Billionaire Ray Dalio Predicts The Next Big Market Crash

so if I have the formula what else do you need for some others say guess what I want to go build an x bridge Wow okay wise guy give it a shot it's more difficult to succeed in the markets than it is to succeed in the Olympics reduce risk without reduce in return think of it it's like going to a horse race you're not gonna pick the best horse diversification is a boring formula it's outfitted etc etc I went from nothing you asked me capitalism it is in danger of dying I understand a philosopher where your goal is down it's a complicated question kind of pumping money into Wow way you got to play by my rules it doesn't work that way which produces better results oh you're not letting me answer your question Wow US China who needs who mourns you have a dangerous set of circumstances history has taught us that so I'm telling this discussions taking place bet on it [Music] so today I'm sitting with Ray Dahlia for those of you that don't know who Ray Dalio is Ray Dalio is the author of principles which is you know the work he's done in his life and his philosophy similar to what Marcus Aurelius wrote in meditations many years ago this is for entrepreneurs and business people if you haven't read it you definitely have to read it but again if you don't know who he is I'll give you some perspective here he's a 25th richest man in America 58 in the world he can write 18700 checks for 1 million dollars for those who don't like Bugattis he can buy ninety three hundred Bugattis that's the kind of wealth he has but he's not just known for that he also go the company that has roughly around a hundred twenty-five billion dollars or more of money under management called Bridgewater associates is the chairman founder and CEO ray Dahlia ray thank you for making the time thank you for making it yes and we kind of wanted to create a romantic setting this is like a notebook esque for you maybe you're gonna open up and tell us some of your insight even deeper than principles well I don't know about your comment about romantic but it is a pretty setting it is a great setting yes so ray for some some people who don't obviously one of the things you and I talk about on the phone I come from the Morgan Stanley background that's kind of how I got into the financial industry how did you get into the business yourself in the 1960s I was caddying at a golf course and then and the stock market was hot at the time so I was 12 years old and I was talking about stocks with the people that I was catting with and I took my catting money and I decided I would invest I didn't know what I was doing first sock I bought was a company which was the only company I ever heard of that was selling for less than five dollars a share that was my criteria because I figured I could buy more shares and that meant if it went up I would make more money obviously stupid mmm-hmm but I got lucky the first company I bought was a company that was about to go broke but somebody acquired it and it tripled and I thought this game is easy so I got hooked how often was that what was a timeline of you best thing to a triple link oh I don't remember exactly but I would say was probably maybe a little less than a year a year I don't pretty quick Patrol I mean I can really hook you yeah when an acquisition comes along so and then I got hooked on the game I know your dad was a musician jazz and ain't a but how did you get into even being interested in that was it listening to what they were talking about the guys that were golfing when you were caddy in or at the time everybody played a little bit around you know the words they were taking the stock market was very hot so but so I'd walk around and we'd be chatting you know I did be asking them questions and they would think it was a little odd that I was asking them questions and they were nice to a young kid and so we would talk about it and I'd say what stock and ones you know and so that's how it happened and at that time if I'm 12 years old and I'm your friend how was revalued what was your personality like will you shy were you curious were you confident what was your personality well the first word that you mentioned that comes is curious okay I'm very very curious all right I'm not shy I'm but I'm polite you know I don't know if they're playing golf I want to do what they want me to do but if you get a nice person and I'm curious and get into an interesting conversation that they're interested in it's great now you carry for some interesting people I know one of them being President Nixon was he a president when you were counting or not yet no not he wasn't yet no he had lost the election you know his first and then he it was post that got it then the Duke of Windsor and some other people that's right and there was Wellington is there was a Wall Street crowd you know and that led to my being able to clerk on the floor of the New York Stock Exchange because one of those guys we were talking about the markets and so on yeah and he had a specialist firm in other words a floor brokerage firm on the floor and so he said hey why don't you in your summer job come down and clerk so between college and my summer job my going to business school I got the clerk on the floor of the knock sock exchange but along the way you know those those guys made a big difference in my life do you remember any dialogue with Richard Nixon or no was there any specific that stuck till today or not know he was there wasn't he wasn't chatting okay that's it's funny I asked Clint Hill I don't know if you know Clint Hill now Clint Hill was the Secret Service age and when JFK got shot he's the first guy that jumped on the top of the car ooh and he was a secret service for Richard Nixon it says he wouldn't talk too much he was always kind of to himself and quiet it seems it's the same thing with you as well so now you go to high school who are you in high school same curious where you're playing sports were you a 4.0 GPA kid who are you in high school no I was the opposite of a 4.0 GPA kid like I I didn't like high school I I did like playing with my pals and and you know having a good time you know there was so much of learn this remember this and I think first of all I think have a very bad rope memory what I mean rope memory is if something doesn't have a reason for being what it is within its context like let's say phone numbers or names and so on I it's challenging for me to remember it but also I didn't understand the purpose of it I didn't get it hooked in it wasn't curious curiosity based it wasn't interesting and so I was a lousy high school student I barely got in on probation to CW post college which is no Ivy League college but I'm very very curious at the time for lots of different things what people would say everything from politics to you know markets and how things work you know not mechanical things but how the system epital I was up involved with politics quiet politics well I was young enough at the time that I remember Eisenhower going to Nixon the debate in Kennedy and I was inspired by John Kennedy and that era and so all along then it was interesting and so when Bobby Kennedy was running for the Senate it was in New York I got very actively involved I was just it was in high school and so that part of it was interesting to me so anyway politics markets gilina games were you a card guy backgammon chests like the judge I don't I play backgammon you play back in yeah played backgammon I play I like Jess I played some chess but no it was mostly my game was the markets because the two things went together okay the two things went together what was going on in the world politics and so on and what was going on in the markets and to me it was an ability to bet on what was going on in the markets right in other words bet on what's going on in the world because what was going on in the world would affect what was going on their markets so to me that enthralled me because it wasn't just theoretical like if you read a you know newspaper and everybody talks politics and they say you what's gonna happen oh yeah bet on it make your your bet and the markets gives you an objective scoring of how well you are at betting on these macro global macro economic political things is that is that a pretty common thread amongst everybody in your world meet when I say your world I'm talking you Buffett I'm talking people that are investors that pay very close attention to politics because so does Buffett he you know he's a guy that was coming to pay attention to that is that very common or not really I'm not really