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Ray Dalio: I Predicted The 2008 CRASH, I Know What Comes Next! — Transcript

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0:00Are you seeing signs that we're in an AI
0:01bubble, and therefore a economic
0:04collapse?
0:04>> The classic signs. And that has
0:06implications for the economy, and it's
0:08bad for the society, and everybody loses
0:12money. But we also have some other
0:14things that are going on that happen
0:15around the same time.
0:17And I can go through these if you want.
0:19>> Please.
0:20>> So what I'm saying is clear, because I'm
0:23a global macro investor.
0:25>> And you were one of the few managers to
0:27foresee the great financial crisis.
0:29>> Yes. And so right now we're very excited
0:31about AI, and we should be very excited,
0:34cuz it's going to be revolutionary
0:35changes. But [music] it's creeping into
0:38almost everything. The way I look at it
0:40is I look at the human body, and I see
0:42like it's replacing the body and so on.
0:45And then it replaces some aspects of the
0:48mind, levels of thinking and reasoning.
0:51But at the same time, we have another
0:53problem that's existing, geopolitics. I
0:56mean, that China is a larger trading
0:58partner with most countries than the
1:00United States is.
1:01>> And that's a changing of the world
1:02order.
1:03>> That is one of the ingredients, right?
1:05And then also, you've got large wealth
1:07gaps. The government don't have enough
1:10money. And so [music] when you have the
1:11downturn, then you have people at each
1:14other's throats.
1:14>> So a lot of people that thinking about
1:16how to sort of secure their future, how
1:17do they all prepare?
1:19>> Let me say that history has shown that
1:21it's not the most intelligent people
1:23that are the most successful. But the
1:25key to things to keep in mind is
1:30>> This is super interesting to me. My team
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1:58year over year and week over week, it is
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2:01double check if you've hit it. Only
2:02thing I'll ever ask of you.
2:04Do we have a deal?
2:05If you do it, I'll tell you what I'll
2:06do. I'll make sure
2:08every single week, every single month,
2:09we fight harder and harder and harder
2:10and harder to bring you the guests and
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2:20with the show.
2:22>> [music]
2:25>> Right. For people that might not know
2:27who you are, you founded Bridgewater
2:29Associates in a two-bedroom apartment in
2:311975,
2:32and you grew it to the world's largest
2:34hedge fund. What was the the total
2:37amount of cumulative net gains that you
2:40delivered for those investors over that
2:41period?
2:42>> I think it was something like 53
2:45billion. We produced about a 12% return
2:49with no never any significant losses,
2:52and it was uncorrelated with other
2:54investments.
2:55>> And you were the one of the few managers
2:57to foresee the great financial crisis,
2:59which allowed Bridgewater to post
3:01positive returns
3:03of 9.5%
3:05in 2008, while the S&P 500 plunged by
3:08almost 40%.
3:09>> Yeah.
3:11>> Let me start with the thing that I'm
3:11most curious about, because I sat here
3:13with an investor called Jeremy Grantham,
3:14who you might know.
3:15>> Mhm.
3:16>> He told me that we're
3:18staring in the face of an AI bubble, and
3:20therefore a economic collapse
3:22potentially.
3:23>> If you look at the data,
3:25it would be compatible with history
3:28for the peak to be very soon. Everything
3:30is in line. This is
3:32I think the biggest investment bubble in
3:34American history.
3:36>> What's your perspective on that?
3:38>> He's right. I don't want to jump to
3:39conclusions as much as I want to explain
3:42reasonings that lead up to conclusions.
3:44I'm at a stage in my life that I want to
3:46help people understand cause-effect
3:47relationships. What they call a bubble
3:49is when the price goes up a lot and
3:53companies do very well and then it
3:56collapses. And that has implications for
3:59the economy, it has implications for the
4:01markets. Like 1929 bubble. Okay? Or the
4:062000 bubble. Okay? Which was the dot-com
4:10bubble.
4:11>> Does it impact real people as well? Cuz
4:12you said the economy and
4:13>> It did. 1929 bubble bursting impact real
4:16[clears throat] people? Yes, the Great
4:18Depression followed. Because what
4:19happens is there's a new technology that
4:21comes along that's revolutionary. The
4:24dot-com bubble, which was 2000, all the
4:27stuff that we have that's wonderful new
4:29technology. People get into that
4:31technology. They say that's miraculous.
4:34I can bet on that. I'm sure it's going
4:36to be successful. And then they bet on
4:39it. And sometimes they borrow money to
4:41bet on it. And they lose sight that the
4:43price of it matters. So, it goes up and
4:46up and it it's everybody's thing, you
4:49know? Like right now, we're very excited
4:51about AI and we should be very excited
4:54cuz it's going to be revolutionary
4:56changes. And it then at the same time,
4:58so I want to buy some of that. And
5:00everybody wants to invest in some of
5:02that. And what they do is they don't pay
5:04attention to the price and there's a
5:06certain mechanics. People will borrow
5:08money. Wealth is not the same as money.
5:11So, you see a lot of people getting
5:13wealthy, but you can't spend the wealth.
5:16You have to sell the wealth to get
5:18money.
5:19Cuz you can only spend money, right? So,
5:22what happens is when they need money for
5:25one reason or another, taxes change or
5:28interest rates go up and so they have to
5:31pay their debt service and so on. There
5:33is a pricking of the bubble, so that
5:35what happens is it falls. Okay? And when
5:38that happens, people lose money. And as
5:41they start to lose money, the process
5:43works in reverse because
5:45when they made a lot of money, they have
5:47a lot of collateral, right? They can go
5:50borrow money because they're worth a
5:52lot. And that compounds on its way up.
5:55And then when it comes down the other
5:56way, it works the other way. Okay, now
5:58you got to pay your debt. And so when
6:00then you have to start to sell assets.
6:02And then there's less demand for things,
6:05right? So there's less demand because if
6:08you're losing money cuz you put some
6:10money in the stock market and that
6:12company and so on, you're going to spend
6:14less. And as you spend less, then
6:17somebody else's income goes down, right?
6:19So you don't go to the restaurants. The
6:21economic downturns that typically follow
6:24a bubble like the Great Depression. The
6:27late '20s was fantastic. If you talk
6:30about changes and and experiencing
6:32This was the first time there was
6:34electricity in houses. So that was the
6:37first time you would have refrigeration
6:40and you would have lighting in houses.
6:42This was the first time that you had um
6:45cars popular. That you could First time
6:48airplanes. First time you had radio. And
6:51so everybody knew that they were going
6:52to be great in the future and they were
6:55great in the future. But at the same
6:57time, what happens is as they buy them
7:00and they stocks go up and they borrow
7:02money to buy them and so on. Um and the
7:05profits don't live up to the price, then
7:07that causes this other dynamic and it
7:10produced the Great Depression.
7:12>> So let's say that I buy this and this is
7:16a unit of artificial intelligence. So
7:18let's say I buy one share in one of the
7:21big AI companies right now because
7:23investors are so excited about AI, they
7:26value this at $100.
7:30This unit that I have here. They say
7:31it's worth $100. So my net worth is now
7:33$100. I go to the bank because I have
7:35this net worth, this paper worth $100
7:38and I ask the bank for a 50% loan on
7:40this right thing that I have. They give
7:42me $50. Now I have $50.
7:45And then something happens in the
7:47economy
7:49which means that
7:51the investors who have invested in this
7:52and investors generally now need money
7:55to pay off their other debts that they
7:57have. So this could be a war, it could
7:59be some kind of event that takes place
8:01and suddenly everybody rushes to sell
8:04their assets like this one.
8:07And so when I go to sell this, the price
8:09of it has now plummeted to say maybe
8:12$25, but I took a loan at the bank for
8:15$50, so I owe the bank $50, but now this
8:17thing that I have that was worth $100 a
8:19couple of months ago is now worth $25
8:21and I'm $25 in the hole. So I have to
8:23quickly sell.
