nike' by Phil Knight

Another book recommended by Trout is "Shoe Dog," which tells the story of Nike's creator, Phil Knight, who was CEO of the company from 1964 to 2004.

After he graduated business school, Knight borrowed money from his father to sell shoes out of the trunk of his car. His success in building a company with a market capitalization of more than $125 billion set a precedent for startups, sneaker culture, and brand power. 

Buy the book on Amazon

'This Is Marketing: You Can't Be Seen Until You Learn To See' by Seth Gordon

Adii Pienaar, the vice president of the marketing company CM Commerce, said he found this book fascinating because it explains marketing in terms of finding like-minded people. "It really gets into storytelling and how to think about building a brand in a business and not necessarily trying to be everything for everyone," he said.

Buy the book on Amazon

'The Tipping Point: How Little Things Can Make a Big Difference' by Malcolm Gladwell

Though Gladwell's "The Tipping Point" has been around for 20 years, Angela Wator, the owner of the party-supply store Bash Party Goods, said the concepts felt especially relevant today. "I've read it a few times, and I find it really helpful in marketing to millennials and also analyzing my business growth," she said. 

Buy the book on Amazon

'Start With Why: How Great Leaders Inspire Everyone To Take Action' by Simon Sinek

Simon Sinek is known for having one of the most popular TEDx Talks of all time, with more than 47 million views on Ted.com. His message on leadership is based on his book "Start With Why," which says people won't buy into a product until they understand the "why" behind it.

Jessica Morelli, the owner of Palermo Body skin-care brand, found this book helpful for her business. "It shows that all humans really want is connection and to be understood. If you approach business in the same way, and find how to connect with your customers, you'll end up being a heck of a lot more successful than the gimmicks that trap so many businesses from next-level success," she said. 

Buy the book on Amazon

'Business Plans for Dummies' by Paul Tiffany and Steven D. Peterson

Before starting her Cleveland bakery, Colossal Cupcakes, Kelly Kandah read "Business Plans for Dummies" to write her first business plan. She didn't go to business school, so the book made the concepts easy to understand, and she recommends it to any first-timers, regardless of experience or degrees. "It helped me know if I was able to afford my location, and it put everything in front of me that I was probably unaware of or afraid to even look at," she said. 

Buy the book on Amazon

'Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers' by Tim Ferriss

Matthew Cummings is the owner of Pretentious Glass Co. and Pretentious Beer Co., a glassware company and a beer brewery in Knoxville, Tennessee, respectively. As a self-proclaimed recovering workaholic, he said the content and approach in "Tools of Titans" were refreshing.

"This book really pushed me to dive deeply into entrepreneurial self-education and was one of the first times in my adult life I started to think about my own self-care," he said. 

Buy the book on Amazon 

'Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!' by Robert T. Kiyosaki

Mark Stallings is the CEO of Casely, an e-commerce company that sells fashionable phone cases, which he cofounded with his sister Emily. Before starting Casely, 17-year-old Stallings operated a small eBay business out of his bedroom. That's when he read "Rich Dad Poor Dad," which helped him think differently about business and investing. "I always knew I did not want to take the traditional path that most people follow, and this helped me feel confident that I was not making a mistake," he said. 

Buy the book on Amazon 

'The Effective Executive: The Definitive Guide to Getting the Right Things Done' by Peter F. Drucker

Mark Stallings read "The Effective Executive" in early 2019, when Casely was gaining traction. As an introvert, he said leadership has always been daunting. The book changed his mindset and taught him that "effectiveness can be learned and must be earned." 

"There may be some individuals better suited for leadership roles, but to be an effective manager, you need to develop the skill of effectiveness," he said. 

Buy the book on Amazon

'Steal Like an Artist: 10 Things Nobody Told You About Being Creative' by Austin Kleon

Before she became the lead designer and cofounder of Casely, Emily Stallings loved taking on creative projects in her spare time. But she was never formally trained in graphic design or art. She said "Steal Like an Artist" was transformational for her creative confidence.

"Creative ideas don't just come out of nowhere, you need to seek them out. After reading this book, I couldn't stop coming up with case-design ideas," she said. 

Buy the book on Amazon 

'Principles: Life and Work' by Ray Dalio

"Principles" is a compilation of advice from the most successful hedge-fund founder, Dalio. Emily Stallings had a friend who worked at Bridgewater and recommended the book to her. "I found his principles to be harsh but very honest and full of important lessons," she said. 

Stallings found one principle in the book particularly influential in the way she and her brother approach their roles at Casely. "Everybody has their strengths and their weaknesses in the workplace — and it's important to identify them and use people efficiently," she said. 

The cofounders identified their unique strengths and compartmentalized the tasks best suited to those strengths. "Often what I was bad at, Mark was able to take the lead on and vice versa. And when neither of us were proficient, we looked to outsource or hire someone who would be better suited for the job," she said. 

Buy the book on Amazon 

'Clockwork: Design Your Business To Run Itself' by Mike Michalowicz

Deidre Mathis is the owner of Wanderstay hostel in Houston. On top of running her business, she's an avid reader. "I have 15 books on queue," she said. One of her favorite books, "Clockwork," gives advice to entrepreneurs who feel bogged down by daily tasks and shows them how to manage their businesses more effectively so they have more free time. 

Buy the book on Amazon  

'Leadership 101: What Every Leader Needs to Know' by John C. Maxwell

Mathis has won 12 pitch competitions, raking in a total of $75,000 to help fund her hostel. Her leadership presence, defined by the way she knows every detail of her business, is one of the traits that helped her stand out in these competitions. 

For entrepreneurs who want to learn how to lead and pitch successfully, she recommends reading "Leadership 101," written by the leadership speaker, writer, and coach Maxwell. 

Buy the book on Amazon

• Bridgewater Associates Pure Alpha strategy barely gained in 2019, Institutional Investor reported Tuesday, citing an investor in the funds. The S&P 500 rose 29% in the same timeframe. 
• The Pure Alpha 18 Percent fund fell 0.5% in 2019 and the Pure Alpha 12 Percent fund gained 0.5% during the same timeframe, according to the report. 
• It's a disappointing reversal in performance for the fund, which gained nearly 15% in 2018 while most funds fell, according to Institutional Investor.
• Read more on Business Insider.

Ray Dalio's Bridgewater Associates, the world's largest hedge fund, struggled to make meaningful gains in 2019 even as the S&P 500 soared.  

The firm's flagship strategy, called Pure Alpha, barely gained in 2019, Institutional Investor reported Tuesday, citing an investor in the funds. The Pure Alpha 18 Percent fund fell 0.5% for the year while the Pure Alpha 12 Percent fund gained 0.5% during the same timeframe, according to the report. 

The flat performance is a big miss for Bridgewater, as the S&P 500 gained 29% in 2019. It's also a disappointing reversal in the fund's returns from the previous year — in 2018, the Pure Alpha strategy gained nearly 15% while most funds fell, according to the report. 

But that performance didn't carry over into 2019. By August, the Pure Alpha fund had fallen as much as 6%, fueled by bearish bets on global interest rates, according to Bloomberg. The underperformance sparked outflows from some wealthy clients in Singapore, Bloomberg reported in December. 

Bridgewater's other funds fared better than Pure Alpha in 2019 — the All Weather fund returned 16%, and the All Weather China fund returned 20.1%, according to Institutional Investor. The firm manages more than $160 billion in assets for roughly 350 institutional investors, according to the its website. 

Other hedge funds also struggled in 2019. The Horseman Global Fund, run by contrarian Russell Clark, shed 35% during the year betting against the stock market. In addition, more hedge funds closed than opened in 2019 for the fifth year in a row.

Join the conversation about this story »

NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

• Ray Dalio is the billionaire founder of the world's largest hedge fund, Bridgewater Associates. Last year he proclaimed that American capitalism had to be reformed. 
• Now he tells Business Insider that people are misinterpreting that as a call for wealth redistribution, rather than for increasing the nation's productivity.
• Productivity, or how efficiently a country is using capital and labor to create value, has been on a decline in America since 2004, and has been especially low since the financial crisis.
• He told Business Insider that the US is headed in five years to an economic and social disaster on the scale of the era that saw the Great Depression and WWII unless it is able to take a bipartisan approach to reducing dangerously high inequality. He estimated there was a 30% chance of it happening.
• To him, reforming capitalism means refocusing policymaking and financial regulation toward increasing productivity rather than short-term benefits. 
• This article is part of BI's project "The 2010s: Toward a Better Capitalism."
• The Better Capitalism series tracks the ways companies and individuals are rethinking the economy and role of business in society.
• Visit BI Prime for more stories.

Ray Dalio sounded frustrated. He didn't want to debate policies, he didn't want to discuss presidential candidates. He wanted to focus on the priority no one was talking about.