okay not really in terms of let's say global macro investor most people find a particular niche let's say I would say even in Warren Buffett's case he will focus a lot particularly on the cash flows you're exchanging one cash flow for another cash flow that has to do with value investing in such things or man you you pay it well investing is an exchange of a lump sum payment for a future clash flow right so it's maybe the cash you have or even the cash you can borrow but you can take a certain amount of cash and you buy something and what you're getting is a cash flow like your investment than that and they all compare so when you can take it at a certain amount of cash that let so you could borrow it at 3% and I can invest it at 6% then I'm going to make a three percent spread and it's the constant calculation of what that would be let's say Warren Buffett's type of type of approach and that would be most important that's more value investing then you do with how the world is changing and what the world is going to be like and that's a little bit different or you go to niches you know a niche might be you follow a particular industry and what will the new AI technologies be for example and how do I bet on that or it may end up being that you look at certain distress debt but quite often it's a much more narrow specialist type of thing so it's a little bit like doctors you know a doctor might be a specialist in this there are a lot of specialists and then the idea of global macro brings me into a different world than most of the menu that you as well because you're more diversified when I look at the way you set up your portfolio it's not as niches that all right I'm big on diversity or very big like patient of knowing how knowing how to adverse by well is more important than almost anything people don't understand this is that an evergreen principle yes that's it evergreen principle and the reason I'm saying that the way it is it's almost like a casino making its money okay okay the way that you do it is you get an edge so now when you have to make a bet I've got a bet against the whole world the world has view on something is reflected in the price so when I think something is attractive or unattractive that means I have to bet against the whole world and whether that's right or not that's difficult I get it right you know more often than I get it wrong but I'm going to get it wrong sometimes and so when you can take a lot of different bets what you can do is like the casino you'll get your average that your bet would be but you'll reduce your risk event one of those tables not being the table that's paying off and so that margin then so I can reduce my risk without reducing my return by knowing how to diverse if I and I'd say that's particularly true important for the people or listening near investors because what they've got to do some risk without reduce in return that's right that's the specialty that's right elaborate a little bit more if you don't mind on that so redo some risk without reducing the return because a lot of times if I'm reducing the risk it means my return is also going Lord but you're saying no no what I'd even reduce them to return right I mean that's a high-paying skill set yeah it's the most important thing that you could start off doing if you have a number of equally good likely bets but they're uncorrelated like the casino you know one table is going to get me a margin like this but take another table and it makes me a margin like this but I might have volatility about those let me take all those investments that I think will make 10 percent so that's my return but they're uncorrelated with each other that means I'll still get to 10 I don't lower my 10 but my diversification means I lower my risk so I improved my return to risk ratio ah is that an art that you can teach oh yeah yeah I wrote about it in there's a what I call a section in this book the holy grail of investing it's a three pages long and it explains basically this important thing because when that epiphany happened to me and how I would do it it changed everything by being able to do that because how old I can improve through diversification I can improve my return to risk ratio by a factor of five so by diversifying okay the return relative to the risk I can keep my returns the same and reduce my risk to one-fifth if I know how to diversify well and that's why I'm explaining it's not all that complicated it's simply explained in the book but in any case that is the holy grail of investing ok that's a big thing if you start to know that that's what you're going for it changes everything and it's so important for the average person is listening and don't let me explain why that is because the average person who's listening too many people think that they can go into this very difficult zero-sum game of betting against the consensus and be right you know what I mean in other words investor says I'm gonna go in the markets I'm gonna make money betting against the consensus and be right right because the consensus is built into the price okay okay that's what's up so it's think of it it's like going to a horse race and there's handicaps okay you're not going to pick the best horse and you're not going to pick the best company a terrible company can be a better investment than a terrific company a terrible company could be a better investment just like the terrible horse can be a better with because the odds that are changing let you go into that and that becomes the longshot but because the longshot is going to pay off twenty five to one right if he comes in that you could just as likely bet on the longshot as the leader and it's going to be equally likely that you're gonna make money right otherwise you otherwise the market would be doing the opposite well the market is like that right in other words if everybody believes that something's going to be terrific okay then everybody's betting on it and its price is high so it's not what's best necessarily it's what's best relative to what's in the price what's discounted so let me ask you saying have your formula let's just I have you for you you got around what fifteen hundred employees with Bridgewater is the number right about 50 ah that's always so if I have the formula that you have what other what edge do you have that somebody else has to have as a character as an individual quality discipline patience what else do you need for some others say guess what I want to go brick build the next bridge Wow okay before I go to that I want to pit complete my thought on this notion shove you was an average investor in why diversification so important in order for you to win in the game like you're gonna go in and pick what's a good investment you are playing against others you have to realize that because that's it's all in the odds it's like when you go to the track you're going to have to play against the handicappers okay so it is very difficult for you to beat me or to beat others who were putting 1,500 people and hundreds of millions of dollars into how to win in that game right and there's a lot of people and I find it challenging I find it difficult so it's difficult to win in that game it's it's difficult to win in that game individually by placing the bets it's difficult to win in that game it's more difficult to succeed in the markets than it is to succeed in the Olympics okay people but people don't realize that they think I'm going to go have an obsession or okay but there are more people trying to do it in the markets that are trying to do it in the Olympics and so nobody would say I'm gonna run and compete in the Olympics when you realize how difficult that is okay but you can diversify well anybody could diversify well so if we look at what the world will be like in five years or three years or one year okay like we're coming in the presidential election we have all these things going on okay you want to bet on it okay wise guy give it a shot that's is that is that easy okay well the only way I can do it is I need to diversify my bets well I wouldn't want to concentrate on any one of those and I tried it I take like the casino I will take I'll take that bet and I'll take this bet and I'll take a bunch of those bets but for you was the average investor you're probably not going to even be able to pick which horses got the the edge what relative to the handicappers okay and so diversification that is the thing that I would say particularly for anybody it is the most important thing it's if you know how to do that well so that's why I'm saying you know that page those couple of pages