8:25And then with everybody selling, all the
8:26price of assets drop, people stop
8:27spending money at the restaurants like
8:28you say, there's less money around and
8:30then the bubble has burst and we're in
8:31this sort of declining
8:33>> You got it.
8:33>> Okay, good. All right, fine.
8:35>> And it happens
8:37because it must happen. I mean meaning
8:40in these uh tremendous uh changes,
8:43uh there's very little that's known. So
8:46anybody who's in the business of making
8:47AI
8:49uh can't be precise. They don't know
8:51exactly how much money is going to come
8:53in, right? So there's either one of two
8:54things. You either don't invest enough
8:57and then the competition runs away or
8:59you
9:00invest a huge amount and you can't be
9:02precise, okay? And so when that dynamic
9:05happens, it's a problem. So yes, you
9:08said it very well. So I'm going to
9:09repeat one other thing to emphasize.
9:12What's quite common now is um you can
9:15issue stock for
9:17uh let's say you raise $50 million.
9:21And you value the company at a billion
9:24dollars. Only [clears throat] $50
9:26million was actually spent on that
9:28company. But now if you raise that,
9:31you're a billionaire.
9:32>> Mhm.
9:34>> Okay? Because the accounting value of
9:36that What do you own? You own stock that
9:39is valued at a billion dollars. Nobody
9:41paid a billion dollars or whatever it
9:42is, right? And now you own that stock.
9:46But that stock, um, you can't spend.
9:49Cuz you can't spend wealth.
9:50>> Mhm.
9:51>> In order to spend it, you have to sell
9:53some of that stock to get money.
9:55>> Yeah.
9:55>> Right? And quite often there's an
9:57interest rate rise because the you know,
10:00let's say as there's a fever and there's
10:03an inflation and the central bank wants
10:06to try to put the brakes on that a bit.
10:08Okay, what does that mean? It means
10:10people who have debt, in a sense, have
10:12to come up with more money.
10:14>> Mhm.
10:14>> Cuz when you own the debt all the debt,
10:16you have to come up with money to pay
10:18the debt.
10:18>> So the downturn works.
10:20>> Between us, we've said it uh clearly, I
10:22think we can understand the dynamic. So
10:24they they have to exist. Now we have
10:27another problem that's existing, okay?
10:29So we're talking about the bubble, okay?
10:31But we also have some other things that
10:33are going on that happen around the same
10:35time. A big gap between the rich and the
10:38poor and which also means the left and
10:41the right, the politics of it, right?
10:43Just as we have now. When you have the
10:45downturn,
10:47um, then you have people at each other's
10:49throats. So if we take politics, what
10:51you see is this that they don't have
10:54enough money. The the governments don't
10:56have enough money. We have big budget
10:57deficits, okay? Where do you get the
11:00money from in order to pay those bills?
11:02The UK has had, I think, six out of last
11:05seven years there's been a new prime
11:06minister. And because there's not enough
11:08money for the government, and so what
11:11you start to see is people come in with
11:13their claims, but there's this how do we
11:15get the money? And then people run who
11:17have money, they say, "I don't want to
11:19be in this tax zone that's going to be."
11:21And then they leave. And so there's a
11:23domestic political problem that is not
11:27people compromising the same way they
11:29used to compromise, right? So now you
11:31have the politics which compounds this.
11:34And And then you have a world, this is
11:37what I call the big cycle. You have a
11:39world in which also the geopolitics
11:42changes. By geopolitics, I mean country
11:45to country. Okay, there's a system under
11:48normal circumstances. When there's a
11:50more dominant power, they impose their
11:53order and that becomes more peaceful.
11:55But when you have on
11:57uh arguments of how things should go,
12:01those arguments start to turn into
12:03conflicts, right? And so, those things
12:07tend to happen together. That's why I
12:09refer to that as the big cycle, that
12:12dynamic. Now, that is the confluence
12:15of the money, the internal conflict
12:18politically, and the external conflict,
12:20which is what we're going through. And
12:23And the problem is, I think, that people
12:25don't know the cycle. So, every day we
12:27go to our sources of information and you
12:31see this latest news, but they don't
12:33connect the dots in in understanding
12:36that cycle.
12:37>> Just going off on this point of the
12:38bubbles, what is it that makes bubbles
12:41pop? So, if we are in an AI bubble at
12:42the moment and it is going to pop at
12:44some point, what is the like, they call
12:46it a black swan event?
12:47>> a few of them. There are bubbles and
12:49then the things that prick the bubbles,
12:51okay? The things that prick the bubbles,
12:53typically in the beginning, are
12:55something that means that I have to sell
12:58some wealth to get money. And that's
13:00usually a rise in interest rates. It
13:03could be something like wealth taxes,
13:05something that means I'm
13:07very wealthy, but typically the
13:09tightness of money because during that
13:11spot, there's inflation pressures and
13:13central banks decide that they want to
13:15tighten monetary policy and so on. It
13:18becomes that the amount of money that I
13:21can get by owning that debt at the
13:24higher interest rates is greater than
13:26the amount of money I could get on my
13:27equity investments. That's part of it.
13:30Also, what you see is a lot more
13:32production of stock. And what I mean by
13:36that, issuance of stock.
13:38Think of that, the supply and the
13:40demand. There's There's demand, right?
13:42And we've been talking about the demand
13:44that makes stocks go up. You know, how
13:47we create this wealth. But there's also
13:50um supply. So, you can issue stock. It's
13:54very easy to There's There's almost
13:55nothing that's easier to produce than
13:57stock.
13:57>> I own a company, I can just uh print
14:00more equity.
14:01>> Yes. Today, you could probably go out
14:03and say, "I'm going to make a company
14:05and I'm going to take it uh public." And
14:08you go to your audience and your crowd
14:10and you can say, "I'm going to make
14:11stock."
14:13Okay? So, it becomes when there's a when
14:15there's a market that wants stock,
14:17there's a production of stock.
14:19>> And is there
14:20>> Okay? And that supply of stock, together
14:23with the other that I'm mentioning, the
14:25the need for getting money and so on, um
14:28causes the
14:30um the the bubble to pop.
14:31>> Are you seeing signs that we're in a
14:33bubble?
14:33>> Yeah. Yeah. Yeah. The classic signs that
14:35we're in a And the bubble, I should
14:36emphasize, it's not a um
14:39you're in a bubble or you're not in a
14:41bubble. It's a degree thing. Okay? There
14:44is also that it's in weak hands. I can
14:47look at now who is in these companies,
14:50right? And is it in strong hands or weak
14:53hands? Classic strong hands is that when
14:56weak investors, not knowledgeable
14:58investors, then put a lot of money into
15:01it, particularly if that's in a
15:03leveraged way.
15:05>> And that way with debt.
15:06>> With debt. Or they can buy an op- a a
15:09leveraged version of like the like there
15:11are ETFs now that are leveraged versions
15:14of the stock market and they and so on.
15:18And so, they get into that. It's more
15:20like they're crap shooting. Okay? and
15:22then that's a sign of a bubble. So I
15:25mean I've listed a few of those signs.
15:27Those are the major signs of those
15:29bubbles. And so that when it goes down,
15:32then you get the fear, then you get the
15:34need out to raise cash, and that dynamic
15:38works its way out in the form of then
15:41the reverse happening. In other words,
15:43everything becomes cheap and everybody
15:46has
15:47the spending and the things you
15:48mentioned.
15:48>> If we are in an AI bubble and it is
15:50going to burst. You know, I had a friend
15:51of mine contact me and he said,
15:52"Stephen, I think we're in this an AI
15:53bubble." And he's running an AI company.