I had called Dalio — the billionaire founder of Bridgewater Associates, the world's largest hedge fund — to get an update on his call to "reform capitalism" in America from last year, and his desire that the country's leadership declare inequality in the country a "national emergency." In the nine months since, the idea of rethinking capitalism had broken into the business mainstream, with advocates like the Business Roundtable, under JPMorgan Chase's Jamie Dimon, and CEOs like Salesforce's Marc Benioff saying that we needed to move away from shareholder primacy.

I went in wanting to see what he thought of these developments, as well as issues that Democratic frontrunners like Senators Bernie Sanders and Elizabeth Warren have been championing. When I asked what he thought about increasing wage inequality over the last four decades, Dalio jumped in. "You keep focusing on measures of inequality, as though those themselves…," he said, trailing off. "To me, the question is merely how from an engineering point of view, how to increase the size of the pie and divide it well." To be clear, he's written extensively about measures of inequality, and he's gone on the record about tax and healthcare reform. He emphasized that he wasn't going to make policy proposals on subjects he wasn't an expert in, but that, "If it increases the size of the pie and divides it well, I'm all for it." 

That message became his refrain for our phone call and follow-up emails: The economy's wealth and opportunities can be divided better, but it must above all else be grown to further benefit Americans over the long-term. 

And it reflected his point that over the past year, virtually everyone has been missing the most important metric: productivity, the measure of how efficiently a country is using labor and capital to create value. When workers are equipped with job-relevant skills, companies are innovating, and industries are growing, more products and services are created with more efficiency, and standards of living rise.

And yet: The United States' productivity has been on the decline since 2004, and has been low since the Great Recession. From 1990-2008, productivity rose annually an average of 2.32%, compared to 0.9% from 2010-2018. 

When Dalio talks about reforming capitalism, he's talking about any policies and regulations optimized to reversing this trend.

What it means to fix the system

Since the financial crisis, Dalio has been studying other debt crises, the rise and fall of great powers, populism, and polarization. He told me that he's giving the US five years before economic and social upheaval, akin to what it saw during the lead-up to WWII in the 1930s, hits it. He thinks it's an inevitability if the US either stays the course or takes a sharp turn left.

That's not to say he's opposing any liberal reform. Last year, in a "60 Minutes" interview, he said that "of course" rich Americans should be paying more taxes, but in our call he clarified that he is wary of any talk from the left that equates significant tax hikes with a solution, by default, to inequality.

"Let me be clear about something. Redistributing the wealth ain't going to do it. Because wealth doesn't last," he said, referring to the depreciation of assets. 

He's taking a basic free market macroeconomic approach here. If we took the current economy we have, he's arguing, and redistributed the wealth to reduce inequality, we would have different sized slices of the pie, but it would still be a lousy dessert. That said, if we continue on the current path, of relatively low taxes on the wealthy and corporations, that hasn't been helping, either. He wants policies that will allocate resources to improving our workforce and stimulating innovation, for the purpose of raising the quality of life for the least wealthy Americans (which could be done through new policies, as well). If raising taxes on the rich is done to fund such a policy, that's great.

Dalio sees everything in life, from nations' economies to person-to-person interactions, as composed of systems. These systems produce patterns that usually repeat, regardless of context. If you can recognize these patterns, you can then respond in the way that historically has yielded the best result. This is the approach that Dalio made famous at Bridgewater, from its investing algorithms to its work culture of "radical transparency" assisted by proprietary iPad apps. 

So, when a decade of economic and historical research is telling him that low productivity, drastic inequality, and polarity fueled by populism will lead to an upheaval of society that will hurt both our economy and social fabric, he's discouraged when others aren't on the same page. Or, that to some critics, he, as an investor with a net worth that Forbes puts at $18.7 billion, shouldn't be offering prescriptions to America's ailments. 

We've begun to demonize each other, he said, "And because of good and evil, 'billionaires are evil.' It's not like we could sit down together and figure out what's best."

He desperately wants Americans to turn to moderate leadership and keep productivity as their North Star.

It's all about productivity

In his LinkedIn essay about reforming capitalism that accompanied his "60 Minutes" appearance, Dalio included charts showing the ways that wages have remained stagnant for the bottom 60% of Americans since 1980 while the wages for the top 40% of earners have increased, how the percentage of young people making more than their parents has sharply decreased over that time, and that the income shares of the 1% and 90% are at 1930 levels. All of that means that even when unemployment is low and the stock market is doing well, as they are now, the winners have been those who have been doing well for the past decade.

Due to a variety of factors, like automation and moving jobs overseas, productivity has lagged, and its tied to the symptoms described above.

A 2017 McKinsey report noted that starting in 2004, labor productivity fell from growing at an average pace of 2.1% annually to 1.2% over the next decade. There was a "brief spike" during recovery from the recession, but the rate since 2011 has been only 0.6%. 

Dalio thinks there are multiple ways to reverse this, including a coordination of monetary and fiscal policy, as well as increased taxes. But redistribution will not be effective unless productivity is also invested in. 

"Keep in mind that we 'eat our productivity,' meaning that what we consume is what we produce," he said. "And what we have,  i.e. our wealth, won't last long, so we have to constantly be mindful about making our productivity greater, which is not what I'm seeing."

The country must invest in education

Dalio considers education "the most important example" of how to raise productivity.

As Dalio became more interested in how America's economic health fit into the wide expanse of history following the financial crisis, he became increasingly fascinated with empires' life cycles, and became a big fan of historian Paul Kennedy's 1987 book, "The Rise and Fall of the Great Powers." He undertook a research project into the subject, considering eight measures: education, technology, output, share of world trade, military, strength of the financial sector, and reserve currency status.

"Education is the best leading indicator of an empire rising. And its deterioration is the best leading indicator of a society declining," he said. American students currently test in the bottom 15% of the developed world.

It's why Dalio and his wife invested $100 million last year in Connecticut's public schools, an amount matched by the state. He's an advocate of public-private partnerships for education, because the private sector can impart what skills it needs to innovate. 

An example of what this could look like is IBM's P-TECH school model, in which public high school students can take skills-based classes in addition to the state curriculum, get access to exclusive internship and mentorship opportunities with a particular corporate partner, and go to a partner community college at no cost to work toward an associate's degree.

As Dalio sees it, if America is going to reform its economy, it needs to rethink public education as a way of building a workforce equipped for a rapidly changing world.

It's a dangerous situation

Dalio said that his research of the past decade led him to conclude that there is a clear cycle that can emerge from periods of extreme inequality. 

Step one: resentment. Step two: demonization of the other side. Step three: causes become more important than the systems for solving disputes. Step four: a revolution totally disrupts the system.

He said that he'd put the US right now at step two, with signs of step three. "Revolutions occur because modifications of the system are typically not enough to satisfy. And so what happens is you go through this cycle all the time. People demonize the other. And they make good and evil," he said.

Dalio instead wishes for a moderate president who would declare America's inequality a national emergency and create a bipartisan board to develop a plan for increasing the nation's productivity. Given the reality of America's polarization — and how Sanders, a top presidential candidate, is outright calling for a "revolution" of the system similar to what President Franklin Delano Roosevelt engineered — Dalio recognizes that it's a longshot. He put the odds of the country headed toward a bipartisan, measured course that would address his concerns at just 30%.

In an election year that's kicking off a new decade, America is at a turning point in its history, and staying the course is going to lead to upheaval. "These things happen over and over again. This is not new," he said. There's a faction of Americans who want that upheaval. Dalio wants to avoid that more than anything.

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NOW WATCH: Ray Dalio says the economy looks like 1937 and a downturn is coming in about two years

• Ray Dalio is the founder and cochief investment officer of Bridgewater Associates, the world's largest hedge fund.
• Dalio discussed key moments from his career in an episode of the Business Insider podcast "This Is Success." In a bonus segment, he explained why he considered Paul Kennedy's book "The Rise and Fall of the Great Powers" the best book he'd read in the past year.
• He considers it important reading for today, especially in assessing the emerging power shift he sees between the United States and China.
• Click here for more BI Prime content.

For the past few years, the billionaire Ray Dalio has been sounding the alarm on the rise of populism throughout the world, and he's been especially concerned about the United States. As the founder and co-CIO of Bridgewater Associates, the world's largest hedge fund, Dalio is one of the most influential voices in finance, and he thinks capitalism is facing an "existential threat" in America.

He told Business Insider in a recent interview that the country was five years away from an economic and social disaster if it didn't turn down polarization and rework its system to serve productivity growth — that is, it has to invest in policies that will benefit the workforce and promote innovation to create new wealth.

His conclusions, he said, were based on spending the past decade researching economic history, including the rise and fall of empires. 

