The secret history of Ray Dalio and the creation of Chicken McNuggets—how a 1980s hedge strategy unlocked a whole new menu

Before Ray Dalio built Bridgewater Associates into one of the world’s largest hedge funds, he was advising clients on a more basic business problem: the cost of feeding chickens.

That expertise, according to Dalio, helped McDonald’s to solve an early obstacle to introducing Chicken McNuggets, now one of its most popular products.

Back in the early 1980s, amid a volatile chicken market, McDonald’s needed help pricing their nuggets and limiting the risk of menu price fluctuations.

Sudden changes in chicken feed costs made it difficult to price the nuggets long-term.

To address this dilemma, McDonald’s hired a young consultant to hedge the cost.

Just a few years earlier, in 1977, the U.S. government announced dietary goals urging Americans to “decrease consumption of meat and increase consumption of poultry and fish,” following a report by the American Heart Association on dietary cholesterol.

At the same time, rising concerns about cardiovascular disease made many Americans more health-conscious .

McDonald’s, which had built its business as a red-meat burger chain, followed the U.S. government’s advice, and turned to poultry.

In 1981, McDonald’s launched Chicken ’n Chips , a combo of fries and boneless chicken pieces, however this meal was eventually phased out in favor of the McNuggets.

In the mid 1970s, most Americans picked beef as their meat of choice, followed by pork and then chicken.

By the 1990s, beef and chicken switched in popularity.

In the early 1980s the chain looked to Dalio, whose expertise in agricultural commodities and previous work at Shearson Hayden Stone advising cattle ranchers and crop producers on how to adapt to various risks made him a qualified candidate for the job.

Dalio, then building a scrappy Bridgewater Associates, already worked with one of America’s largest poultry producers as his client, which became a helpful connection in the McDonald’s assignment.

“I went to one of my chicken-producing clients and McDonald’s, and I showed how this chicken-producing client could hedge the price and give them a stable price,” Dalio told Bloomberg on the “Odd Lots” podcast last year.