15:56So he he said to me, "I'm going to raise
15:57lots of money now so that when the the
15:59markets come down and investors are
16:01fearful, they don't want to invest in
16:02companies, people stop spending as much,
16:04they start thinking about their
16:05subscriptions, they start canceling
16:06subscriptions, we're going to be good
16:08and we're going to be able to buy up
16:09some of our competitors who are going to
16:11be struggling. So he's just raised um
16:14hundreds and [snorts] hundreds of
16:15millions of dollars for his AI company.
16:17>> Right. Yeah, it's probably like that.
16:19Easy.
16:20>> Yeah, it was easy now.
16:21>> Right. The question here is like what
16:23should at different levels? So like the
16:25the average Joe on the street up to
16:26entrepreneurs that are running
16:27companies, how does how do they all
16:29prepare for an economic bubble that
16:31might burst?
16:32>> He's such a good example. And what that
16:34does just following it through on what
16:36we said a minute ago is that increases
16:39the supply of AI stock.
16:41>> Okay, yeah, cuz he sold stock and raised
16:43money.
16:43>> more.
16:44>> Yeah.
16:44>> Right?
16:45And so as he and others do that more,
16:49the greater supply of stock comes in and
16:52and so he wants to get ahead of it in
16:54that dynamic. And then, you know, that
16:57contributes to the bubble.
16:59But
17:00how do they prepare?
17:01>> How do they prepare for this?
17:02>> I would also say something.
17:04The future is very unknown.
17:07And people should not be timing.
17:10Sophisticated investors have a real
17:12challenge even in timing a bubble.
17:15So on the important thing always is to
17:19diversify. Now, we're going to go back
17:21to money, the basics of money
17:23management. And I by the way,
17:25I personally have gone through the cycle
17:27cuz I didn't have any money, and then I
17:30did then I had a lot of money. And I
17:32remember the cycle very well. What
17:35happens is as you start off
17:37um I used to count how many months I
17:40would be okay I have a certain amount of
17:42money, how much money I would be okay no
17:45more money came in. If I lost my job or
17:48whatever I did, I mostly never
17:51I worked 2 years for somebody, but in
17:53other words, if money didn't come in and
17:55it would be months and then years and so
17:58on to build that security cuz I take
18:02care of my family and so on. And so what
18:05as we're looking at these things, these
18:08are the choices that you have in order
18:11to be able to say, do I buy my house or
18:13apartment? Do I put my money into cash?
18:18And what happens with money is you have
18:21to put it into something. Because
18:23they'll pay you interest on it, okay?
18:26So, that's your cash deposit and so on.
18:28And people think that that's the safest.
18:31It's not, it's the worst investment over
18:33a long period of time because inflation
18:35will eat it away.
18:36>> You mean putting it in a bank, just
18:38leaving it in a bank?
18:38>> In whatever form, a money market fund, a
18:41whatever it is that is that short-term
18:45of deposited and it'll give me an
18:47interest rate.
18:47>> Okay.
18:48>> Okay? And that's what they think about
18:50as cash. You don't nobody leaves it
18:52literally in cash because if it's
18:54literally in cash, it doesn't earn
18:56interest. So, why shouldn't I put it
18:57there and get some interest on it? And
19:00so, that's cash. And people think that
19:02that's the safest and has the lowest
19:04return guaranteed almost to have the
19:06worst return over the longer period of
19:08time.
19:09>> People keep cash because it feels safer.
19:11>> That's right. And I'm saying it's not
19:13safer. Because of inflation.
19:16>> Explain that to me in simple terms.
19:17>> Okay. Well, if I got no interest rate,
19:20um then what I would do is I'd lose the
19:24to the inflation rate.
19:25>> And what's the inflation rate?
19:26>> And well, 3 and 1/2 or 4%
19:29happens to be about where it is now.
19:31>> A year?
19:32>> Yeah, a year.
19:32>> So, that at least $3.5 a year.
19:35>> That's right.
19:35>> If I just leave it in cash.
19:36>> That's right.
19:37>> Okay.
19:37>> Okay. Now, I'll get an interest rate on
19:40it if I put it someplace and it'll give
19:42me maybe an interest rate that's
19:45somewhere in that vicinity, similar to
19:48that.
19:48>> 3, 4, 5, 4%.
19:50>> And then I have to pay taxes on it.
19:52>> Oh, you have to pay taxes on the gain?
19:54>> You're Yeah.
19:54>> Okay, fine.
19:55>> Right? Even though you really didn't
19:56gain relative to inflation, you still
19:58have to pay the taxes on whatever you've
20:00earned or something. Anyway, over the
20:03long term, it's a lousy return. Because
20:06also think about returns also come from
20:08productivity. And over a period of time,
20:11people learn how to do things better and
20:13so on. So, then you can invest in let's
20:15call this stocks, okay? That we'll call
20:18that the stock market. This is cash and
20:20then you think on the stocks. And then
20:23the stocks can go up or down
20:26and then they have this dynamic that
20:28we're talking about that creates these
20:30big cycles and the busts. And those
20:33cycles, when they go down, um go down um
20:3760, 70
20:39percent. Okay, that's that's what a bear
20:42market looks like. Woo, what a
20:45what a dive. Okay, this is gold
20:48that's gold and these are bonds and this
20:51is your house and that's Bitcoin. Okay,
20:54so these are the choices. They each
20:58um change for certain reasons. I'll
21:01digress into that in a minute. But what
21:04happens is they go like this. When gold
21:06goes up, tends to be that the bonds will
21:10go down in value or your house. And
21:14these change in a certain way, and so
21:16the best thing to do is to have a
21:19diversified portfolio that when you have
21:22that rather than anyone, you won't
21:26reduce your return, but you will reduce
21:28your risk.
21:29>> And diversified means having a little
21:31bit of each.
21:31>> Right, a certain amount. And you have to
21:33know how to balance them because of
21:35their volatility. This one, stocks, is
21:39more volatile than this one. And my own
21:43recommendations are you start first of
21:46all with what you need. Should I buy a
21:49place or should I use that money and I
21:53could travel more and so on. One of the
21:55advantages of the house, the apartment,
21:58and whatever is it's your environment.
22:01Your environment is important. It
22:02produces forced savings. Sometimes that
22:05forced savings is good. It is It
22:08typically is taxed better. It's a It's a
22:11better vehicle for tax over a period of
22:13time. But I'm not arguing for this
22:16alone, but I'm saying when I'm looking
22:18at this, then I think this one, gold, is
22:23very interesting because when all of
22:25these tend to do badly, this tends to do
22:28well. Okay, so it's a very effective
22:31diversifying because this was money. Not
22:35until 1971.
22:38And it's still the second largest
22:40reserve currency. Central banks hold
22:42reserve currencies. So it has qualities
22:45that are different from this. And this
22:48has qualities like when the value of
22:51money goes down because of inflation,
22:53this
22:54>> Bonds.
22:55>> Okay.
22:55>> And bonds are basically lending the
22:57government money.
22:57>> That's right. If you lend the money at a
22:59certain interest rate,
23:01and then inflation and interest rates
23:04rise, you're kind of locked into that
23:06interest rate. And so it has its own
23:09problems. The more important thing I
23:11would say is, you know, you save up and
23:14you say, "How many
23:16years can I live if money doesn't come
23:19in?"
23:20Okay? And then you take that and you
23:23say, "How could I be secure?
23:26So I don't want to put it into one thing
23:28that can go down 70%. So how do I
23:31diversify that? That's my main headline.
23:34>> A lot of people in the comments of our
23:36last episode, they were asking this,
23:38like how does this apply for someone who
23:41doesn't have much money, maybe doesn't
23:43have any assets, say they're 30 years
23:45old, they
23:47have I don't know $100 disposable
23:50income,
23:51and they're thinking about how to sort
23:53of secure their future. What is the
23:54advice for someone in that situation?
23:56>> Your only asset is yourself.