And in an interview last year for Business Insider's podcast "This Is Success," Dalio gave a book recommendation in line with his assessment of the world today, calling it the best thing he'd read in the past year: the Yale historian Paul Kennedy's award-winning 1987 history, "The Rise and Fall of the Great Powers."

"I think we're going to enter a period that's very similar to the 1930s — and I held that view before reading this— but it's definitely the case that there is an arc for countries, just like there's a life arc," Dalio said. He sees the US on a decline and China on a rise, marking the early stages of a change in global order.

"That dynamic has happened many, many times in history and understanding that well, I think, is very important," he said.

Kennedy's book is an investigation of the life spans of the world's great powers since 1500, the start of modern history. Each power was defined by economic hegemony that fell when that country became overstretched by its military presence and spending, which was accompanied by a lack of investment in other aspects of society, like education, contributing to an overall decline. Kennedy noted that the US in 1980 looked to be in a similar position to the United Kingdom ahead of World War I, when it was headed toward falling from its peak.

In short, Dalio is worried about the state of America and believes that inequality should be treated as nothing less than "a national emergency," or else the shifting power dynamics around the world will hit the US especially hard.

Dalio said he had been spending much of his time researching world history of the past 500 years, with a particular focus on reserve currencies (the dominant global currency), to help him make sense of where the world was at the moment and what could be done to mitigate any damage. Of everything he's used in his research, he said, Kennedy's book is the one that's enthralled him the most.

You can listen to the full "This Is Success" interview below:

This is an updated version of a story that ran on July 7, 2019.

SEE ALSO: Ray Dalio says that everybody is missing the key metric for saving America's economy from inequality — productivity

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NOW WATCH: Ray Dalio shares what he's learned from his succession plan at the world's largest hedge fund

• The 20 best-performing hedge fund managers of all time gained $59.3 billion in 2019 to post their best annual return in at least a decade, according to a report released Monday by LCH Investments.
• TCI manager Christopher Hohn led his fund to a $8.4 billion windfall last year, the largest return among the group of 20.
• The best-performers bagged about one-third of the $178 billion taken in by hedge funds in 2019, LCH said.
• Most funds still underperformed equities as the US stock market soared through 2019. The S&P 500 gained 29%, while the hedge fund industry saw a 9% gain in the same period, according to Bloomberg's Hedge Fund Indices.
• Visit the Business Insider homepage for more stories.

The 20 best-performing hedge fund managers of all time gained $59.3 billion in 2019 to post their best annual return in at least a decade, according to an LCH Investments report released Monday.

Funds enjoyed major gains from surging stock and bond markets through the past year. TCI manager Christopher Hohn led his fund to a $8.4 billion windfall, the largest among the group of 20. Steve Mandel, manager of Lone Pine, took second place with a $7.3 billion gain.

The 20 best-performers bagged roughly one-third of the $178 billion taken in by hedge funds in 2019, according to the report.

Though many hedge funds posted their best gains in years, most lagged behind investors who focused on the US stock market. The hedge fund sector notched a 9% gain in 2019, according to Bloomberg's Hedge Fund Indices, well below the S&P 500's 29% gain through the year.

Last year's gains mark "a significant improvement after several years of muted returns," LCH chairman Rick Sopher told the Financial Times. The top 20 managers still posted moderate gains in 2018, though the hedge fund industry lost $41 billion of investor capital, the Times reported.

"The 'hedged' nature of hedge funds has resulted in them lagging way behind the returns of the equity markets in particular," Sopher added.

TCI's leading gain in 2019 placed it at 14th on the list of top 20 managers after not making the cut in 2018.

Ray Dalio's Bridgewater remained at the top spot despite its meager $600 million gain through the year. The fund holds $131.9 billion in assets under management, more than the next four best-performing funds combined.

Caxton Associates and Two Sigma lost their spots in the top 20 last year, the Times reported. Egerton, led by John Armitage, was the second fund to make its way onto the list in 2019 after TCI.

Lone Pine jumped from seventh to fourth place between 2018 and 2019, the biggest jump among funds included in the list across both years.

The hedge fund sector continued to shrink through 2019 despite the healthy returns. The industry saw more closures than openings for the fifth year in a row in 2019 as lofty fees and soaring stocks drove investors to other vehicles. Major players including David Tepper's Appaloosa and Louis Bacon's Moore Capital converted into family offices in 2019.

Appaloosa took 10th place on LCH's list, while Moore Capital sank to 19th from 15th in 2019.

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• Ray Dalio proclaimed "cash is trash" and warned investors against ditching stocks for dollars in a CNBC interview on Tuesday.
• The Bridgewater Associates boss argued a weaker dollar and growing money supply would be eroded by the value of hard currency over the next few years.
• Dalio's advice contrasts with the stance of Warren Buffett, whose Berkshire Hathaway conglomerate was sitting on a record $128 billion in cash at last count.
• "I will never risk getting caught short of cash," the famed investor told shareholders last year.
• Visit Business Insider's homepage for more stories.

  ---

Ray Dalio proclaimed "cash is trash" and warned investors against ditching stocks for dollars in a CNBC interview on the sidelines of the World Economic Forum in Davos, Switzerland on Tuesday.

The advice from the billionaire founder of Bridgewater Associates, the world's largest hedge fund, contrasts with the stance of Warren Buffett, whose Berkshire Hathaway conglomerate was sitting on $128 billion in cash at last count.

Dalio warned the value of hard currency would be eroded by a weaker dollar and growing money supply. He recommended investors build a globally diversified portfolio that includes at least some gold. 

"The depreciation of the exchange rate and the printing of money over the next few years is going to be the biggest thing," he said. "Cash is not gonna be good."

Last week, Bridgewater boss Greg Jensen told the Financial Times that gold could spike 30% to a record high of over $2,000 an ounce as central banks allow inflation and political fears mount.

Meanwhile, Dalio struck a similar chord at Davos two years ago, saying investors would "feel pretty stupid" if they hoarded cash while stocks soared. The three main US stock indexes — the Dow Jones Industrial Average, the S&P 500, and the Nasdaq — are currently trading close to record highs.

Buffett has balked at current market valuations and shied away from bidding wars for Tiffany's and Tech Data in recent months. As he continues to hunt for Berkshire's next "elephant-sized" acquisition, Berkshire's cash pile has ballooned to a record level.

"Prices are sky-high for businesses possessing decent long-term prospects," Buffett wrote in his letter to shareholders last year, tempering their expectations of a major takeover.  He also underscored the value of dollars as a safety net, adding, "I will never risk getting caught short of cash."

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NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

• The stock market is having room to run even higher this year despite a 29% gain in 2019 and warnings of a reversal, Goldman Sachs analysts wrote.
• Fund inflows are lagging the surge in US equities, leaving plenty of cash to fuel additional market records, the team said in a Tuesday note.
• The investment bank also noted that traditionally safer assets like government bonds and cash haven't yet seen "meaningful outflows," suggesting that "a large portion of positioning has still not moved into equity."
• Watch Goldman Sachs trade live here.

The US stock market has surged to record highs numerous times throughout the new year, and Goldman Sachs views a few factors as fuel for driving prices even higher.

While retail investors have piled back in to the historically long bull market, mutual funds and exchange-traded funds have lagged in shifting their positioning to equities, the team of strategists including Alessio Rizzi and Christian Mueller-Glissmann said.

"This suggests that there may still be room for a more bullish rotation alongside the better growth/rates mix we expect," the Goldman strategists wrote in a Tuesday note. The gap between market advances and fund inflows is among the largest on record, the team added.

The S&P 500 is up about 2.3% year-to-date after leaping 29% in 2019. The index opened at a record high on Wednesday before paring gains, and now sits slightly below its all-time peak.

Many analysts feared a reversal in the new year after the S&P 500's best annual performance since 2013, but Goldman warned that investors holding cash in safe assets are missing out from further gains. Sovereign bonds and money markets "have not seen meaningful outflows" in the year-to-date, the strategists noted.

"This suggests that a large portion of positioning has still not moved into equity," the team wrote.

Bridgewater founder Ray Dalio similarly called for investors to flee safe-havens earlier this week. The billionaire said "cash is trash," and warned against rotating from stocks to dollars in a Tuesday interview with CNBC. 

"The depreciation of the exchange rate and the printing of money over the next few years is going to be the biggest thing," he said at the World Economic Forum in Davos, Switzerland. "Cash is not gonna be good."

The investment bank isn't the only player on Wall Street that expects stocks to continue soaring through 2020. When asked by CNBC if he viewed public valuations as overpriced, JPMorgan Chase CEO Jamie Dimon noted that the bull market's continued strength is supported by the US's healthy economy, and that high prices don't equate to overvaluations.