here was something I wanted to pass along to you you'll see a lot of people will say that's a boring formula or it's an outdated you know you'll be in the industry install this whole diversification is a boring formula etcetera etc I'm I'm just trying to say I went from nothing you asked me okay I my dad's a jazz musician middle class or lower middle class family I had nothing other than parents who cared me and I could go to a good public school and that was the only thing I had and if I took that and I say ok Here I am with the things that has happened over the markets and making money and building a business and so on there was there a limited number of principles that I want to pass along to people because I think if they can get those principles that that would be extremely valuable and this is not boring so when I come back and you say okay that Arkin lodge or is not boring that was a very successful and exciting arc in life and this is one of those principles so if you take diversifying well how to diversify well please go understand that principle it's only a couple of pages please go understand that principle because when you have savings and you think how much money do I need for my kids education or my retirement or whatever it is and so on and if you don't know how to do this well you're risking a lot and if you do it well and so on it produces an enormous amount of opportunity so you have 1500 employees here how many of them do research for you specifically tied to politics election what's going to happen how much are you spending time studying that part of it since you're saying two things that intrigue you in high school politics and economy and how it's tied to each other are you guys focused heavily on study and what's happened in politics as well regulation laws a lot of well well we need to we need to more so today than we have ever had to why do you say that well because we're in a period of time which is very much like the late 1930s there are three main things that exist today and are the biggest forces in what is happening that did not exist before in our lifetimes but existed in the 1930s okay and if you look at history they repeat themselves and the first is that there's a very large gap between the rich and the poor and as a result big gap in politics between the left and the right okay it's become more extreme and in this coming election it will be more extreme and around the world it's more extreme that's why we see the rise in population okay that has very big implications on how the economy will work and how taxes will happen let me give an example that the corporate tax cut which happened was a big boost for stocks because you own a stock and they had pay Lex taxes the stock is worth more the company's worth more if there is a let's say a Democrat elected there's a high probability almost certainty that that would be route to old bat sure so one of those or in other matters and it matters in a lot of different ways more than it ever mattered before so item number one the wealth gap in the political gap the second factor interest rates are close to zero and the printing of money to buy assets is not as effective in the old days in the normal days if the economy didn't do so well you'd hit it with a little joke of stimulation you lover it lower the interest rate and put some cash out there you give it a hype and then it goes okay when you get to zero or close to zero you can't blower those interest rates so we're close to that level in the United States we're at those levels negative interest rates in Europe negative interest rates in Japan that baby ain't going to work any more when you try to lower that in terms of that won't happen okay that's limited and then there what they do is they go out and they print money and they buy financial assets and that is not working as well because what happens is when you buy the financial assets it goes into the hands of this of who own financial asset investors and what they do is they put it into more investments that notion of putting it into more investments makes those investments go up in price which is great for the people who have the investments but not so great for the people who don't have the invest it widens the wealth gap and it's a its own challenge and it's not going to be stimulative and you'll see it so item number two that didn't exist in our lifetimes before but did exist in the late 30s was is that item number three that exists is that there's a rise of a power to challenging an existing world power China China rising to challenge the United States and if you look at through history when there's existing world powers and there's rising of a challenging power there is a conflict there are conflicts and they've led to wars in the last 500 years that's happened 16 times then to 12 of those times they had there were Wars there were four types of wars that happened simultaneously we always think shooting each other and sending people and bodies into wars and that kind of war but but there they all have four types of wars they have a trade war they often start with a trade war 1930s smoot-hawley Tariff there is a technology war there is a geopolitical war like is happening with China what will it mean for Asia Asian countries and there's a capital war capital war in all of these cases so for example just recently the Trump administration said that they're considering shutting off capital to China a certain flow of capital to China well it's not happened before you have to go back to World War two and in World War Two and a number of wars that other countries have had they have a capital war which means that that they can say the Trump administration can say to the Chinese you know those trillion dollars of bonds that you own well we're not going to pay you or we're gonna do this or that these types of wars and how to how does money flow between autorai who need to hock I'll digress into that but I just wanted to make clear that at number three so these are factors short one wealth and political gap extreme number two monetary policy can't so if we have a downturn and they're at each other's throats serious number three the conflict with with China these things have played out now when you ask how do you play the game in China us that's a that's a conversation but I just wanted to clarify that the nature of the powerfulness so now when you look at why is politics more important today than it was because that will determine in the markets what will happen in in the markets in the economy right in number one that wealth gap who you elect will have a big economic and market impact from number two the absence of monetary policy will have a big market impact as to what will be done and number three this geopolitical war which involves those four things technology and so on will have a big impact so that's why it's more important than ever so question for you what US China who needs whom or because China was communism you write about it in your paper why and how capitalism needs to be reformed which we're gonna put the link below if you haven't read it you got to read this paper so who needs two more their communism they look at what's going on in the world they notice us is doing good this whole book about Karl Marx communist manifesto flopped it impact a lot of people were killed it didn't work my family happened then we're communists then they look around Russia says hey Reagan comes maybe you got a consider capitalism Russia kind of starts tuna now China is looking at it they keep communism at the power at the top where there's not really freedom of press but economy maybe let's test capitalism now they're coming up isn't the leader still us where they rely on us even though if they want to compete against them because I know the sole plan to have what made in China 2025 with IP and all these things they're taking with the whole plan I'm sure you've read about it but my question for yourself I live I spend a lot of time in China and and I know leaders and I and I see both perspectives and I want to try to be as accurate as I possibly can in painting those perspectives okay there was a hierarchy and in most large companies in the United States you would not have a vote and an election as to who's operating it and so it's a top-down kind of management in which the government is working in the coordination of its private sector and its public sector extremely involved right now exactly and they would say it seems so crazy not to be I mean so a leader of China described it as follows okay he said and and this will help you understand the Chinese on