A conversation with Ray Dalio on where countries like the UAE and KSA are in their arc cycle

all right thank you for taking the time since you gave me the book back in October 2021 it took me a long time to read sorry and that's that's because you know you cannot go through the book without reflecting on where do things fit with with regards to where I am living and other other countries that I observe and then that experience I went through it was others who who also had the same thing in the and they asked me so what does Rey think about where the UAE is is doing or or other countries who are neutral and also uh want to do who want to do things to to grow and that led me to the idea of I'm curious and I'm sure others would like to also hear that to ask you to run the research on the UAE Saudi Arabia Singapore and Switzerland which is also have been a reference point for for larpier as the boutique country so perhaps you know if you can share where these countries fit in that Arc I know that the world is there is the us there is Europe and there is China that covers the the whole globe but there are other countries who are working towards making their countries better yes I think what you're referring to is the fact that there are reasons for health like a human body and they're measurable like um you just mentioned that you had a physical and with your physical you can almost do the checklist and almost know your life expectancy practically but there are Basics right and so the basics are uh few do you earn more than you spend are you financially stable do you have a good income sheet and balance sheet do you work well with each other so that or is there internal conflict that is disruptive are you at risk of an international war or are you outside of a risk of an international War these issues are defining issues between countries but their outcomes go back to basics such as most importantly how do you educate your children and education I don't mean just education such as I know my Reading Writing and arithmetic how I know how to do algorithms or something like that education and character development does the individual know how to control oneself to work well with others civility because through those things good education develop skills but working well with each other creates both productivity and Harmony and makes for a better Society so that produces those finances then there are many many many many many measures that capture these things and they're captured in surveys that go across countries such as attitudes about work um his work um do you have a mentality where your sense of accomplishment is a joy and that you're going to work hard many countries it's more of a savior life you know work hard save your life we all have that work-life balance corruption for example there are corruption indices between countries that show the different corruption levels there's a negative 54 percent correlation between the level of a country's corruption and its growth rate over the next 10 years so there are those basic elements and so when you look at countries that succeed well it's almost like families that succeed well you know um are they well educated or well behaved do they have Harmony do they have those solid values of being productive or is there corruption and so on and I'm designing undefining success as um really mostly economic success I'm measuring it some societies might say that there are other measures of success and then I would use other measures for other measures of success you know um also the cost of an educated person in other words education matters but those countries that have educated people working cost effectively such as India are very very competitive because you can get more value you can get an educated person more cost effectively in countries like that and so when you mention the countries that you're learning you referred to Abu Dhabi Saudi Arabia Switzerland and Singapore what you're seeing is those qualities being exhibited now in Switzerland and in Singapore they're not blessed with the same natural resources but they have um and so the human capital was particularly important what's happening in Saudi Arabia and has happened for a long while in uh the UAE is the ability to invest well to have a highly educated highly civil population that's very clever well educated and then works well together to create the economic Miracles so even though Abu Dhabi has nearly half of its income externally from energy it has developed a very strong non-energy economy Saudi Arabia is in the process of transforming itself to be invest a lot more internally particularly with the new leadership from our previous conversations once you you said something interesting that if you're rich you have two paths you could either say I'm rich I'm just going to hang out and have a good fun I don't need to worry about working or you or you say I'm rich and I want to improve myself and do more things and so to me now uh the UAE and and and so and Saudi Arabia have taken that path of yes we have we're rich and we want to improve ourselves that's right there's a decadence okay meaning a Decay when you're just living off of your wealth That's a classic sign that happens late in the cycle you lose competitiveness you lose income you lose wealth as you're depleting the wealth um it's really the opposite now that's happening in the UAE and in Saudi Arabia it is invest in human capital development that invest make the country greater so the investments in both of those countries while they're investing outside the country they're committing a huge amount of their resources to invest inside the country to create infrastructure and talent development human capital development because the greatest capital is human capital right so if you invest in human capital that will also Carry On from one generation to another the parents teaching the Next Generation to uh how to be smart and work hard and accomplish those things then you have sustainability and that's what is really really happening in both of those countries uh and particularly Saudi Arabia is made enormous leaps in that regard openness uh so you know when I go back to history and and I know that in your