"We've always had overpriced companies in life, and stock prices are at a high, but those prices can be justified if you have a growing economy," Dimon said.

The chief executive added that, despite nearly all assets gaining through 2019, the only sector he views as a bubble is the sovereign debt market.

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• This article is part of BI's project "The 2010s: Toward a Better Capitalism."
• Over the past two months, we have explored the ways reforming capitalism became the defining debate in America for the past decade. It has set the stage for the policies we'll see in the 2020s.
• In the series, we explore the relationship between taxes and inequality, the renewed antitrust movement, turning talk around sustainability into action, labor rights, and what investments will best help the economy.
• Regardless of our sources' politics or goals, all of them agreed that the US is at a turning point in its history, where it will set the stage for what it wants to look like for years to come.
• The Better Capitalism series tracks the ways companies and individuals are rethinking the economy and role of business in society.
• Visit Business Insider's homepage for more stories.

Back in January 2018, Insider Inc. cofounder and CEO Henry Blodget kicked off Business Insider's "Better Capitalism" series at the World Economic Forum's annual meeting in Davos. He spoke about the ways America's approach to business over the past 40 years have led to rising inequality, with the rich getting richer and the middle class declining. This shift resulted in populist anger, he said, and slowed economic growth.

But it didn't have to be that way.

Given that we recently finished a decade and began a new one, Business Insider embarked on a project called "The 2010s: Toward a Better Capitalism."

Over the two years of exploring what "Better Capitalism" could mean, we've taken a look at how the US got to historically high levels of inequality, how labor power declined, how short-termism contributed to a climate crisis, and why our current version of capitalism is not the way America has always practiced it. Along the way, we found that while these issues are 40 years in the making, it took the financial crisis and Great Recession to bring them to the forefront. The 2010s saw millions of Americans reconsidering the economy that guided their lives.

For our decade in review series, we spoke to everyone from the CEO of outdoor-apparel darling Patagonia to the billionaire founder of Bridgewater Associates. What's striking is that regardless our source's worldview, all agreed on one thing: The US is at a turning point in its history, and if it wants to have a healthy future, it needs structural reform.

Below, we've collected summaries of and links to each story in the "The 2010s: Toward a Better Capitalism" series.

SEE ALSO: 10 books to read if you want to become the ultimate authority on the American economy

Occupy Wall Street gave the country a vocabulary that even its initial detractors would go on to use regularly.

The Occupy Wall Street Movement of 2011 was not particularly large, and was widely derided by establishment figures on both the left and the right. But it captured a real angst that came out of the financial crisis and recession.

The rallying cry of "We are the 99%" ingrained itself in American culture, adding a new degree of class consciousness based on the tremendous wealth gap that was on its way to reaching a level not seen since the period that led to the Great Depression and eventually WW II, where it is now.

As for the issues the Occupy protesters were once mocked for — a wealth tax, universal health care, and a general rethinking of how companies approach business — they all became mainstream by decade's end.

Read more here »

The 33-year-old economist Gabriel Zucman has been at the forefront of the inequality debate this whole time.

Three French economists have led the way in collecting and analyzing data on the rising levels of inequality around the world: Thomas Piketty, Emmanuel Saez, and Gabriel Zucman.

Zucman, at just 33, has been in an advantageous position, having collaborated extensively with Piketty and Saez and turning his research into proposals with a real impact.

His career began during the recession, and when he came to America in 2013, he and Saez set to work charting the degree of US inequality since 1913. They discovered that the top 0.1% owned 20% of the country's wealth, and that their share had been on the rise since the 1980s.

By 2015, they had turned toward determining solutions for an imbalance they felt threatened America's stability. They came up with a wealth tax proposal, which taxes billionaires' assets. The Democratic candidates they proposed it to for the 2016 election found it too radical for the public, but for the 2020 race, both Warren and Sanders have worked with Zucman and Saez on their own versions, and are passionately backing it.

Read more here »

Elizabeth Warren helped make the call for antitrust reform a political movement once again.

Last September, 50 American attorneys general announced an investigation into Google's domination of internet advertising and search. The Federal Trade Commission said in December it was going to investigate the fairness of how Facebook integrated its apps. Antitrust policy, aimed at preventing corporations from exerting monopoly power that harms competitors and consumers, is a regular part of the news cycle.

We spoke about this development with Matt Stoller, author of the antitrust history "Goliath," and a researcher at the Open Markets Institute who helped put an antitrust plank back into the Democratic platform for the first time since 1992.

He attributed the buzz around antitrust to Warren, who began calling for breaking up Big Tech back in 2016. Stoller, however, has seen that there is also notable Republican support for strengthening antitrust, most loudly from Trump's ally Sen. Josh Hawley.

To Stoller, the past 40 years of deregulation have resulted in a power structure that has exacerbated inequality, and antitrust is a key lever for reversing it. "We have the choice of whether we want to govern or let them govern," he said, referring to the country's largest corporations. "And that's really what's on the ballot right now."

Read more here »

The nonprofit behind the 'B Corp' designation has created a tool to help companies determine and meet sustainability goals.

Management guru Peter Drucker's line that, "You can't improve what you can't measure," has become a cliché, but it fits perfectly with the current movement around sustainability. Whether a company is looking solely for good marketing or is earnest, a sustainability initiative is meaningless unless it can be closely tracked and measured against real metrics.

B Lab, the nonprofit that has been pushing against shareholder primacy since 2007, released its SDG Action Manager tool in January, in conjunction with the United Nations Global Compact. It provides companies of all sizes and industries with a self-assessment against the UN's 17 Sustainable Development Goals (SDGs). The tool then helps the company determine which goals and policies to set, and how to track them.

B Lab, whose community includes large public corporations like Danone and smaller private companies like Patagonia, aims to have 5,000 active users for the SDG Action Manager by the end of the year.

Read more here »

Toys R Us bounced back from bankruptcy with worker policies that could provide a model for labor rights.

Erica Smiley, executive director of the union rights group Jobs with Justice, believes that if the US has any shot at reducing its historically high inequality, companies have to not only treat workers better, but give them more say in the direction of their business.

She pointed to the Fair Food Program and Toys R Us as examples of how to make this work. In the former, Florida farmworkers have made deals with farm owners and multinational food companies like Yum Brands around fair wages and safety practices.

And following bankruptcy and a restructuring, Toys R Us employees formed a "mirror board" to meet with the actual board, a model somewhat similar to the co-determination model in Germany that Democratic presidential candidate Sen. Elizabeth Warren advocates for.

"It's time for business to evolve, and place worker participation at the center of its growth," Smiley wrote in an editorial.

Read more here »

Opportunity zone legislation may reshape business communities across America.

The legislation for opportunity zones passed in 2017 as part of the Republican tax bill, but its roots are in a bipartisan effort that was led on the policy side by Democratic Sen. Cory Booker and Republican Sen. Tim Scott.

Opportunity zones are generally low-income communities where investors receive tax breaks, and do not have to pay capital gains taxes if they keep their investment for 10 years. There are nearly 9,000 of them across all 50 states, DC, and five territories, and the regulations around it were only just finalized in December.

Steve Glickman is a former adviser to President Barack Obama, and as the cofounder of the Economic Innovation Group, he set out to develop an investment model that would incentivize wealthy investors to move money into parts of the country especially hit by the financial crisis.

Glickman is hoping that the policy outlasts this era of polarization and becomes one of the country's go-to tools for addressing pockets of inequality through business opportunities, not gentrification that shuts out existing residents.

Read more here »

Labor leader Sara Nelson is America's most influential flight attendant, and she's on a mission to revive unions.

Sara Nelson is the president of the Association of Flight Attendants-CWA, an affiliate of the AFL-CIO, and she gained headlines a year ago for inspiring air traffic controllers to not show up for work during the federal government shutdown. It had a ripple effect that led to grounded flights, and within a few hours, the government reached a deal that ended the shutdown.

In an editorial for us, Nelson wrote that the financial crisis and recession gave corporations and political donors an opportunity to crush labor power, but that these experiences of the past decade also sowed the seeds for a new labor movement that is gaining momentum and will come to fruition in the 2020s.

She said her union is fighting alongside those pushing for universal healthcare, significant climate policy that also creates jobs, and regulations that rein in unchecked corporate power. "But to win those fights, all workers need a sustained structure that can call people in and rally us to fight together in solidarity," she wrote. "Workers need unions."

Read more here »

Patagonia CEO Rose Marcario has been leading collaborative movements that bring competitors together to fight climate change.

As the CEO of outdoor apparel company Patagonia, Rose Marcario has significantly grown her business while doubling down on its mission to have a positive effect on the environment.