mentality and because you have you you you know Iran and you know the United States if one needs to suspend biases in order to try to hear the others perspective and so what a leader in China described to me said the essence of the difference between the United States and China is what is the unit of map that matters in the United States it is the individual it is individualism and it is the individual and everything is bottom-up you know it's the entrepreneur you elect your government from bottom up and and so on so it's a bottom-up type of process companies are put together by people who all want to make money together they find it and they come together and they make it bottom up but it's bottom up if you want to build a highway okay individual property rights will matter a lot more in the United States so an individual can almost stand in the way that high would be if you have a mission to get something done individuals can stand in the way or facilitate it so that's bottom-up and he said in China the unit is with the family and when if you understand Confucianism Confucianism is for China what judeo-christian roots is for the United States and that starts with the family and it says if you know how to run your family well and there are rules for running your family well according to confusion and and then you know how to enter with your family interacting with the greater society you have order but it's very paternal paternal means okay your responsibility it's top-down so when they so there's a variant they when they're running the government it would be very similar to maybe running a big company here that they would say okay well there's top-down which produces better results I'm not going to get that that we can ask but yes I get put in all kind of philosophy so it's top-down so so the courts a complicated question right the important thing what so I'll give you what my thoughts are on that in their experience when I first started going there which was in 1984 since 1984 they have increased their incomes by an average of 26 times they've gone from 2% of GDP to 22% of GDP they had a poverty rate which was 88% it's now gone to less than 1% they have lengthened the life expectancy by 10 years I'm not saying which is gone better or not but I'm saying they believe and when you look at it that that process is a logical process and it works well and so that is the one that they're operating by I grew up in America which was a land of opportunity for me and this goes back to what I'm saying in terms it's got to be a land of opportunity but I grew up in and and all I had were two parents who loved me and I went to a public school and and I believed in this opportunity and that that element of those types of freedoms to create that that that opportunity right now in the United States we have a problem in the public education system in terms of the quality certain areas which are can't receive basic funding for basic things the most basic things because money doesn't get to them they would say well that would be intolerable how do we get deal with it we have our own problem so that each has a elements of pros and cons they could say listen having my company's work with my government if it let's say on research if I was to take AI research or if we take Huawei or companies like that and you would say well there in earlier years in earlier decades there was funding for original research if it's just the exact profit motive before you make it it may not be that the best results are necessarily always dealt with particularly the profit moment so they might say listen we'll put money into development now we would say in a I think a maybe too black-and-white way that putting money into the development by the government making some of those moves would not be our way of doing it from profit down and so if you look but if you look at let's say what DARPA is come up with in terms of where the internet came from and where GPS came from so there are issues my main point is let's step back from that the question you're asking me is irrelevant which what I like it doesn't matter I mean you know because the pros and cons because the issue really is will they have the right to do it their way you know what let me just finish will they have the right to do with that show that way or no there is a question around the right because will they do it that way and will we do it our way and then you have the real conflict okay because the real conflict when you get down to the nitty-gritty of that conflict is they say the team I'm going to put on is going to be a government company partnership type of thing okay and we will choose not to have as much of a government partnership and then we argue about what the rules of the game are and that's where the hardball starts to come in right because what are the rules it again I don't know if I yeah it whatever way you want to run your family you're on your family it's not my business no but wait what I'm saying to you as China wants to run it with those rules go be at it no but you're not understanding what I'm trying to say no no I'm trying to make we're when you're when there's a question of an intersection what are the rules of a game the United States and China would disagree well that's where the nubs the rubs come in other words if Huawei is a company which has a tremendous lead in 5g technology and what an American perspective and the rules would be that China pumping money into Wow way is not the way the rules should be okay China would say well that's for you to say and then and so they'll argue but if more for this top-down versus bottom-up that okay you're trying to do business with me in my community you got to play by my rules not you yeah that's right it's not so clear-cut that's the point but but if the whole thing with the CFO and the whole you know Iran and side you with another company nobody you get what I'm asking you no but I'm saying if you're going to do business with us and the community wouldn't it have to be by the rules that us of course each can operate by its rules within its domain however it doesn't work that way okay because of how intertwined they are okay because of how intertwined a1 technology is for another if I was to recount what goes into our technologies are there technologies and the world that we've gone through has been intertwined the globalization has meant that companies get this piece from the other and that piece from the other and there were trade routes and now we're having to go through a division of those because it would be easy to say when you're in my domain but the world doesn't work like the domain is cut and isolated and you're just within it because the products are not just within it if you take an Apple phone if you take Apple devices if you take a lot of things that we're using or vice versa they are intertwined and that is where the rub is I'm very familiar with that I'm very familiar with how many phones are in China and how much business they allowed us to go in and how much you know 5g is playing the influence with Huawei and they were getting to the systems even though they weren't selling a lot of phones yeah I understand that part with the race for y way how big of a race for 5g is today the only thing I'm asking is principle wise a power force controlled no free press no one really knows what their unemployment is they'll say 30.8 but no one really knows would you say it's a competition and with that competition whatever it is you will have our bottom up they'll have their top down they'll be control and will be this and and so on and that's how it'll work and so let's look at that both objectively and then just also understand what they're doing and what their perspective is because if you don't understand their perspective and you just paint it as you know a good evil thing whatever it is or I don't want it I don't think it's a good evil think that's not what I'm asking I'm saying if America doesn't take a stand for what made them great and they start compromising their beliefs and principles to make other empires happy we are getting weaker we don't become the leaders that Islam no but I couldn't agree with then we wouldn't have any disagreement if that's all you're saying okay because I couldn't agree with that statement analysts say well you know you know it's okay if China is doing this we have to understand their way of living we understand their way of living I just don't know if I want to compromise my like the other day I asked a question from somebody I said would I rather have my government control me or a corporation control