23:59And I guess what you're going to get
24:00from the government. How do you sell
24:02yourself at at getting a better income?
24:05Or how much how are you getting money
24:07from the government?
24:08>> Mhm.
24:08>> You selling yourself is the main thing.
24:11This is one of the big problems now with
24:13the artificial intelligence and other
24:15machines replacing people and and
24:20different types of jobs, it becomes more
24:22difficult. It produces that big wealth
24:25gap while you're having more
24:27productivity. Everybody wants more
24:28productivity because it means how do you
24:31produce things more efficiently, but
24:33that's
24:34contributes to the income gap because
24:37your productivity equals your income for
24:40a large extent. And then you have the
24:42and you know, the political dynamic.
24:44It's tough to get yourself out of this
24:45position that you mentioned. You know,
24:47I'm imagining that person. Okay? It's
24:50not easy. There is this giant polarity.
24:53If you're in the top 10% of talent,
24:56let's say,
24:58the world's your oyster.
25:00But, nowadays, in order to be there,
25:03okay, that's that's difficult. Find
25:05something that
25:06gives you
25:08the ability to sell your time for good
25:10money. Is that going to be that you're
25:13driving an Uber? Is that going to be
25:15that you have the talent and you're
25:17going to be able to understand AI and
25:20contribute that understanding to a
25:22company that values that? Or what is
25:25your skill? You found this, okay? And
25:29and you found the way, okay? But, you
25:31need money.
25:32Okay? And the the thing that you want to
25:34do, what you're doing, and I'm lucky
25:37enough to do, is to make your work and
25:40your passion the same thing,
25:42and don't forget about the money part.
25:45>> Yeah, I am I one of the things that I I
25:47think I didn't realize earlier in my
25:48career is that
25:50whatever skills you have will be valued
25:53differently in different contexts or
25:55industries, should I say. So, for
25:57example, say that my skill here, and I'm
25:59not trying to flatter myself, but say my
26:01skill here is
26:01>> is working.
26:02>> having conversations, right? Let's say
26:04that's what it is. There's lots of
26:05places I could have conversations.
26:07And those places would value my ability
26:10to have conversations wildly differently
26:12per hour.
26:13>> Right.
26:14>> So, I will often think this and speak to
26:15my friends about this when they they
26:17tell me their skills, I say,
26:19let's look at the different industries
26:21and how they would value the skills you
26:23currently have differently. A good
26:25example, again,
26:26you know, you could be an Uber driver or
26:27you could chauffeur
26:29Ray Dalio.
26:30Now, I imagine those two things pay
26:32wildly differently, but it's the same
26:34skill of driving a car, broadly
26:36speaking.
26:37>> I agree with all that.
26:38>> And so, I think that's one way to just
26:40you know, the other way is you go ask
26:41your current boss for a promotion.
26:43But, again, they're going to value you
26:45in the context of their other employees,
26:47the market in that industry, etc. So,
26:49it's you You get 10%, but you're not
26:51going to see a step change necessarily.
26:52So, that's something that I always say
26:54to people is
26:54>> Absolutely right.
26:56And another law of something, I don't
26:59think it's almost a law of everything.
27:01It's a law of you
27:03um buy almost anything
27:05is those at the top
27:09whatever that thing you're buying, if
27:10you're buying a painting, a piece of
27:12furniture, a piece of clothing, a a
27:14person's time or whatever
27:16command premiums that are many multiples
27:21of the average. It's almost like if you
27:23can invest
27:2510% more
27:28of your time, your effort, your skill to
27:31go up.
27:33>> Mhm.
27:33>> Okay? You will get
27:36twice as much
27:38>> Mhm.
27:38>> for 10% better something like that,
27:41okay? So, that's part of the formula of
27:44life and the formula of employment. And
27:47it's so I think if you keep what you
27:48brought up and what I'm bringing up in
27:50mind, that helps you position yourself
27:53and know what to do.
27:54>> Mhm.
27:55>> There should be a button just down below
27:57here. And if it says subscribe, you're
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28:10haven't yet hit that button. Thank you
28:11so much.
28:12We didn't mention this thing here
28:13actually. So, I probably should talk
28:15about it cuz people are talking about it
28:16a lot right now, which is uh
28:18>> Bitcoin.
28:19>> Or Bitcoin.
28:20>> Mhm.
28:21>> What's your perspective on Bitcoin? I
28:22know the market in Bitcoin is down at
28:23the moment.
28:24>> I have about 1% of my portfolio in
28:27Bitcoin because there's different kinds
28:29of money that and the money that you
28:32can't print, that's one kind. This is
28:35the other kind of money that you can't
28:37print.
28:37>> Gold.
28:38>> Yeah. You cannot crack it with
28:40technology. You can
28:43hold it, you own it. It's There's a
28:45saying that it's the only um financial
28:48asset that is not somebody else's
28:51liability. Somebody has to give you
28:53something for it. It has that. So, in my
28:56category of wanting, let's say, make
28:59sure that I have some hard money, which
29:02for most people should be between 5 and
29:0415% of their portfolio. I prefer that.
29:09I'm pointing to the gold bars here.
29:13Rather than
29:15the Bitcoin.
29:15>> Is it still in your view gold like
29:18asset?
29:19>> Yes, it's it's a type of money that
29:22can't be printed.
29:23But
29:25there are technologies that can
29:28hurt it. In other words, if there's
29:31quantum computing and it can be
29:33monitored by governments and so on. It
29:36could be taxed. And digital currencies
29:39are somewhat similar.
29:41>> But you don't like Bitcoin as much as
29:42gold because of privacy reasons as well.
29:45>> And when the governments say, "I don't
29:47want it." They have the power,
29:49therefore, to do whatever they want with
29:51it. And central banks will not own any
29:55significant amount of that because of
29:57the reason I said. They They want their
29:59transactions to be private and in their
30:01control. Think about how different it
30:04would be for Russia. Okay, they
30:07confiscated
30:09these kind of other assets. They didn't
30:12get these.
30:13>> Gold.
30:13>> Okay, gold. And so,
30:16what you're seeing even particularly in
30:18this time of conflict is
30:21that there's a sense that if I'm holding
30:24this others won't get it.
30:26>> You mentioned a second ago the impact
30:28you think AI is going to have on the
30:30economy broadly, but also again to real
30:32people's lives. There's lots of debate.
30:34I mean, there's been a debate over the
30:35last 10 10 10 years or so within the
30:37world of AI. You had the big AI I
30:40originally saying that AI would cause
30:42job disruption.
30:44And that, you know, you've even had some
30:45of the CEOs more recently saying work
30:47will become optional in a world of
30:49superintelligence. At the same time, we
30:51have robotics coming over the horizon.
30:53So, you've got this sort of convergence
30:54of intelligence and then I don't you
30:57could could think of it like muscles,
30:58like physical muscles or ability. At the
31:01same time, um we're seeing AI accelerate
31:04in its capabilities.
31:06What does this mean for the average
31:07person and their job? And who's going to
31:09benefit from this AI revolution in your
31:11point of view?
31:12>> It means that
31:14you will either be cutting edge and
31:17capable and among that top fraction of a
31:21percent down to 10% of the population
31:24who is um cutting edge and using it and
31:27accelerating, or uh you will, if you're
31:31in a thinking job, uh be at risk of
31:34being uh replaced. We're coming into a
31:36world where we can automate everything.
31:40The evolution of man
31:43was we had the agricultural era. And
31:47there was no real inventiveness. And
31:50then man invented the machine.
31:55And what the machine did is it replaced
31:58man's physical necessity. So, men used
32:03to be like oxen in the agricultural
32:05field and so on. And they were replaced
32:08by tractors. And then there was we
32:11entered the industrial age.
32:14First, you had the printing press
32:17that allowed people to learn.