Under Marcario, Patagonia has sued the Trump administration for reducing the size of a national park and led a successful boycott against the location of a trade show due to support for that policy, refused making corporate gear for any company without a significant sustainability policy, helped spread a regenerative agriculture practice to other companies, and has continued co-leading the Sustainable Apparel Coalition alongside Walmart.

"The 2020s could be the decade where we invest in the future, not rob from it," she wrote in an editorial. "The coming years could see innovation and collaboration providing solutions to our biggest global challenges. We know the answers — we just need the courage needed to act on them."

Read more here »

Bridgewater founder Ray Dalio said all economic and financial reforms must have productivity as their primary goal.

Bridgewater founder Ray Dalio has been one of the several billionaire business leaders calling for structural change, and even deemed American inequality a "national emergency."

In an interview with Business Insider, he said that he's open to a wide range of ideas on topics like healthcare and taxes, but that no policy will have a long-term beneficial effect unless it can increase the US's productivity. This has been on the decline since 2004, and has been especially low since the financial crisis.

Dalio said that the most effective tactic for increasing productivity lies in educating our workforce.

He told us that if the US can't move past its intense polarization and ends up choosing either far left ideas or the status quo, it will head toward an economic and social crisis of the kind last seen in the 1930s, which saw the Depression and start of WW II. He gives the country a 30% chance of avoiding that disaster, but is trying to remain hopeful.

Read more here »

Insider Inc. CEO Henry Blodget said that while all of the ideas you just read are great, we can't forget about raising wages.

Insider Inc. cofounder and CEO Henry Blodget has spent the past decade writing about the ideas that he formalized as "Better Capitalism" in 2018.

In a new editorial, he wrote that he's been happy with how the business world has embraced the notion of "stakeholder capitalism" over shareholder primacy. But he wants to keep the spotlight on his pet issue, wages.

"The people who have been most hammered by 'shareholder capitalism' have been low-paid employees, many of whom are now paid so little that they're below the poverty line," he wrote. Wages have remained stagnant for the past 40 years, the same time period of profit maximization at all costs.

Corporations need to remain innovative, Blodget wrote, but if they are going to maintain long-term success, they must raise their workers' standard of living.

Read more here »

• Ray Dalio's Bridgewater, which runs $160 billion in assets and is the biggest hedge fund in the world, said in a new report on market conditions that a group of Asian countries, led by China, are set to grow much faster than the US and Europe.
• The report projects that the "Asia bloc" of seven countries, led by China, will own a majority of the global stock market by 2035.
• The report also states that the group of countries will become "increasingly inwardly focused and independent" as tensions with the US increase. 
• Visit Business Insider's homepage for more stories.

The coming years could see a huge shift across the globe in who owns stocks. 

Currently, roughly three-fourths of the global stock market, by market capitalization, is held by countries outside of a bloc of Asian nations that includes China, according to Ray Dalio's Bridgewater. 

But in 15 years, that bloc will own the majority of the global equity market, according to a projection from the $160 billion hedge fund's annual report on the markets. 

The areas of growth Bridgewater is looking at include China, Singapore, Thailand, South Korea, Malaysia, Hong Kong, and Taiwan.

"This emerging Asia bloc already produces a level of output that is comparable to the US and Europe, combined. And in the past three years, its contribution to global growth has been 2.5 times that of the US plus Europe. Trade between these countries is a bigger portion of their economies than trade between the countries of Europe," the report reads. 

Dalio's fund has been bullish on China for years. In 2018, the firm's co-chief investment officer, Bob Prince, told a conference in Toronto that the bloc of Asian nations will grow by the size of Europe's entire economy in just 10 years.

"As an investor you're buying and selling cash flows," Prince said in 2018. "That's a lot of cash flows."

The growth however will not be from increased exports to the United States, the new report states. 

"This bloc is increasingly inwardly focused and independent, reflected in its nominal GDP growth substantially outpacing exports over the past decade," the report reads. A battle for geopolitical power between China and the US has already led to sanctions, a trade war, and a ban on one of China's biggest companies, telecomms firm Huawei. 

Fellow billionaire hedge-fund founder Ken Griffin recently warned attendees at an Economic Club of New York lunch that the US "has a false sense of security" about maintaining its status as a technology powerhouse. 

This group of countries, which Bridgewater states are beneficiaries of China outsourcing labor, is a much more attractive option to invest in than the US or Europe, the report states. While the US is limited by its ability to use monetary or fiscal policy to a revive an economy that begins to falter, emerging Asian countries have a lot of room to grow, Bridgewater believes.

The report projects that China, Thailand, Singapore, and South Korea will experience significant productivity increases over the next 10 years while the US, Spain, France, Italy, and other European nations are either not increasing productivity or becoming more unproductive. 

The report does not touch on possible effects from the coronavirus, which has forced factories and businesses to close down to limit the spread of the virus. But in an opinion posted to LinkedIn at the end of January, Dalio stated that the response from China on the virus has been better and more transparent than how the country handled the SARS outbreak when it emerged in 2003. 

Despite the response from the Chinese government, coronavirus has already caused more deaths than SARS, as more than 800 people have died as of early February. More than four times as many people have been infected with coronavirus than SARS.

A note from Bridgewater's chief security officer Richard Falkenrath, who previously worked on the SARS problem for the George W. Bush administration, stated that the market reaction to the Coronavirus has been "more severe" than what it was for SARS.

"At this point, the coronavirus has the potential to be the most significant medical disruption in decades, but the cone of outcomes remains wide," the note from Falkenrath reads. 

Join the conversation about this story »

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• Hedge-fund billionaire Ray Dalio said Wuhan coronavirus has had an outsized impact on markets and will blow over soon.
• The Bridgewater Associates boss argued the flu-like illness "probably had a bit of an exaggerated effect,"Bloomberg reported.
• Dalio said he was more worried about political and wealth inequalities.
• Visit Business Insider's homepage for more stories.

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Hedge-fund billionaire Ray Dalio said investors have overreacted to the Wuhan coronavirus outbreak, and markets will recover soon.

The fast-spreading epidemic "probably had a bit of an exaggerated effect on the pricing of assets because of the temporary nature of that," Dalio said at a conference in Abu Dhabi on Tuesday, according to Bloomberg. "I would expect more of a rebound."

Dalio — the boss of Bridgewater Associates, the world's biggest hedge fund — doesn't expect the flu-like illness to live long in the memory.

"It most likely will be something that in another year or two will be well beyond what everyone will be talking about," he told the audience, Bloomberg said.

Wuhan coronavirus has infected around 42,000 people, killed more than 1,000, and spread to upwards of 20 countries. It has disrupted Chinese manufacturing and commerce, and threatens to slash the growth rate of the world's second-largest economy this year. The outbreak has also forced US companies including Apple, Disney, and Starbucks to temporarily shut some or all of their operations in the region.

However, Dalio argued that investors should worry more about political and wealth inequalities, emerging technologies, environmental challenges, and the growing competitive threat from China.

"Each one will interact," he said, according to Bloomberg. "What concerns me most if you did have a downturn ... the wealth gap and the political gap, I would be more concerned about that."

Join the conversation about this story »

NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

• The hedge fund billionaire clarified his comments regarding the "exaggerated" impact he's seen the Wuhan coronavirus have on financial markets in a LinkedIn post Wednesday.
• The impact of coronavirus will be temporary, Dalio said, and the market sell-off did not reflect that.
• Coronavirus has infected 45,000 and killed 1,100, rocking financial markets across asset classes and regions.
• Visit Business Insider's homepage for more stories.

Ray Dalio clarified in a LinkedIn post that he believes coronavirus could have a substantial impact in the near-term, but that the market sell-off did not reflect the temporary nature of the outbreak. 

The post followed up comments Dalio made Tuesday at a conference in Abu Dhabi that the coronavirus "probably had a bit of an exaggerated effect on the pricing of assets because of the temporary nature of that."

Dalio, who runs Bridgewater Associates — the largest hedge fund in the world — corrected what he meant by those comments in his post.

"I think the most likely outcome is that this virus will be a larger version of SARS that will have a significant temporary effect but won't have a big long term influence, so the downward market price moves related to it are probably becoming exaggerated," he said.

At the height of investor fear around the Wuhan coronavirus, markets across assetclasses and countries sold off. US equities have mostly recovered, but other markets such as oil and copper remain in the lurch. Coronavirus has infected 45,000 and killed 1,100 in its spread to more than 20 countries.

The economic effects are already apparent: US companies including Apple, Disney, and Starbucks shuttered their operations in the region while Chinese manufacturing and retail have seen disruptions as well. Multiple economists have warned the virus could undermine growth in China, the world's second-largest economy. 

In his Tuesday talk, Dalio pointed to wealth and political inequalities as trends he finds concerning for the global economy. 