me meaning they have a spy on me what I rather have the US government spy on me or have a corporation spy on me well I'd rather have the corporation spying me why because their motive is really going to be what profit okay but if the government is maybe they're trying to get data would I have control from another country having access over me I don't know so this is all things that I myself do that's that's that's fine all we're really doing I think is saying there are two teams that are coming on the field and there are two different approaches to those okay and now let's look at each one I would say the biggest issue in the United States is how do we be as great as we can be and that's where my greater worry is because at the end of the day what's going to happen is if we are as strong and capable as we can be and it's great as we can be we will be good for ourselves and we will be good for the world the best in in the event of any conflict I agree with that okay and that my worry is more about that okay than anything else perfect do you want if we go into this article yes you're incredibly written I love that I enjoyed it I highlighted made some notes and I brought some boards if anything you wanted a show to kind of highlight the points so when I read this I wrote three things down here on the side quotes on what you said in your one you said most capitalists don't know how to divide the economic pie well and most socialists don't know how to grow it as well okay then you said meaning capitalists kind of maybe or like hey let me go compete I want it all and socials like well I don't really know how to grow my thousand dollars ten thousand dollars fair to one's income growth results from one's productivity growth which results from one's personal development this leads me to one of the points you'll make about education which I want to cover and then last one I caught here was I believe that all good things taken to an extreme become self destructive and everything must evolve or die and that these principles now apply to capitalism do you believe the basic fundamentals of capitalism is an evergreen philosophy I'm a professional capitalistic capitalism has made my life what it is and and I and I love capitalism when you use the word evergreen I'm as I said there I think everything needs to look evolve everything needs to look at its problems and say what are its problems and change and if it doesn't look at its problems and change it is in danger of dying and so when I look at capitalism now and I go into this I hope anybody who's in this interview will take the time to read this so that they don't make a stereotypical view highly recommend you read the article highly I'll put the link below as well okay thank you but what what what it is certain outcomes and those outcomes are things like is this a country that I love the things I grew up with is this a country of equal opportunity can we share the notion what is our overarching principle can we share it just like you described when you came from around I think this is a country in which it was fabulous in being able to bring people without prejudice from anywhere in the world and they can really be citizens here in a way where based on their opportunity and their good behavior but in addition that are the the thing that I grew up with and I always believed was most important was equal opportunity so if I would say what is America it's a notion it's a country of equal opportunity and circumstances have changed this was not because of evilness of anybody but circumstances have changed having to do with combination things having to do with technologies replacing jobs and certain types of jobs having to do with going global and the workforce being a global workforce where others will in those jobs produce it outside the United States and bring it in having to do with monetary policy which means that the central bank's buy financial assets which benefits those who have financial assets relative to those having to do the way the Constitution is even written as regards that who is responsible for education aid or federal it's a state issue by the Constitution and it is and and and so then you would say as I examine them that's I just wanted to see the differences so I I carved it away I want to look at what the bottom 60% of the population what their lives are like and separated it from the top forty percent because the averages are misleading and really that's almost like an 80/20 thing in other words the bottom 80% of the relative to the top 20 because that other group is not it's basically similar to the bottom and and it's not an environment in which we can say that we are striving well for equal opportunity okay opportunity because in that top 40 percent the average per capita amount of money spent on a child's education is five times that in the lower 60% and so if you look at the outcomes not put the outcomes of income aside for a bit but just even deal with productivity and usefulness and you look at the tragedy of not being able to get adequate number of books in places or adequate teachers and and then you say is that productive and is it fair it's not productive because you're losing an education of a large percentage of the population the proper education the proper care we also have family issues families are breaking apart in other words like I said I had the benefit of two parents who love me and took care of that in some of these cases that you have a problem of that there's not good family guidance and and and and that's a whole social issue but it becomes a spiral and so I think the question is are we going to look at that well and how do we deal with it in a non-partisan non-ideological ah ideological way right so okay so the whole part we talk about the kids being raised without married parents I think 1960 73% were today's thirty eight percent you know that don't have both and the numbers obviously higher than it's ever been today but and I'm not just saying marry maybe you live on married or maybe there are different kinds of forms of households but I am saying the guidance in somewhere of a loving person at least right or two better for the care of those children is an important determinant that and basic education these are important determinants so you you think a lot of the references you make here goes to 30s and referencing cow you know the top 1% in the 30s versus today you know you showed this that the top 1% in the 30s versus today you know top 1% income share has the same amount as the bottom 90% in the last time it was like that in the authorities are you kind of suggesting that we may be facing what happened in the 30s years or no yes I'm saying you so that is why I'm saying there are three major divisions okay three major forces and that force which i think i emphasized the opportunity gap not just the wealth gap but they both matter if you look at history across countries across timeframes and you say when there's a large income and wealth gap and you have an economic downturn you have a dangerous fight on your hands you have a dangerous set of circumstances history has taught us that you said in April income inequality is the biggest crisis we have in America on 60 minutes and I think in recent a couple months ago you said wealth inequality those are the two main things that we ought to become I'm not saying an even more fundamental those are the outcomes and even more fundamental is opportunity in quality and production inequality because at the end of the day just like you said we have to find how to make this thing work well and you you quoted me as saying correctly that I think that the capitalists know how to make it better and the Socialists know how to maybe divide it okay but what they've got to do is they've got to get in there there are things that we could do that will make our country more equal opportunity and more productive such as what as well where you're going to put the education part but there's so many different there's so many different things but certainly basic equality and education if you go back to the most basic that dough oh okay but first you have to start with the following beliefs number one that we must deal with the issue okay that you treat that risky situation not at and political division that exists like this as a national crisis that we better get on looking at it's okay what a lot of different countries try to do with it you're not letting me answer your question cuz I'm sorry my answers are too long but if you I have to okay you've got to do it you've got to do it together okay you got it first of all