32:19And then you had these inventions, the
32:21industrial revolution, the first
32:23industrial revolution. And what you had
32:26is the
32:28replacing the physical that that man
32:31would do in factories then and so on.
32:33And so, the way I look at it is I look
32:35at the human body. and I see like it's
32:38replacing the body and so on. And it's
32:41coming up uh higher and higher, and then
32:44it replaces some aspects of the mind
32:47that you can computerize. And it's
32:49coming up and up, and it's replacing
32:52higher and higher levels of thinking and
32:55reasoning. Okay. So, that path is part
32:59of the evolutionary path that is
33:03happening. Okay. So, then you start to
33:05say, "What do I have to offer?" And so,
33:08in answer to who benefits from it, those
33:11who benefit from it are those who are
33:16um the capitalists with the ideas that
33:20replace uh the workers. And so, if you
33:23look at there's revenue for businesses
33:26when you buy something in a store,
33:28there's revenue. Okay. And if you look
33:31at the share that is going to workers,
33:34you see that share going down. And if
33:36you look at the share that's going to
33:39those who own that business, that share
33:42is going up. That's you know, how do
33:44they share that revenue in terms of the
33:47cost, and you see that that's rising.
33:49And so, um this is an evolutionary
33:52process. And it's true that what happens
33:55is you get more uh free time. Okay. So,
33:59now the so- society has to think, "How
34:01do I deal with this?" So, for example,
34:03the work week, which used to be, you
34:06know, a 60- or 70-hour work week, goes
34:09down to less than a 40-hour work week.
34:12And there's more time. But there needs
34:14to be uh you know, how do you create a
34:17bottom? And so, we're going through this
34:19phase in which there is this upper end
34:23that is making incredible amounts of
34:26wealth as we described, and then this
34:28lower end that is um then having these
34:32challenges. We've have a relatively good
34:35economy and the
34:37difficulty of college graduates to get
34:40employment has increased significantly.
34:43And I can tell you that in in many
34:45businesses, it becomes more of a pain in
34:48the neck to have a college graduate
34:52let's say do what they have to train
34:54them, you have to and many of those
34:56tasks, many of that thing can be done
34:59very quickly with the AI and with
35:02computerization. And as you get into
35:04robotics, you're going to have that
35:06happen, right?
35:08>> The speed of the disruption that we're
35:10seeing because of the amount of capital
35:12that's flowing into these AI frontier
35:14models like the Anthropic's and OpenAI,
35:16etc., etc.
35:18is is quite different from anything
35:20else. It's sort of the historical
35:21precedents as we've seen through the
35:22industrial revolution where it took time
35:24to build the tractors.
35:25>> There's an element of speed. What
35:27happens usually is the bubble bursts.
35:30>> Mhm.
35:31>> And now you have the cyclical dynamic of
35:34that while the technology,
35:36you know, evolves, but the the supply
35:39demand and the debt problem that we just
35:41talked about then come in. And so
35:44unemployment is due to
35:47typically
35:48some sort of a combination of a
35:49financial crisis that like we talked
35:51about the debt and stocks going down and
35:54people not having collateral and then
35:57therefore not buying assets and that
36:00dynamic. That causes the unemployment
36:02rate, that factor.
36:04>> That's the sort of economic reasons, but
36:05in terms of the AI agents, robotics
36:08being able to replace you. I sat with
36:10Dara from Uber and Dara said that he
36:13imagines in the future the 9 million
36:16riders that they have around the world
36:17doing deliveries will be replaced by
36:20autonomous vehicles, autonomous robots.
36:22>> Those 9 million
36:23drivers careers that you have will be
36:25out of work
36:27conceivably in the you know talking
36:28about being honest about the situation.
36:30>> Yeah, I think again it goes to physical
36:32AI as well, right? So I think 20 years
36:35from now you can imagine that those 9
36:37million will be
36:4020 million AAVs maybe. But we have time
36:43between now and then partially because
36:46we don't operate in the virtual world,
36:47right? We operate in the physical world.
36:49You have to get the regulations up, you
36:51have to build the cars, you have to
36:52build the sensor stacks, the the models
36:54have to get there. So there is time
36:56between now and then, but you can
36:58imagine the majority of our trips being
37:02fulfilled by robots of some kind.
37:06>> The unemployment rate gets very
37:09influenced by the bubble bursting
37:12and the economy going down. You see that
37:14spike.
37:15>> Mhm.
37:16>> You certainly have the evolutionary
37:18change that you're referring to.
37:21>> Okay, so it's both.
37:21>> Okay, in other words there's this
37:23evolutionary thing in which they like he
37:26says,
37:28you know, the tractor replaces the labor
37:31or the assembly line worker as
37:33technology is replaced and that is an
37:36evolutionary thing that goes
37:38continuously for you know, many years
37:41and in the way that you're describing.
37:43Because you asked about the unemployment
37:45rate, I just wanted to emphasize that
37:48the unemployment rate is very heavily
37:50affected by that bubble bursting.
37:52>> So okay, you've got two forces at once
37:53then you've got
37:54>> When the bubble bursts everybody as we
37:57said needs cash so they start cutting
37:59their costs.
38:00So that's when they start laying people
38:02off.
38:02>> Yeah.
38:02>> They start looking around the company
38:03and go forget growth, we just need to
38:05survive. So we're going to lay off that
38:07team and that team and that team and
38:09then you see unemployment going up. And
38:11then you've got this sort of underlying
38:13shift happening at the same time which
38:14is workers are replacing their team
38:18members with AI agents or are or in the
38:21factories then are using robots to do
38:23factory work, etc. And that's the sort
38:25of current slow march forward.
38:27>> Right. So, I have this chart. Okay? What
38:31this represents, this line,
38:33is the um evolution of technologies. In
38:37other words, we have greater and greater
38:39learning and doing things better, and
38:42that's the evolution that we're talking
38:44about that also machines replace people
38:48or replace their tags over that period
38:50of time.
38:51Then you have this big cycle, which is
38:54typically lasts for
38:57about a lifetime, on average, about 80
38:59years. Uh we went through that uh last
39:02time, 1945. There are orders. There's a
39:05monetary order, there's a domestic
39:07political order, there's a geopolitical
39:09order. Okay? You have the bubble
39:12bursting, okay? You have this. This is
39:16what we're talking about, um that dive.
39:19And then you when you go through that,
39:21you break down these orders.
39:24And when they break down, then um you
39:27would get rid of the debt burden. So,
39:29you get rid of the monetary system as
39:31you're used to it. You um may get rid of
39:34the domestic order. Many countries'
39:37orders, their systems, end. I mean, they
39:41all end at some point. And so, they can
39:43break down quite often in a time of
39:46great internal conflict. Does the system
39:49last? And that happens at that time. And
39:52so, that's that big breakdown. But
39:54still, what you're talking about is and
39:57and I and I agree with you, this keeps
39:59going up. Okay? Because learning, you
40:02don't unlearn what you've learned. So,
40:04as this goes up and and you're uh you
40:08you still keep this thing going up,
40:10okay? But you have the big cycle, the
40:12debt, the conflict type of movement. And
40:15these little cycles are the cycles that
40:18we see in this roughly on average, let's
40:22call it an 80-year period, but
40:25you see the
40:27you see the recession and
40:30recession has higher unemployment and so
40:33on. Then they stimulate monetary policy,
40:35they make money looser then the economy
40:38goes up and you have prosperity, then
40:42you go into a bubble, okay, that then
40:45you run lower on capacity cuz you're
40:47using up the capacity, inflation rises,
40:51they tighten monetary policy, and then
40:53you have the the recession that follows.
40:57So these movements from one recession to
41:01the next recession, that cycle that I've
41:03just described, on average has lasted
41:05about 6 years and give or take about
41:09three.
41:10So that's the way it looks.