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NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

• Ray Dalio is the co-CIO and chairman of Bridgewater Associates, the world's largest hedge fund.
• Dalio often express concerns over political and wealth inequalities, and he urges people to gain an understanding of today's world through books. 
• The billionaire investor is a voracious reader, sharing classic reads ranging from "The Rise and Fall of the Great Powers" by Paul Kennedy to "Beyond Religion" by the Dalai Lama. 
• Business Insider compiled a list of 13 books based on Dalio's recommendations throughout the years. 
• Click here for more BI Prime stories.

Billionaire investor Ray Dalio is known for his "principles" on everything from power dynamics to calling for "reform capitalism" in America. He authored a best-selling book, "Principles: Life and Work," which elaborates on  his core philosophies and the lessons throughout a more than 40-year career — from building the world's largest hedge fund to now passing on what he's learned. 

Dalio draws inspiration from more than just his own ruminations. He's fond of reading and scouring through interviews, and he's often vocal about turning to books for advice.

Whether you're a college student trying to figure out your next steps or an experienced investor looking for a career boost, Dalio recommends that you find answers and glean meaning from these 13 books. 

SEE ALSO: Ray Dalio says anyone who wants to understand today's world should read a 32-year-old book about empires

“The Rise and Fall of the Great Powers” by Paul Kennedy

Dalio thinks this is an important read for today if you're looking to better understand the hegemonic shifts between the US and China. He told Business Insider in a 2019 interview it's the best thing he'd read. 

Author Paul Kennedy tracked the arc of world powers since 1500 and drew parallels in how leaders rise and fall over five centuries. Each power mentioned in the book fell due to over-investment in military spending and a lack of attention toward other aspects of society like education and income inequality.

Dalio noted that the US could face a similar predicament if leaders don't treat inequality as a "national emergency,"Business Insider reported. Dalio read this book to understand where we are in history — predicting that US power will eventually decline while China expands. 

"That dynamic has happened many, many times in history," he said, "and understanding that well, I think is very important."

Get it here »

“The Hero with a Thousand Faces” by Joseph Campbell

Joseph Campbell's 70-year-old mythology book helped Dalio process and reframe his business and personal failures, he told Business Insider. 

"The Hero with a Thousand Faces" outlines the phases of a hero's journey — it shows how many mythologies, folk tales, and religious narratives follow a similar story structure, including a call to adventure, a descent into the underworld, and a comeback into society. 

Dalio's son Paul gave him this book in 2014, and he immediately identified with it, he wrote in his book. The Bridgewater chairman used Campbell's roadmap of a hero's journey to understand where he is along that path, and what he should do next. 

Get it here »

"The Lessons of History” by Will and Ariel Durant

In "Principles," Dalio described "The Lessons of History" as a 104-page distillation of the major forces through history.

The book was published in 1968 by a Pulitzer Prize-winning husband-and-wife duo that studied thousands of years of Western history. This work tracks the cycles of history, and Dalio writes that it shows "how the same things happened over and over again throughout history."

Get it here »

“An Unquiet Mind” by Kay Redfield Jamison

In his book, Dalio wrote that his son Paul struggled to manage his bipolar disorder for three years. Dalio came across Jamison's "An Unquiet Mind" while seeking answers to better understand his son's battle with mental illness. His personal experience taught him that many mental differences are physiological.

"The experience not only taught me a lot about how brains work but why creative genius often exists at the edge of insanity," Dalio writes in "Principles." He then lists creative, productive people who have bipolar disorder, including Kay Jamison, the author of this book.

Jamison "has written frankly about her own experiences with the disease in her book 'An Unquiet Mind,'" Dalio writes.

Get it here »

“River Out of Eden” by Richard Dawkins

In an episode of Tim Ferriss' podcast, Dalio said he thinks evolution is "the greatest force in the universe."

In "River out of Eden," author and biologist Richard Dawkins drew similarities between DNA-coded information and computer language, in which we are all "survival machines" looking to carry on our genetic makeup and the "database" we carry. 

"I think the purpose of everything is to evolve,"Dalio said in the podcast. "I think individuals are just vessels for our DNA evolving."

Get it here »

“Originals: How Non-Conformists Move the World” by Adam Grant

Adam Grant of the Wharton School has written extensively about Bridgewater and the unique way Dalio runs it.

In "Originals," Grant focused on how leaders can build on their ideas and how to fight groupthink. He gave examples of individuals who experienced success after challenging a norm or approached a business decision in an unusual way. 

Grant was one of a number of behavioral psychologists who went to Bridgewater to evaluate their operational style and concluded that Dalio's "unusual" leadership style was necessary to its growth.

Get it here »

“Thinking, Fast and Slow” by Daniel Kahneman

Kahneman, a psychologist who won the Nobel Prize in economics, breaks down human thought into two systems: the fast and intuitive "System 1," and the slow and deliberate "System 2."

His book brings an awareness to when we can and can't trust intuition, and how can make the best choices professionally and personally. The author added we are easily influenced by our surroundings and often automatically respond to things without much filtering.

"Thinking Fast and Slow" lays out the framework of cognitive biases that affect our everyday behavior, from halo effects to planning fallacies.

Get it here »

“Beyond Religion: Ethics for a Whole World” by the Dalai Lama

In his book, Dalio reminisced about a conversation he had with the Dalai Lama about the overlap between spirituality and religion. 

"His view was that prayer and meditation seemed to have similar effects on the brain in producing feelings of spirituality (the rising above oneself to feel a greater connection to the whole)," Dalio wrote, "but that each religion adds its own different superstitions on top of that common feeling of spirituality."

Get it here »

“Welcome to Your Brain: Why You Lose Your Car Keys but Never Forget How to Drive and Other Puzzles of Everyday Life” by Sam Wang and Sandra Aamodt

This is the first book listed in Dalio's bibliography in "Principles."

Coauthors and neurologists Sandra Aamodt and Sam Wang outlined brain processes and addressed common questions we've probably all thought of.

By offering explanations to random questions like whether drinking alcohol kills cells or whether a head injury can make us forget our names, "Welcome to Our Brain" serves as a myth-dispelling guide on how our brain works.

Get it here »

“Einstein's Mistakes: The Human Failings of Genius” by Hans C. Ohanian

The title "Einstein's Mistakes" by Hans Ohanian is really as on the nose as it sounds. Dalio read this book in 2011 and explained that reading the analysis of Albert Einstein's failures taught him to learn from his mistakes rather than being stuck on them. 

Einstein's pitfall, according to Ohanian, is that people gifted with a genius mind naturally have a more difficult time believing or accepting that they're wrong. They become blind to their mistakes, and if they are stubborn, cling to a mistake forever without correcting it.

Get it here »

“My Stroke of Insight: A Brain Scientist's Personal Journey” by Jill Taylor

This New York Times best-seller was included the bibliography of "Principles." It describes how a brain scientist's stroke 24 years ago led to her enlightenment.

Though it took eight years to fully recover from the impairment in the left hemisphere of her brain, Taylor wrote that the stroke led to greater access to her intuitive right brain, where she felt "well-being and peace."

Get it here »

“The Undoing Project: A Friendship That Changed Our Minds” by Michael Lewis

"The Undoing Project" by Michael Lewis delves into the partnership between Daniel Kahneman (whose book "Thinking Fast and Slow" also appears on this list) and Amos Tversky, two psychologists who pioneered the field of behavioral economics. Despite having drastically different personalities, Kahneman and Tversky worked together and developed a fruitful partnership. 

Lewis explored the workings of the human mind in looking at how people with fundamental differences can still become great collaborators. 

Get it here »

“The Upside of Inequality: How Good Intentions Undermine the Middle Class” by Edward Conard

Dalio has voiced his concerns about the state of America, and said that inequality is an urgent problem. According to Dalio, inequality should be treated as a "national emergency," and this book explores the nuances of inequality as it relates to the middle class.

In "The Upside of Inequality," author Edward Conard argues that the success of the world's top 1% can push upward pressure on employment rates in the US. He tracks data on the American economy and proposes that a good way to bridge income gaps involves training and retraining talent to fit relevant jobs in today's day and age. 

Get it here »

• Eileen Murray — one of the most powerful women in finance and the departing co-CEO of Bridgewater — told attendees at the SuperReturn conference in Berlin that hedge funds and banks need to do a better job of including their underrepresented employees.
• While Murray is happy that the gender balance on Wall Street has gotten better since she started her career decades ago, she believes the next step needs to be moving past having diverse employees just for diversity's sake.
• "I don't think there's been a sufficient amount of time and effort spent on how to develop people."
• Visit Business Insider's homepage for more stories.

Before she leaves her role atop the world's biggest hedge fund, Eileen Murray has some advice for Wall Street on how to improve: Start including underrepresented people.