treat it as I'm adjust your interview style you you your answers are long-winded and I got I'm sorry I'm gonna make notes no you go I'm gonna make notes and I'll come back and visit it please continue okay yeah I am long-winded no it's good the content is good but you're um you're getting me to ask a question from certain things you're saying cuz I'm curious I know and I feel at some that I can't answer complete the answer and that's my dilemma when I'm you know so I don't know you tell me because you know it's your it's your interview so do you tell me how to do it I think we as a country have got to come together and realize that we share a common problem of this polarity and that it should be first declared as a national emergency okay and and that it should be done in a knowledgeable and bipartisan way I don't think it's gonna happen but I think it's necessary to happen because otherwise you'll have a fight and this that fight will itself be very damaging and that you have to then engineer it so that you both increase productivity and you increase a fair system and you can do that I gave example you could do it by education you could do it by a number of things I won't that's where it led him to your question your question was then how would you do that in education that that was your follow-up to that sure and I am my example and I would say if you start with the will and the necessity and you did the engineering with the knowledgeable part partners in various ways you can get there the capacity of the individual so does that mean for example you might carry it forward in the following way you would say now just raise taxes but say what are our needs that we have to meet and how much money is it going to take to meet those needs and you start with not just a redistribute the money okay we have to redistribute the money but you start with the critical necessity like we need to approach at equal education or something approaching equal education so you put that in and you'd say how and how do I build that out and I could tell you lots of ways I encountered all the time in education my wife and I are very active in terms of dealing with that on a nitty-gritty basis and I could tell you that money put into education in a certain way can have a catalytic enormous benefit that will change that will have an economic benefit as a social benefit because if you look at for example what it takes to take a child through high school education okay it doesn't take there's there programs that we're working on the my wife is leading and in Connecticut 100 million dollars I saw that but but also on that comes from a nitty-gritty on the gum on the ground doing this for ten year kind of perspective that to get a child to go through to make it through high school or not and into a job doesn't cost that much okay now you compare that with the cost of not doing that what that has in terms of the differences in the crime rates the differences in the incarceration rates do you know that to incarcerate a person cost between 80 and 120 thousand dollars a year okay you got a fifty billion dollar of cost right there for you right now so you can change I cost-effectively you could give better opportunity and you can make it more advantageous because you'll create more productive people rather than less productive people so the discussion of how to engineer that is not taking place so I'm telling you a myth discussions taking place no no I'm saying no I'm saying the thing you don't think people would want to be able to help no I'm saying it's you're asking me is it taking place you're saying no what I'm saying is not taking place so here what I'm saying is there declare it as a national emergency no okay is our people with the real perspectives of both perspectives operating in a nonpartisan or bipartisan way to deal with that problem no okay it is progress being made to deal with that problem No yeah are they dealing with the cost-effectiveness of that dollar to produce a better dollar we're about them so you asked me examples I could give you many many many examples in which there are cost-effective ways to make more people productive and make the system fair and I'm saying it's not going to happen and it's not it's tragically not going to happen because you have these two sides so you have the let's say the socialist undermining entrepreneurship or or the American dream okay in many ways and in terms of changing things or you have the capitalist who is essentially not recognizing what the dilemma is for that other percentage of the population that's how it looks to me is it fair to say that in order for this to also improve we have to leave the freedom to fail up to the populist as well or else we're going to other regimes that are controlling their people let me explain what I mean by this if I'm if I'm trying to make any influence in the country like for myself I grew up in a family welfare my mom and then my mom was on welfare she ran out of money she went back to Iran I stayed here I joined the army went for two and a half years I had a 1.8 GPA in high school I'm a calculus kid I did good in calculus everything else I wasn't good at so I go to the army I get out a kid calls me friend of mine says I think you'd do better out of the army I'm about to relist ago Special Forces Sears Rangers I got all the orders I'm gonna go to DL I speak five languages that we're gonna use me this is gonna be a great guy to keep for 20 years I'd be a great soldier in the military he calls me society you can do good in the free market so what do you mean says you should get out so I get out then a man my first boss and my sister recommend me to pick up a book and I start reading then I get inspired then I get failed miserably and then I make a few hundred million dollars of my 30s that that happened because someone said hey what do you want to do with this but the same person that offered me a book offered 50 other people to read a book you understand this this is it all right that's the American Dream what I'm trying to say is but the point I'm trying to say that for you your background you shouldn't be worth eighteen point seven billion dollars today based on stats your dad's last names not Vanderbilt or Kennedy or its value and you made value irrelevant to the world where the world world Moses let me finish my statement and I'm also gonna be a little bit long-winded here please don't turn the wind back over to I promise you I think sometimes when we try to encourage the populace to do something if we go the route of a more entitlement entitlement entitlement but the kid is coming home to the wrong mindset nothing is changing so how much it is is this to work on the parents of the eight-year-old PBB or their 12 year old rate value how much of it is on the parents to want to also do something about it and want to pick up a book want to develop themselves as it is on the kid because I think we're forgetting the influence of who the kid is going home to I'm not forgetting that okay I'm talking about parenting right I mean that's one of my bigger come on that's one of my big things the only again how do we influence them well I think you I think you've just said I want to emphasize the things that you said because that's the American dream okay the American Dream is made up of the fact that you own it you acquired early on the the good guidance from adults and ideal your parents and you had an education system that was a fair education system that you can get through and there you went and then you had you and your self discovery process and your character that allowed you to do that in in the process of doing that not only did you take care of yourself you produce such great outcomes and the results that the consequence you are a real net contributor and so when we look at the we have to make these people net contributors unless somebody's handicapped if somebody can't for whatever their inability and that's a social program you have to give those other people essentially the opportunity to struggle well to be able to struggle well and to develop the character and the capabilities that come from struggling well that's the formula so we agree on that formula and so if we have a situation where we're failing because you can go to school districts and I know the school districts in which they don't can't afford each kid to have a book enough books or in some places not enough to have pencils at each kid having adequate pencils so they break them in half and sharpen them from both directions so that they can get by and doing that and you have that and we look at them