41:13>> So I'll play this back to you to make
41:15sure I understand it. There is a sort of
41:17bigger macro bubble which is over 80
41:20years which is the changing of the world
41:22order.
41:23>> Yep, you get deeper and deeper and
41:25deeper in debt over a lifetime till till
41:27I'd say your debt capacity. You have a
41:29certain amount. So the government's debt
41:31capacity, for example, it can borrow
41:34when you wipe it out here, then you can
41:37build it up and build it up until it
41:39starts to squeeze. Debt service starts
41:41to squeeze out.
41:42>> the changing of the world order.
41:44>> That is one of the ingredients, right?
41:46So okay, we have too much debt. At the
41:49same time, what you're building up is
41:52you're building up great wealth gaps
41:54because capitalism, and I love
41:57capitalism, but it's it's here's the
41:59reality, it creates big differences in
42:02income and wealth. And when it does that
42:06that also creates differences in
42:08people's opportunities because the rich
42:10people can educate their children well
42:13and they can give them all the benefits.
42:15I mean education is a big benefit.
42:18That's why there should be broad-based
42:19excellent education. But all of that
42:23happens and so you see wealth gaps build
42:25up. So like the Industrial Revolution
42:28leads into the Gilded Age. Okay, the
42:32Gilded Age looks a lot like now, you
42:35know, people buying expensive things and
42:37looking very gilded. And then it leads
42:40to the robber barons. And the robber
42:43barons are people who are considered,
42:46you know, the
42:48that they're
42:49taking advantage, the billionaire class,
42:51and it becomes that cycle. So that's the
42:54way it works.
42:55>> So you've got this 80-year sort of, you
42:58know, boom and then there's a collapse
43:00which is sort of ends in conflict and
43:02the changing of the new world order. And
43:04then within that you have these little
43:06bubbles which really economic bubbles
43:08that go up and down recession. People
43:10get very excited. They they contract,
43:12they get excited, they contract. And
43:14then you have the the straight line here
43:16which is the sort of technical
43:18technological improvement across the
43:20spectrum of ideas and technologies and
43:22all these things.
43:23>> It keeps going.
43:24>> And it keeps going regardless of this
43:25boom and bust because as you say people
43:26never forget. I guess so a couple
43:28questions on this then.
43:30I don't even know which one to dive into
43:31first, but let's go for I guess just
43:34closing off on the last point that I was
43:35I was getting at is there's this
43:37narrative that there'll be new jobs
43:39created because of AI and robotics and
43:42everyone will be fine. A lot of this
43:43narrative comes from Silicon Valley.
43:46>> Who is producing the technology that
43:48doesn't want to be attacked because
43:50they're
43:51>> making a lot of money.
43:52>> They may have an act
43:53>> And they're in the Gilded Age.
43:54>> desire to have a certain perspective. I
43:57think objective people
44:00in Silicon Valley
44:02and there are number of them would say
44:06it's going to have a big employment."
44:08But you you you can see it um in the
44:11wealth. Who owns stocks and who doesn't
44:13own stocks?
44:14Okay. Now, if you own stocks,
44:16um um you're very happy now.
44:20Okay? And if you don't own stocks,
44:22you're not getting the benefit of owning
44:24stocks. So, that in and of itself
44:26creates a greater greater wealth even
44:28aside from employment. Okay, so there
44:31are these forces to create the greater
44:34uh wealth gaps, right?
44:37>> Roughly so 61% of US adults own stock in
44:42some form,
44:43and most of them hold it indirectly
44:46through their retirement plan. Only 20%
44:48of Americans directly own individual
44:50stocks or shares through a brokerage
44:52account. While over half of Americans
44:54own stocks, ownership is heavily
44:56concentrated. The top 10% of households
44:59hold almost 90% of the stock.
45:03How do you feel about this narrative
45:05coming from predominantly Silicon Valley
45:06that there'll be new jobs created that
45:08we can't yet forecast and everyone will
45:09be fine. They point to the Industrial
45:10Revolution. They say, "Look, when the
45:12tractors came, we thought everyone was
45:14finished. When factories came, we
45:16thought everyone was finished, but look,
45:17we figured some other stuff out."
45:18>> Because if you look at that, this is
45:21this what um
45:23thing I'm saying that as your body is
45:25more and more replaced with your mind,
45:28then you can do that. But when your mind
45:31is
45:32replaced and your body is replaced,
45:36uh what is it that you have to sell?
45:38>> What is it that we have to sell as
45:39humans once our body and our minds are
45:42replaced?
45:43>> What man has
45:45um is emotions
45:48and has
45:50um
45:52intuitions. There are certain things
45:54that artificial intelligence doesn't
45:56have.
45:57And so, if you have to get down to what
46:00those
46:01things are, it um
46:03you know, does the
46:05robot give a good massage?
46:08Does
46:09you know, what is it
46:11that is left? And so we will
46:15wrestle with what it is that is left,
46:17okay? But I think that for the
46:20foreseeable future
46:22those who can work very well where they
46:25have an exceptional
46:27human intelligence and work in
46:29partnership with the artificial
46:32intelligence
46:33that they are going to be at the cutting
46:36edge of all of this.
46:39>> I've got 60 seconds and I'm going to
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47:39Just like Jon Jones where marginal
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47:44sometimes I podcast for 10 hours a day.
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48:09and she goes, "This is the best product
48:11ever made." [clears throat] And I think
48:13in part that's because she really cares
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48:33just change your life.
48:35So, if you had kids that were 16 years
48:38old now, Ray, and they said, "Dad, what
48:40what do you think based on everything
48:41you know about the future,
48:43what should I be doing?"
48:44>> First of all, there's the question of
48:45what what what matters most in your
48:47lifestyle.
48:49So, I'm going to get philosophical, not
48:52assuming that the highest income is the
48:54best. Okay?
48:56Because happiness
48:58You want happiness and health.
49:01And so, in answering your question,
49:03there's very little correlation between
49:07the amount of money you have and the
49:08level of happiness that you have past
49:11the basic level. And so, I could be
49:14answer your question first, which the
49:17obvious way is to say to earn the most
49:19amount of money, and I want to start off
49:21in saying that
49:23you know, my experiences is so on is
49:26like I love being in nature.
49:29And it doesn't cost me hardly anything.
49:31I mean, it depends where your pull is.
49:34And so, don't lose sight of your pull
49:37and what it's about. What you want to do
49:40is you want to get above the level that
49:43you don't have to panic. We just earlier
49:46discussed how many months can I live and
49:49to be able to secure that and to be
49:52excited and have that passion or that
49:54whatever it is the life that I want to
49:56have. So, I just want to emphasize keep
49:59in mind of that. But then also, you
50:01know, my principle is make your work and
50:04your passion the same thing and don't
50:07forget about the money part.
50:09Right? So, know your nature.
50:12Uh um this is what I tell my grandkids.
50:15Okay?
50:16Yeah, you have a feel and you also have
50:18a nature. It's not just your
50:20preferences. People think differently.
50:22Some are uh more adventurous. Some are
50:26less adventurous. Some are more
50:28conceptual or artistic and can think
50:32with imagination and they love doing
50:34that. Some people don't like that. Some
50:37people want to they may life should be
50:39more concrete and more certain and so
50:42on. That's your nature. You're partially
50:44you're a lot born with that nature and
50:46you also
50:48learn it in your earlier years. We know
50:50this of how how neuroplasticity works
50:53and so on. So, we're all on a journey to
50:57um find the match between our nature
51:01and our path. And you find though that
51:04path, but you can't forget about this
51:06money part while you're pursuing that
51:08path.
51:09>> Don't forget about the money. So, if
51:10your, you know, grandkids came to you
51:12and they said,
51:13"I want to become a lawyer." Would you
51:15say,
51:16"Listen, let's forget about the money
51:18because I think AI might take that job."