book you you do mention about the Islamic Khalifa system that the the height of that is when they went to spread religion but they really then got and they brought in other civilizations and in fact the majority of the scientists and and and under that period were actually non-arabs and so when I when you move forward to today you actually see the openness and other characteristics showing up now in these two countries that they're opening up they want people to come ownership come in and live and share and all of that stuff which which to me it's very much resonates that when you're open and when you meet people then you get to learn new and new habits in your new eyes you get to know the best the thinking in the world you know that was why the reverse of that is why the collapse of China in other words in the Qing Dynasty which was took it through in around 1840 it was really the richest country in the world and it was isolated and they didn't have the benefit of the other ideas and the foreign powers came in and because of that defeated them over and they have what they call the Hundred Years of humiliation which there was the collapse it ends in nineteen really 49 World War II and then 1949 the then the PRC comes into existence it's the opposite openness to different ideas is what you're referring to and as those measurements um really give a good example and and it's so true what you're saying I mean think about the UAE where 90 of the population is from other places and you've really created an environment where uh people from all over have wonderful lives that they that they're at home and they feel great about educating their children here and you have that diversity of thought so Talent magnet um these places have now become Talent magnets and this is particularly true and valuable at a time when there's great conflict in the world so if you look at the great Powers now if you look at the United States or you look at China right now um it's much more difficult environments because of some of the reverse sets of circumstances and also the possibility of well there are Wars going on between those countries there's attack War there's a trade War there's a geopolitical influence War there's an economic and capital War it could be a military war those conflicts that are existing between those countries and some of the problems that they're having in the United States education internal conflict financial problems those types of things create relative advantages for environments such as Singapore Switzerland to some extent and what we're seeing here in the areas that you mentioned the UAE and the region and so they become the Renaissance States like if you look about where were the renaissances in history there were the places where there was great trade and education and they offered a lot of inventiveness and so on and they were not in the middle of the wars they almost benefited from the wars and so Talent magnets yes as you're describing they're Talent magnets they're bringing these intelligent people they're educating their populations well and they're bringing that diversity of perspective to get to take the best of the best in a world now where there's strategic competition so the even the ability to use each other's Technologies is limited right now these places have access to different Technologies in different ways of thinking which is a competitive advantage you mentioned something in the beginning about being civil with each other which I think you know I mean the stability of course is very important so here we you know we take it for a given you don't need to worry about uh safety if things the thing things are organized so that idea of being civil with each other obviously every every society has its own way of dealing with it you have you have a democracy you have other versions of a democracy that certain societies want to want to go to govern themselves so when you study the these different societies uh throughout history so so the Chinese had their own version of how to be civil with each other largely confusion okay uh the uh Spain when it was an Empire it was a a a monarchy and that's how they or even everybody yes everybody and you know how to behave and of course you know the the the us or the UK or greater Britain back then you had the uh the checks and balances in the system so the I guess you know my question is that civil being civil with each other isn't important essential essential how you do it it doesn't have to be a one a one criteria no okay many ways yes many ways yes okay as a matter of fact but in Plato in the Republic gave the cycles of these different types of systems um and there's a threat to each and that cycle is something like the great threat to democracy is anarchy what happens is when people start fighting with each other and then rule of law is no longer as dominant power then there's this great conflict that causes a revolution or a civil war of times and then um and then in the cycle then the despot comes to power and the best was the benevolent despot in other words the autocratic leader but who puts the population first he believed that that was the best you know put the population the wise and he knew how to put the population but he'd provide the leadership and then history has shown that sometimes power corrupts and absolute power can corrupt absolutely and sometimes you get then the leader who comes along who is not as strong not as capable more self-focused not as and then you have another Revolution and that other Revolution produces more change so you see that none of these systems have existed forever and each system has more of its time you know there's an environment for example in an environment of great conflict you see that then you become more autocratic in the leadership because fragmented decision making in a war for example makes for an ineffective side in that war they fighting internally as well as externally so you see that that cycle revolves um and um but you see civility you see that you can simultaneously work well together and compete work well together and compete and of course the magic is taking The Talented creative can-do entrepreneurial type of person and I don't mean just in