we just don't look in the mirror and say can what can we give them to have that equal opportunity we have a problem because the way it's now laid out to me it looks like is that there was a one political party or one view that becomes extremely one-way that in terms of saying okay don't how do you create that that desire that opportunity that need to be productive and do don't give just the money give the means by which you're going to operate and you have another political party who was saying I will not deal with restructuring it so that we produce the outcomes that are necessary to create that education and create that equal opportunity so when I look at each one of them it's a scary choice because I don't think that either of them is creating that process and unless we come to do it and we'd stop talking like corporations are bad or our billionaires are bad you know most fill language to boast most most billionaires became I'm an accidental billionaire and most people became accident billionaires because what they did is they produce something of value that people wanted whether it's millionaires to get million three or just earning a good job you're producing something that some wants and in producing something that someone wants they pay you for it and the more you produce that somebody wants the more they pay you and that's the way the system is and that entrepreneurship and all of that is a very important thing that's why equal opportunity people from all over the world came to the United States for that okay so now if we can agree on that and how do we do that deal with it in a in a way we're together we're working on that rather than just want to get trying to kill the other and then undermining that we won't fix ourselves and we need to fix ourselves because if you're looking at the world and you're saying okay now you're competing with the world you're competing with China one way or another we got to make our system work well then the final question for you would be in this areas I read a book a few years ago by Lawrence Miller titled the barbarians to be repressed never sold a lot of copies great book I called him one time I said Lawrence how do more people not know about your books I'm not a good marketer I just wrote the book and he says how there's a prophet first the visionary first and then there's a the barbarians I'll go out there make it happen sometimes a prophet is also the barber you know like maybe a Steve Jobs a prophet barbarian builder explorer administrator bureaucrat aristocrat okay so America is kind of getting at this face of bureaucrat aristocrat yeah that's right that's what we are that's right but then he says that during these times is when you can give birth to a synergist right that brings it together where does the sinner just come to bring the left and the right because you know the media is not playing the sin or just the media is kind of dividing over that's right so okay becomes a sin no but I think I think he's created what is a beautiful description and I will ask having read history and watched dynasties rise and decline and empires rise and decline I have never seen the sinner just you've never seen this energy I've never seen the synergist so I want an example of the synergist what I have seen happen over and over again is this decline he's the client he's describing that notion also one generation to another that what happens is it's the person who doesn't have anything works our accomplishes some thing has it and so on the synergist I've never seen the synergist all I've seen in history is these people deteriorating that leadership deteriorating and those people fighting that's what I've seen repeatedly in history that's what I'm saying it happened in the 1930s but it happened I've studied this going back literally I had to study I wanted to stay the last 500 years to understand the rises in declining of Empires and if I go to I've studied before this the British Empire before that the Dutch Empire I started the Spanish Empire I studied the dynasties in China and they all have the same paths they all basically have the same paths and those paths are an optimistic it's the same thing as even companies it's a company path or think of a multi-generational family you know the first generation makes it they work on the second generation and that's why they go from the same from shirt sleeves the shirt sleeves in three generations okay if you think about the company the corporation corporation starts with an entrepreneur and then it goes to the cycle he's describing and then you get to the bureaucrat okay and then somebody who's the entrepreneur and scrappy like you or whatever those people come up and they're the revolutionaries and they tear it down because they come up with better ways of doing it and those are what the patterns look like you said in an interview are not competitive or you're driven I'm sorry you said in an interview I'm not competitive or you're very driven using it okay okay so I'm curious and I'm passionate how involved are you in encouraging this conversation and dialogue to take place if you think income inequality and wealth inequality and opportunity and equality if you think those three our national crisis how come you national emergency how come you're not leading that charge to bring and unify the groups together because you have credibility and you know like my ability my look power come comes with the extent of the role I met a state so I'll back and I'll describe where my what my you know sure sure sure and I'm trying to answer it and like any of my answers you have to be because they take a couple of minutes okay but for the first is where I am in my life I think there are three phases in one's life first days is you're dependent on others in your learning then you go out in the world and you're increasingly others become dependent on you and you're working and you're trying to be successful then you approach the third phase where I'm in a phase where I'm going to my third phase and in that third phase my goal is to have other people be successful without me and that's like extends to your kids extents other thing so the reason I'm passing along these things is because III hope that they're helpful the reason we're doing this interview I'm not doing it for money okay I'm not doing for any other reason that I hope it's helpful and so I'm passing that along it's so much dependent on other people to make their choices one Crusader is going to come in there I'm not running for president I'm not running I'm not gonna be in that position of control that is not where I am I'm just hoping that I could pass along my thoughts for people to take it or leave it and leave it up to them right so so do I want to build what do I want to go run for government government or anything you're we're in a situation if you don't have your hands on the levers of power it doesn't matter okay so because I agree you because you can only have to convince the people who have their hands on the lover of power so the only thing I could do is give my best thoughts for people to take or leave it and that's where I am so do you think there's any room today for a media company to come out that is Walter Cronkite esque you know a platform that's not Fox that's not CNN MSNBC time whoever it is Washington Post that's in the middle where somebody can go to and say you know what he's I don't know fine I'm a Democrat but I don't know if I agree but makes sense I'm a Republican I that's kind of make do you think we need something there were pee Gotha to say these guys are pretty independently thinking under state maps absolutely do I think it will happen probably not why do you say that history has shown me and also I study psychology and neuroscience as to how the brain works and how habit and community decision making in in a psychological neural neurological way is very much that you start with your conclusion and you m1 filters consistent with the conclusion and there's affinity groups and so on and so I think that just the notion of that population deviating from that and also the mechanics of sensationalism in terms of what sells yeah that it produces a dynamic in which the media itself is not going for the profit and the economics itself of the media is such that it doesn't sell it doesn't support itself I don't think there's a large enough market and I think it's being exemplified by the power of extremism or illogical emotional behavior so it almost need to be somebody that wants to contribute rather than want it to profit from but I don't even know how them how big the market is