51:20Or would you say, "Yes." Would you If
51:22they said, "I want to be
51:23>> I think you uh uh
51:24>> I want to do a thinking job."
51:25>> Let me say that history has shown
51:29that it's not
51:31the most intelligent people or the most
51:33intelligent species
51:36that are the most successful.
51:38And it's not
51:40no necessarily those that work the
51:42hardest, although these things are very
51:44important.
51:46It is the those who species and and
51:50people who are also most adaptable.
51:52And and so there's going to be great
51:55change in your lifetime. Okay? And so
51:58yes, today it's artificial intelligence.
52:02But if you went back
52:04not long ago, we didn't even know
52:06artificial intelligence would exist the
52:08way it artificial intelligence today
52:10exists. And the future will be like
52:13that. So when you're nailing it down,
52:16you know it used to be make sure that
52:19you know how to code. And then Claude
52:22code comes along and all of those who
52:24are coding
52:26are worried about their jobs. Okay? So
52:28what is it that matters? Okay? It is
52:33It is the approach to life in a sense
52:36that produces that you know the the
52:39general understanding and also the
52:42adaptability.
52:43I think a lot has to do with knowing
52:45yourself. That's why in building
52:47Bridgewater,
52:48the personalities of the person were
52:51very important in what suited their
52:54jobs. And then I built this
52:57a personality profile test.
52:59Then I made it online for anybody to go
53:02take. It's about 30 minutes. It's free
53:05online. It's called Principles You.
53:07That'll tell you a lot about your
53:08nature. Okay? But your goal is to find
53:12that nature and what it what are the
53:14paths. And there are several paths and
53:17they're constantly changing to find that
53:19nature. Okay? You'd experiment. You
53:21learn. Okay? But you know, you probably
53:25were pulled into this job by your
53:28nature, right? And so and you and you
53:30made it work and here it is it works in
53:33all of those dimensions and it's like
53:35that for everybody.
53:36>> Yeah, it's it's it's interesting cuz you
53:38look forward to the future and I I think
53:40if I was a young person at this stage,
53:42and I was trying to set out where to aim
53:44my career, I would be more confused now
53:46than ever before, especially cuz they're
53:47also contending with this uh
53:49unemployability crisis amongst entry
53:51levels.
53:52>> if you're talking about you'd be
53:55confused because you can't anticipate
53:58the future,
54:00that's right. That's just the way it is,
54:03right?
54:04And and if you say, "What is it that I
54:07need, given that reality?" Okay. I need
54:11to I need to learn, I need to know how
54:14to maximize the use of tools like AI to
54:18be able to in- increase what I know, and
54:21how do I use that to the best of my
54:24ability to be as useful as possible
54:28doing things that fulfill me.
54:30>> Mhm.
54:31>> Okay? So, that's what you need to do.
54:33You're asking what you need to do. Uh
54:35just get over the fact that you don't
54:37know what the future's going to be like.
54:39So, if you're looking for an answer, and
54:41it's going to be a computer programmer,
54:43is it going to be this or that? No, just
54:45be maximize uh your ability to know,
54:49which is so easy to do nowadays, right?
54:52So, maximize that, and then maximum use
54:55that to maximize your usefulness in in
54:58jobs that make you happy, and that's the
55:01thing that
55:03that's the best I can give you in terms
55:04of more mice 16-year-old,
55:07that's the best I I can give them.
55:10Because I I don't want to mislead them
55:12that it's the thing, that it's the
55:14particular job.
55:16Okay? That'll mislead them.
55:19>> You talked about this 80-year cycle,
55:21which results in this new world order,
55:23and it sounded like you were saying that
55:25near the end of the cycle, you see
55:27wealth inequality.
55:29And you see the Gilded Age, where some
55:31people have lots of nice things, and
55:32other people at the other end are
55:34struggling, and this is a function of
55:35capitalism.
55:36>> First of all,
55:38um
55:40it's a reality
55:45that it's not only just a um a
55:47a wealth gap difference. And if the
55:49majority
55:51system is not working for the majority,
55:53well, you're going to have a problem.
55:56And yes, it is um it's contributed to
56:00these things where one wants to create
56:03more opportunity through education
56:06and through other basics, that there's
56:08certain level that a floor
56:11that nobody should go underneath
56:14because it's bad for them and it's bad
56:17for the society. And just to embellish
56:19on that point, my wife and I live in
56:21Connecticut. It's the on a per capita
56:24income basis, I think it's the second
56:26richest state. But 22% of the high
56:29school students have either dropped out
56:32of high school or are failing with
56:35absentee rates of greater than 25%.
56:38And as a result, a lot of it is gangs,
56:42shootings, drugs, and so on that leads
56:45to a lot of incarcerations.
56:47And the bill for incarcerations
56:51has become uh larger than the education
56:54budget. When you have that kind of cycle
56:57and so on, the system has to work for
56:59most of the people and and so on. So,
57:01you you um you you have that dynamic.
57:06But it all comes down to productivity.
57:09And so, um the way I look at it is the
57:12government run by almost anybody
57:14can't make these things run well. I
57:17mean, governments do not things run
57:19well. So, what is it like to give them
57:21the money and expect that they're going
57:24to make things work well? And so, you
57:26look at this set of circumstances and
57:29you say, "Who is going to make it work
57:30well?" I and I don't know the answer.
57:33And there's a budget considerations and
57:35so on. You have to prioritize to the
57:38things that make it work well. And and
57:40you know what that is? That is educating
57:43people to be productive and civil. We
57:46don't talk enough about civility, you
57:48know, how we work together to be able to
57:51achieve a
57:52productive result. And the way these
57:54cycles go, it's more likely that they're
57:56going to have a big fight and we're
57:58going to have, you know, a debt problem
58:01and those kinds of things than we how we
58:03are going to come together and work out
58:06how to achieve this environment which
58:09takes care of wonderful education and
58:11productivity of people and all of that
58:14to make the society work better
58:17for most people. And that's the way it
58:19looks and that's what's happened.
58:21>> Capitalism leads to inequality, it
58:24seems.
58:24>> Yeah.
58:25>> So
58:26>> But it doesn't have to.
58:27There are some societies
58:29um like in Singapore, some of the
58:32Scandinavian countries, some some
58:34societies, there is a a floor that
58:38everybody uh
58:40can have um good education, adequate
58:44housing, and adequate health care.
58:47The foundations.
58:49Okay?
58:50Because if you go below those levels,
58:54uh the society will pay terribly for it
58:57because those people
58:59will be
59:00liabilities, not assets of the society.
59:03They'll be disruptive.
59:04>> So what about wealth taxes? Cuz this is
59:06the big debate now. The the big debate
59:08in the UK at the moment is tax the rich.
59:10It's been all over our news over the
59:11last couple of weeks. The big debate in
59:12New York and LA is wealth taxes and tax
59:15the rich. Good idea, bad idea?
59:18>> It's a very difficult idea in the
59:21following ways.
59:22I'm just talking about the mechanics.
59:25They have to sell the wealth.
59:27And
59:29and that contributes to get the money to
59:31pay the taxes. That's one of those
59:33things that can cause the bubble to
59:36burst as we're talking about. And then,
59:38[clears throat] um, operationally,
59:41it's very difficult, unlike if they did
59:43it as, um, stepped-up tax bases. In
59:47other words, right now, when you die,
59:50your capital gains gets put aside. And
59:53you don't have to pay capital gains
59:55taxes, you pay inheritance taxes. And
59:57there are ways that you can raise taxes
1:00:01and not hurt the economy. But we do have
1:00:04to realize that it will lessen
1:00:06investment. Because what wealth is
1:00:09mostly used for is to put it into
1:00:11investment. So you have to do this with
1:00:14a at the same time the improvements in
1:00:18those that are going to improve
1:00:20productivity, like education and so on.