Murray, the co-CEO of Ray Dalio's Bridgewater Associates, is planning to step down from her job next month. She plans to work after, doing something she's "passionate about," according to a talk she gave at a conference in December, where she did not elaborate further. 

But on Wednesday, at the SuperReturn conference in Berlin, she told attendees that while gender diversity has improved since she joined the industry decades ago, finance still has a long way to go — and it should start by focusing on inclusion.

"I don't think there's been a sufficient amount of time and effort spent on how to develop people," she said.

"We don't focus on inclusion. People spend tons of money getting candidates in, getting them at the table, and then they don't listen to them. They don't include them."

Murray, who was floated as a potential candidate for the Wells Fargo CEO role before Charlie Scharf got the job, acknowledged the progression from decades ago. For instance, she said that "for most of the 90s, everyone spent a lot of time making the case for diversity" and why it was needed in finance — a discussion she said is no longer needed.

It's one of the reasons that she supports sponsorships, not mentorships, internally — the goal is not to train someone to be just like you, but to give someone the freedom and the backing to be the best version of themselves, she said.

"Let people be who they are."

The culture of Bridgewater, outlined in Dalio's book "Principles", helps sponsors find the right roles for developing talent because a person's strengths and weaknesses are constantly being monitored and updated by others at the firm.

In her role at the $160 billion hedge fund, she has realized she also has to create accountability programs to make sure people are following through on inclusion measures, including ones that are tied to managers' compensation. Without that, she said, these programs fall to the wayside as day-to-day tasks pile up.

"I think without that accountability, the urgent overtakes the strategic."

SEE ALSO: Outgoing Bridgewater co-CEO Eileen Murray hints at her next moves and explains how she smashed the hedge fund world's glass ceiling

SEE ALSO: $160 billion hedge fund Bridgewater is projecting that a group of Asian countries will blow past Europe and the US to own a majority of global stocks in 15 years

SEE ALSO: Bridgewater founder Ray Dalio is sharing the apps behind the hedge fund's 'radical' culture with the public. They feature real-time employee ratings and a 'pain button.'

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• The coronavirus outbreak is a once-in-a-lifetime epidemic that will squash those who don't defend against a worst-case scenario, the Bridgewater cofounder Ray Dalio wrote in a LinkedIn post on Tuesday.
• The billionaire investor pointed to insurance companies offering insurance against the outbreak and investors selling deep out-of-the-money options as those set to face the brunt of the outbreak's financial hit.
• Companies with healthy cash flows are becoming more attractive amid the wave of market volatility, he added.
• Dalio's post arrived just after the Federal Reserve issued its first emergency rate cut since the financial crisis. Such policies may prop up demand and asset prices, but coordinated monetary and fiscal policy targeting specific debt constraints would more efficiently contain the economic fallout, he wrote.
• Visit Business Insider's homepage for more stories.

The coronavirus outbreak is a unique event that will crush investors who don't protect against the worst, Bridgewater Co-Chairman Ray Dalio wrote in a LinkedIn post on Tuesday.

The billionaire investor highlighted his perspective on the outbreak itself, its economic impact, and markets' reactions. He noted his aversion to betting on events mired in uncertainty, adding that he prefers to insulate himself from murky risks.

Bridgewater's worst-case coronavirus scenario resembles the Spanish flu pandemic of 1918, and investors should defend against the coronavirus outbreak escalating to a similar level, Dalio wrote. Those who underestimate the epidemic's development are likely to suffer for it, he added.

"It seems to me that this is one of those once in 100 years catastrophic events that annihilates those who provide insurance against it and those who don't take insurance to protect themselves against it because they treat it as the exposed bet that they can take because it virtually never happens," the investor wrote.

Read more:Bank of America's equity chief shared with us a once-in-a-decade buying opportunity in US stocks — and explained why its gains are just getting started

He later called out insurance firms insuring against fallout from the outbreak, as well as investors selling deep out-of-the-money options contracts to fund hedging strategies. Companies with healthy cash flows represent the other side of the spectrum, steadily riding the wave of volatility "as many market players have been shaken out," the investor wrote.

Dalio's comments arrived the same day the Federal Reserve issued its first emergency rate cut since 2008. The 50-basis-point adjustment was designed to boost consumer spending as fears about the virus grow, and Fed Chair Jerome Powell signaled that additional stimulus is in the cards if the outbreak intensifies.

Though lower rates can prop up demand shortages and pad some risk-asset values, increased liquidity has little value if people "don't want to go out and buy," Dalio said. The Tuesday cut pushed the federal funds rate to a range of 1% to 1.25%, an unexpected low after three rate cuts in 2019 and hints that the central bank would hold rates steady until inflation picked up. The Fed still has some room to cut if the coronavirus outbreak further chips away at demand, but other countries aren't able to employ the same tools, the Bridgewater cofounder said.

"In Europe and Japan, monetary policy is virtually out of gas so it's difficult to imagine how pure monetary policy will work," Dalio wrote, adding, "So, it seems to me that containing the economic damage requires coordinated monetary and fiscal policy targeted more at specific cases of debt/liquidity-constrained entities rather than more blanket cuts in rates and broad increases in liquidity."

Read more:Goldman Sachs reveals the 10 best stocks to buy now for a market comeback from the coronavirus-driven plunge

Despite telling investors to "imagine the worst-case scenario and protect yourself against it," Dalio said he didn't expect the outbreak to create a long-term economic rut. The investor said he expected a V-shaped recovery in asset prices and economic activity once a cure is introduced or the virus is contained.

History shows that the deadliest pandemics, even the Spanish flu a century ago, served as "much bigger emotional affairs" than drivers of sustained economic downturn, Dalio wrote.

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• One of the most popular alternative investing strategies over the last five years has been private debt, thanks to low interest rates and banks stepping back due to more onerous regulations.
• JPMorgan global market strategist David Lebovitz said the number of managers running a private debt fund has more than doubled compared to five years ago, to over 1,800. 
• The impact of coronavirus on some companies that received loans from private-debt managers may be severe, warns Anton Pil, JPMorgan's managing director of global alternatives, and could force them to take over properties and other assets.
• "If you never managed a building before, you should probably be prepared to take possession," Pil warned money managers new to the lending game. 
• Pensions like Illinois teachers' fund and Indiana's state workers' retirement fund put hundreds of millions to work in these types of strategies last year. 
• Click here for more BI Prime stories.

Hedge funds and other alternative investment managers dove into the private-debt space in the last five years, thanks to low interest rates and regulations put on banks following the financial crisis.

According to JPMorgan, the number of managers with a private-debt fund has more than doubled over the last five years, with more than 1,800 active today. 

These strategies act similar to banks, lending money to companies in the form of bonds or loans for a set period of time. It's been increasingly viewed as a safe bet that's capable of putting up annual returns above public debt options like Treasuries, with pensions like Illinois teachers' fund and Indiana's state workers' retirement fund putting hundreds of millions to work in these types of strategies last year. 

These money managers are about to have their first big test, however, thanks to the growing coronavirus outbreak that has whiplashed markets and shut down parts of the global economy, says Anton Pil, JPMorgan's managing director of global alternatives. 

"Will companies that are highly leveraged have enough cash flow to pay their debt?" he said. If not, money managers new to the lending business could wind up having to take possession of assets the companies borrowed against. 

"If you never managed a building before, you should probably be prepared to take possession," said Pil, who runs the $146 billion unit of JPMorgan Asset Management. 

JPMorgan has also been pushing more into private credit

David Lebovitz, a global market strategist for JPMorgan, said the recent growth in the private-debt space could lead to "first-time players who have been in a risk-off environment and now have to take possession of assets."

Pil isn't the only one keeping an eye on companies' cash situations. Billionaire Bridgewater founder Ray Dalio wrote in a LinkedIn post Tuesdayy that the coronavirus is an event that "annihilates" those underestimating its potency. 

Dalio believes the virus has made companies with solid cash flows more attractive "as many market players have been shaken out."

JPMorgan itself has expanded into private credit recently, appointing the asset management unit's CFO Meg McClellan to be the firm's first head of private credit, and closed a fund, the Lynstone Global Special Situations fund, in October with more than $1 billion in assets. 

SEE ALSO: The $800 billion shadow-lending industry is staffing up with recession pros who can sort out messy credit meltdowns

SEE ALSO: Hedge funds are losing to private equity in a tug-of-war over investors' portfolios, and experts say it's only going to get worse

SEE ALSO: PIMCO's flagship hedge fund has lost more than 14% in 2019 — a rare stumble for the $3 billion credit strategy

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• Reading books and listening to podcasts can help form productive habits. 
• According to career expert Michael Simmons, some of the richest people in the world embrace the "five-hour rule," where they spend at least a couple hours during their day reading. 
• Business Insider has highlighted some examples of books and podcasts that will help you learn new skills for your career. You can find more book lists by subscribing to BI Prime. 