what you buy it would you subscribe to it well of course I had my one of my sons came up with a platform but what he would do was it would it was an online he saw past the idea along I thought it was a terrific idea just a social site that on oh he called it the issue that was the name of the company and it's an on site and on that issue whenever there was a controversial point of view all he would do was find the smartest people who held different points of view on that and he would put together two or three of those which had then the opposite point of view on that and you would look at that and so you could say I'm interested in the issue and seeing both and by the way anybody can do this all it all into the world you could just I hope somebody gets inspired to do that so you could then say I can get informed on both presides of the perspective of that issue I was supporting a major correspondent type of person to bring on - to have the name of the show was going to be in pursuit of truth and they would find opposing points of view on any issue and have the default full debate about those issues the first one we we did actually a pilot for it and it was called picked the most controversial point of view God reality or delusion we picked you could take this thing or that whatever the rule that picked the most controversial things and have a civil conversation about those types of things in terms of seeing both sides of the issue it's a real big thing for me i think dennis prager did a little bit of that with thomas solo when I was in LA we'd go to Wayne Hughes house and he would bring all these guys from both sides like Obama's campaign manager versus Bush's campaign manager and they'd go at it and it was beautiful it's like you're sitting at home taking notes you only got one question in it and then you realize issues are more complicated than they could be may exact writing you see similarities I know I'm alehrer cheese we're like why these guys have more in common than you thought and they walk away to like in each other yeah I mean these are smaller settings yeah love like like and let's let's book our agreements let's get the ingredients so could we agree that education better education is an important thing could we agree on those problems and then work together for that man I'm where we need to go yes last question in and I'll do speed running and we're done process of replacing yourself as a CEO I know you're spoken about it but now it's a little bit deeper because it's different than you wrote in the book then even articles you written in the last two years I'm curious where you are right now if you have to go over again to replace yourself and bring another CEO and you're the founder so emotionally you're attached that's your culture your principles how do you process and what are you thinking about to get somebody to bring in and what you're looking for it is it internal-external are you comfortable external being a CEO how do you process replaced well let me let me again start with the big particular picture it is stupid to be attached to the ways that should be done or attached to one doing the job of being a CEO that is a stupid thing because there's a certain life arc and we evolve and as I say to go to the third phase and that let them go to the second and that's why be helping others be successful without you is the higher objective so first you have to start and you say that because it's like your children let's say you have adult children you know your parents the best thing that could happen is they smile and they look at you and they see how you evolved along those ways so you have to want that that that becomes your arc the second thing is that you have to realize that like anything if you haven't done something of a principle if you haven't done something three times before successfully don't assume you know how to do it so all along those lines as you start off you have to allow enough time for mistakes and learning that's going to come along the way in order to be able to make that transition successfully and I've learned that over there you know it was a process first time around it didn't work second time around but we all learn because all these experiences are learning that's the purpose of them all so it's okay to fail a few of these times and then to get there as long as you eventually get there and then you have to you know help them so yeah you know enable them enablement is the word not control an able be an orator or personality like you do oh it's so great it's a partnership if the the first thing I first sentences in this book that I wrote first of all understand that I'm a dumb [ __ ] and anything that I have I haven't done [ __ ] you're seeing like you have to know I'm a dumb [ __ ] oh you're dumb [ __ ] in other words that what I mean is that any success I've had in my life yeah mordioux to mine knowing how to deal with what I don't know then would then do to anything I know okay once you start to realize that and the power does not just listen bottled up in your own head okay and you can draw upon the best then you can then you change your approach to life and I'd say it's the opposite the greatest tragedy of mankind or the greatest tragedy of individuals who together make up mankind in their dealing with each other is they have bottled up in their heads wrong opinions that they don't know how does stress test because it they think if it's in their heads and it's it's right if they have an opinion and it's so easy to get around that if you can think about how do I go beyond that with true so the reason I'm saying that is I love partnerships in which there's a back-and-forth and you knock things around and you get to the right answer where there's open mindedness and learning at the same time as there's the assertiveness as you're trying to figure things out together very cool last thing is speed Ron I give a name you just give me a word that comes to your mind okay I'll give a name you give me one word Buffett a wise Lawrence called when he was a CEO of Danaher metrics interesting Boris Johnson loose cannon okay 1994 Newt Gingrich accomplishment Joe Biden who knows Milton Friedman naive Michael Bloomberg well balanced and capable Jeff Bezos interesting Peter Thiel don't know enough okay very cool so I appreciate you going through that that was fascinating value Tanner's before I wrap this up couple things number one highly highly recommend the first thing you do is go in the description section there's gonna be a link to the first one go download his app principles you'll see it we're gonna put the link it'll go right to it and even through it if you ask you download the app you want to get the book the second link below leave its to go to the book principles I've read this multiple times I have every single one of my executives read it and write a paper on it I have every single one of my sales leaders read it and write a paper on it because it's that effective of a book if you haven't read it you got to read it having said that Rea thank you so much for your time I'm looking forward to doing this again in the future I look forward to it too thank you hope you enjoyed this interview with Ray Dalio I know we talked about a lot of different things but I want to hear your thoughts send me a tweet at Patrick Bay David let me know what's the biggest takeaway from this sit-down I had with Ray Dalio and outside of it I got two other videos I want you to watch one video is a one I did on us-china trade war that did very well got a few million views you can click on this to wash it us-china trade war or the other video is on wall way since we talked about China and we talked about Huawei in this interview you may also enjoy those videos having said that if you haven't subscribed to the channel please do so take everybody bye-bye [Music]

Channel: Valuetainment

Views: 1,307,724

Rating: 4.7886205 out of 5

Keywords: Entrepreneur, Entrepreneurs, Entrepreneurship, Entrepreneur Motivation, Entrepreneur Advice, Startup Entrepreneurs, valuetainment, patrick bet david, ray dalio, principles book, ray dalio and patrick bet david, ray dalio principles, ray dalio china, ray dalio documentary, ray dalio bridgewater, bridgewater associates, ray dalio speech

Id: Ca9uu36w_Vo

Length: 75min 40sec (4540 seconds)

Published: Fri Nov 15 2019

Reddit Comments

[u/Curious1122]

he also said in a recent paper that automation is the biggest threat and will accelerate the income inequality even further in the next decade but he does not support UBI to get through it.All over a great guy and a self made billionaire.