business maybe it's an entrepreneurial type of person in science somebody who can imagine the future and make it happen and get resources to them so that's one of the reasons that capitalism has been effective as a means of getting re we're all trying to find who's the smartest person who's then going to take that and convert that into productivity and and so on so Capital rule of law capital and the talent is the magic ingredient you take a talented person and you put Capital to that talented person and you create an environment that works well and you have prosperity I want to go back to to finances also because you you touched on it at the beginning so all of these countries they have their finances in order uh as in you know they don't have too much debt and also they are earning more than they're spending or or there is a break even for for for the commodity that that that they sell so that must be also another ingredient that allows you it's so basic yeah um look there's no difference between an individual's finances and a country's finances other than the country has the ability to print money okay that's the only Okay so if you spend more than you were you will produce a debt a debt must be repaid that'll either be in hard money or in soft money because you're printed and so it's not the same for countries the income statement the balance sheet is very much like in individuals if you're earning more than you're spending and you have a good balance sheet then you have the financial Health if you don't have Financial Health then you don't have health because a lot of this is all about living standards and I mean what do people want if you don't provide them with good living standards you'll have a revolution so that requires Financial Health and the Financial Health is the same for a country as it is for an individual except the central banks can print money any advice you want to give these countries um again I want to I just want to emphasize the basics the things I mentioned before earn more than you spend uh be civil rule of law um healthy competition and don't go into an international war and try to stay out of War okay educate your population well the young people all the way through the issue that you refer to in terms of Civility it's difficult when you have to enforce it as distinct from when it exists within the people you know it's not necessarily to have a stronger police force to deal with criminals it's to have an ethics and a way of being within the people that doesn't produce the problems so it's those fundamental Basics I think that a equal opportunity it's funny you watch the dynasties in China once study the rise and declined of the dynasties in China and I follow um equal opportunity is very very powerful because it accomplishes two things it brings Talent from wherever it exists you could never tell where the talent is going to come from so by having equal broad-based talent you have access to Greater population of talent and that means that you're we're going to have a greater probability of finding the talent that together with the capital and so on will make good results but it also creates a sense that the system is a fair system a lot of revolutions take place and they they're devastating a lot of revolutions take place because the people there's a big wealth Gap and with that wealth Gap they feel the system is not fair so when they feel the system is not fair you get uh the consequences of internal conflict win at all cost so we're seeing more of that in the United States now right you're seeing more of the differences in not only economic circumstances differences in values and more populism classically populism begins to emerge and you could tell populism and there's left in the populism the left and populism of the right and those are people who say I will fight and win at all costs so working it out with the other side is not the primary objective getting what they want is the primary objective and that creates the ingredients of conflict conflict produces inefficiency at the first and then it produces you know worse than that in summary um in summary okay it's the fundamentals it's the education it's the how you are with each other it's the finances the balance sheet it's um all of the things that through time probably your parents tell you and and someone you've seen through time um the advice that I would give is measure it okay I like I have 18 measures of these things it's like a health index and by measuring what is your degree of corruption what is the amount of debt what is these things those health indicators by measuring those health indicators and looking at whether you're improving your health indicators or that they're deteriorating in an objective way then one has a guide for that and then beyond that one has leading indicators just like if you go for your annual physical and they you look at those things in your certain age and you're doing certain things that they can estimate your longevity the same is true if for you for the country's well-being and your financial well-being so I would say it's those fundamentals we've just talked about but then measured and using self-discipline and knowing also where it exists in the world you know like why am I here okay because the world changes and things change so know where they are appreciate them grow them if you're growing your country but also find them and appreciate them so so you read you you really want to keep a mark of what's going on and comparing it to to others so this becomes a guide for all of that Ray thank you for taking the time to share your insights on this such a pleasure we've known each other for a long time and I think we all know these things you know yes yes but I think you know just the the fact that you reflected it on a country and then looking across the globe and studying through history to me it it focuses people's attention whether you know I think it's a policy maker or or or somebody living in a community because these are Essentials for a family and for a country thank you sir my pleasure

Channel: Liwa Capital Advisors

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Length: 26min 20sec (1580 seconds)

Published: Sun Jun 25 2023