Books are more valuable than ever for people seeking success.  

Career expert Michael Simmons said that many of the world's top leaders like Oprah Winfrey and Warren Buffet use books for what he calls the "five-hour rule," or a habit of spending a couple of hours each day learning. This habit can help business owners adopt new skills and build upon the strengths they already have. 

Several entrepreneurs claim reading is part of their formula of success.

Interviews with more than 1,200 wealthy people in the book "How Rich People Think" reveals that the wealthy have one thing in common — they love to read. For example, cofounder and CEO of Microsoft, Bill Gates said he reads 50 books per year or about one book per week, Business Insider previously reported. 

"Walk into a wealthy person's home and one of the first things you'll see is an extensive library of books they've used to educate themselves on how to become more successful,"writes Steve Siebold, author of "How Rich People Think."

Whether you are studying for a master's degree in business administration or a venture capitalist, reading can bolster your business's success. To help you find the right book, we've rounded up a list based on dozens of interviews from today's top leaders. 

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• Chris Cole's Artemis Capital, an Austin-based hedge-fund firm with three funds, has racked up gains while the markets tank. 
• A recent stat sheet shows that Artemis' Vega flagship fund has returned more than 14% in March through Wednesday.
• Other hedge funds that have done well in the choppy markets include macro shops like Brevan Howard and Kirkoswald, short-sellers like Odey and Horseman, and new commodity fund Quantix Commodities.
• Visit Business Insider's homepage for more stories.

Artemis Capital's flagship Vega Fund fell more than 13% last year when the markets churned relentlessly higher, minus a dip in early September.

But the volatility-linked fund is now in its element, as markets have been thrashed by the quickly spreading coronavirus and a glut of oil supply that has sent crude's price tumbling. 

The $139 million Vega Fund has posted returns of 14.66% in March through Wednesday, according to a factsheet seen by Business Insider, after returning 6.1% in February, when the coronavirus selloff starting gripping markets. The firm's other strategies, all of which are volatility arbitrage, have also jumped in March so far — Hedgehog is up 11.94% and Hedgehog and the Fox is up 4.40%.

For the first time in years, hedge funds have been given the chance to prove that they do what they say they do — hedge the market. While the most popular stocks in the world have been the drivers for a lot of hedge funds' returns over the last decade, the new shakiness of the market has given managers with unique strategies a chance to shine.

"Artemis Vega is a form of defensive alpha and is intended to perform best when the rest of your portfolio is at its worst," the fund's factsheet reads.

Macro managers like Brevan Howard and Kirkoswald managed the February selloff well, sources told Business Insider, as each put up returns around 5% last month when stock markets fell nearly 9%. Both firms declined to comment.

Short-sellers that have been killed in recent years, including last year, have seen their fortunes turn around, with European managers like Odey and Horseman leading the way.

And Quantix Commodities, a hedge fund run by former Goldman traders, including former partner Don Casturo, is up for the year as of Monday, sources say. The fund, which follows commodity indices and bets on futures in different commodities, is up 2.35% for the month and 7.65% for the year.

Some of the biggest names in the hedge fund world have been taking more bearish positions, including Bridgewater, the world's largest hedge fund. Dalio's fund shorted dozens of Europe's biggest names earlier this week just before the US severely restricted travel to the continent. 

SEE ALSO: Massive hedge fund Bridgewater just made an $11.8 billion bet against giant European companies like Bayer, Santander, and Adidas as the coronavirus spread has Italy on lockdown

SEE ALSO: Hedge funds are making most of their money by piling into no-brainer wins like Apple and Amazon — and that's fueling investor fears about crowded trades

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• Ray Dalio was blindsided by the market sell-off sparked by coronavirus this month, he told the Financial Times.
• The billionaire founder of Bridgewater Associates didn't pull out of stocks, commodities, and other assets before they tumbled in recent days.
• Bridgewater's flagship Pure Alpha Fund II is down 13% in March and 20% for the year, the Financial Times reported.
• "We're disappointed because we should have made money rather than lost money in this move the way we did in 2008," Dalio told the newspaper.
• Visit Business Insider's homepage for more stories.

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Billionaire hedge fund manager Ray Dalio was caught off guard by the coronavirus-fueled market sell-off this month, he told the Financial Times.

The founder of Bridgewater Associates — the world's largest hedge fund with about $160 billion in assets under management — didn't escape stocks, commodities, and other assets before they tumbled in recent days.

"We did not know how to navigate the virus and chose not to because we didn't think we had an edge in trading it," Dalio told the Financial Times on Sundau. "So, we stayed in our positions and in retrospect we should have cut all risk."

Bridgewater's flagship Pure Alpha Fund II began this month betting that equities and Treasury yields would rise, a source told the Financial Times. However, both plunged due to escalating fears of the economic fallout from coronavirus and the breakout of an oil-price war.

As a result, the fund's value has dropped 13% this month, two sources told the Financial Times. It fell 8% over the course of January and February, leaving it down about 20% this year.

"We're disappointed because we should have made money rather than lost money in this move the way we did in 2008," Dalio told the Financial Times.

The famous fund posted a 9.4% gain in 2008, striking a sharp contrast to the 37% decline in the S&P 500 that year, the newspaper said.

Read more: Massive hedge fund Bridgewater just made an $11.8 billion bet against giant European companies like Bayer, Santander, and Adidas as the coronavirus spread has Italy on lockdown

Dalio underscored the abnormality of the current trading environment in a LinkedIn post on Monday.

"I wasn't, and still am not, able to anticipate the most important things happening in the markets because of the extremely rare nature of the circumstances," he said.

Looking back, it appears that Dalio made the wrong call when he warned investors not to ditch stocks for dollars in a CNBC interview in January, declaring that "cash is trash."

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• Bridgewater's All Weather fund is down 14% and the Pure Alpha fund is down 21% as of the end of Monday, according to a note billionaire founder Ray Dalio sent to investors this morning.
• He said "while it's not what I would want, it's consistent with what I would have expected under the circumstances."
• Dalio in the note points out how the firm was down 20% in September 2008, before making money by the end of the year.
• Pure Alpha was flat last year while All Weather made nearly 20%.
• Read the full memo below.
• Visit Business Insider's homepage for more stories.

Ray Dalio isn't happy with the performance of his Pure Alpha and All Weather funds in light of the sell-off due to the novel coronavirus sell-off, but he isn't surprised.

The billionaire founder of $160 billion hedge fund firm Bridgewater told investors this morning in a note that "while it's not what I would want, it's consistent with what I would have expected under the circumstances." His Pure Alpha fund is down roughly 21% as of the end of day Monday, and the more measured All Weather fund is down roughly 14%. 

In a two-page note to investors, Dalio said that the firm initially thought the virus was similar to other global risks that they had built into their programs, like an earthquake or a war with Iran. 

"For those sorts of big potential risks or others we can't even imagine, we have controls that are intended to limit our losses to tolerable amounts," he wrote. "In this case the risk control process worked as designed. As a result, our losses have been similar to those in our prior worst-performing periods."

The big winners in the hedge fund space include commodity and macro players, as well as volatility managers. In the equity space, value managers have outperformed growth funds so far. Bridgewater has been the most high-profile of managers to suffer serious losses, as many other large multi-strategy firms, like Citadel and Point72, and quants, like Renaissance Technologies, have remained roughly flat or suffered more muted losses. 

Dalio reminded investors that the firm was down 20% in September of 2008, before making money for the year, and wrote that the firm has "maintained our liquidity to be able to adjust the portfolio in response to changing conditions."

The firm used a similar playbook to its 2008 game plan, with a focus on interest rates and a floor of 0% rates.

"For example, eight years before the 2008 financial crisis our study of the Great Depression led us to understand the mechanics of hitting 0% interest rates in an economic downturn, which led us to build a 'Depression Gauge' so that when rates hit 0% in 2008 we had it in our systems and we stuck to it and it helped us a lot," he wrote.

"Similarly the game plan that we had going into this coronavirus crisis used indicators to trigger our defensive moves
in a downturn toward a 0% interest rate floor. It also included holding options positions designed to limit our losses
in the worst-case scenario regardless of the cause."

Toward the end of the note, Dalio warned about a world with negative interest rates, "a global wealth gap, and populism."

"It is one we have been preparing for a long time. I will soon send you my research about this. We do think that we have an edge in knowing how to invest in this environment. Right now we are deep at work, looking at the implications in detail," he wrote.

Bridgewater declined to comment further.

Read Ray Dalio's full memo:

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