1:00:23If you're just making transfer payments,
1:00:26wealth payments, and you undermine the
1:00:29productivity of the society by doing
1:00:31that. In other words, you're just giving
1:00:34it for consumption and so on. And the
1:00:36money's going from what was capital
1:00:39expenditures and those kinds of
1:00:42investments that make, uh, a better,
1:00:44more productive society to go to, in a
1:00:47sense, consumption and so on. That
1:00:50doesn't produce that prod- productivity.
1:00:52That's going to be a problem. So you
1:00:54have to think, how do you make people
1:00:57productive and how do you make your
1:00:59society productive for most people? Or
1:01:03you're going to have to find a way where
1:01:06you say that other group of people who
1:01:08is not productive, um, the overall
1:01:11society can have a higher level of
1:01:13productivity, but we're going to still
1:01:15establish this bottom that I'm talking
1:01:17about. The bottom in education, the
1:01:19bottom in conditions. And then you have
1:01:21to say who was capable of doing it.
1:01:24Building
1:01:25a uh
1:01:26a society that will be productive.
1:01:29>> And who is that?
1:01:30>> Well, as I say, you have this dynamic
1:01:33problem that um
1:01:36uh typically a privately owned
1:01:39capitalist owned
1:01:41business
1:01:42will do better than their government
1:01:45counterpart.
1:01:47>> Okay, so business is more productive
1:01:49typically than a government entity.
1:01:51>> That's the system.
1:01:52>> So entrepreneurship, you need
1:01:54entrepreneurship.
1:01:54>> Yeah, and capital. In other words,
1:01:56people who are capable of making the
1:01:58thing they're responsible for
1:02:01productive. Okay? Run efficiently. Run
1:02:04efficiently. So you need those
1:02:07indisputably. And if you're doing that
1:02:09in government, you need that in
1:02:11government in order to be able to do it.
1:02:13And government has its own
1:02:15uh it first of all, it doesn't attract
1:02:17many of those people. And then it also
1:02:20has, by its nature, knowing many people
1:02:22have gone into it, it it is almost
1:02:25dysfunctional as it causes all of this
1:02:29arguing and problems. So those who want
1:02:32to be most productive tend not to go
1:02:34there. And also, um it doesn't uh
1:02:37distribute well. These people do not
1:02:40they're not on the ground. They don't
1:02:42have the direct contact. They don't know
1:02:44what it's like. And as I'm describing, I
1:02:46see it this way.
1:02:47>> Politicians.
1:02:48>> Yeah, the politician who says I'm uh I'm
1:02:51going to you know, so you still have to
1:02:53come back to the question, who's going
1:02:55to make it run efficiently?
1:02:58>> This is something that I've made for
1:03:00you. I realize that the Diverce City
1:03:02audience are strivers, whether it's in
1:03:04business or health. We all have big
1:03:06goals that we want to accomplish. And
1:03:07one of the things I've learned is that
1:03:09when you aim at the big, big, big goal,
1:03:12it can feel incredibly psychologically
1:03:15uncomfortable because it's kind of like
1:03:16being stood at the foot of Mount Everest
1:03:18and looking upwards. The way to
1:03:20accomplish your goals is by breaking
1:03:22them down into tiny small steps, and we
1:03:25call this in our team the 1%. And
1:03:26actually, this philosophy is highly
1:03:28responsible for much of our success
1:03:30here. So, what we've done so that you at
1:03:33home can accomplish any big goal that
1:03:34you have is we've made these 1% diaries,
1:03:38and we released these last year and they
1:03:39all sold out. So, I asked my team over
1:03:42and over again to bring the diaries
1:03:43back, but also to introduce some new
1:03:45colors and to make some minor tweaks to
1:03:46the diary. So, now we have a better
1:03:50range for you. So, if you have a big
1:03:52goal in mind and you need a framework
1:03:54and a process and some motivation, then
1:03:57I highly recommend you get one of these
1:03:58diaries before they all sell out once
1:04:01again. And you can get yours at the
1:04:02diary.com.
1:04:04And if you want the link, the link is in
1:04:05the description below.
1:04:07What is the UK currently a cautionary
1:04:09tale of?
1:04:10>> It's the classic cycle. They
1:04:13have gotten over
1:04:15indebted,
1:04:16under productive,
1:04:19and they've run out of choices.
1:04:22In other words, there's not enough
1:04:24money.
1:04:25Okay?
1:04:27And because there's not enough money
1:04:30um to to do all the things,
1:04:33then they've gotten this
1:04:35internal political conflict going.
1:04:38And you've had uh
1:04:41six out of the last seven years, you've
1:04:43had it a new pri- prime minister.
1:04:45Because somebody else comes in and they
1:04:47got their promise.
1:04:49And and the promise doesn't pan out, and
1:04:52it doesn't take long to be that that I
1:04:54don't believe your promise anymore, so
1:04:56you bring new people in and then you
1:04:58throw them out.
1:05:00>> We We just had a new prime minister
1:05:01yesterday.
1:05:02>> Yeah, I know. I'm I'm It's all part of
1:05:04this cycle. And so, what happens is they
1:05:06don't have the financial and the people
1:05:08move. It's just logical, right? It's
1:05:11just When you're heavily indebted
1:05:14and you're not as productive
1:05:16and you've got large wealth gaps,
1:05:19what are you going to do? It's politics.
1:05:21Um you're going to say, "I can't raise
1:05:23taxes because if I raise taxes, besides
1:05:27having great in conflict, people are
1:05:29going to leave."
1:05:31Uh okay. So, I can't I can't cut
1:05:34benefits because those who are receiving
1:05:36whatever those benefits are are the ones
1:05:39that are suffering them. And what am I
1:05:40going to do? Cut those benefits?
1:05:43So, now okay.
1:05:45But, wait a second. I'm running a big
1:05:46deficit or I don't have enough money.
1:05:49So, where does the money come from? How
1:05:51do I get out of not getting more in
1:05:53debt? And then what does that mean for
1:05:55the person who's lending to you? They
1:05:58don't want to lend to you, right? So,
1:06:00you're not going to get the money to
1:06:02finance the deficits.
1:06:04It's mechanics.
1:06:06>> So, what is it they have to do to get
1:06:07out of that situation?
1:06:09>> They're going to have to have a, you
1:06:11know, a major
1:06:13restructuring. You're going to have to
1:06:15um
1:06:16>> Go bankrupt.
1:06:17>> Wipe out.
1:06:18Yeah, well well, the the way these
1:06:20central banks work now is they do a
1:06:22mixture of printing money, which
1:06:24produces inflation,
1:06:27and then restructuring the debt in some
1:06:30way, like maybe changing the maturity.
1:06:33Well, and and in these cycles, quite
1:06:36often they put in capital controls
1:06:38because they think people are leaving,
1:06:40so they don't want them to leave and
1:06:42take their money with them. So, they put
1:06:44in capital controls that says, "You
1:06:47can't leave with your money." Okay, and
1:06:49they'll have exit taxes. And that's the
1:06:51type of thing that happens until, you
1:06:54know, there's period of great
1:06:56turbulence. Then you um through a
1:06:58combination of restructuring the debt.
1:07:01Restructuring the debt means like quite
1:07:04often you lengthen the maturity of the
1:07:06debt.
1:07:07>> Okay.
1:07:07>> I think what's needed is a strong
1:07:10middle.
1:07:11>> What does that mean?
1:07:12>> Right now,
1:07:13there's a left and right, and they're
1:07:14extreme.
1:07:16And as long as they're at war with each
1:07:18other, that's going to make things
1:07:19worse.
1:07:20>> Yeah.
1:07:21>> If you can find that middle course, so
1:07:24that those at most extreme
1:07:28um
1:07:30are more alienated than those who say,
1:07:34you know, we're going to have to figure
1:07:35this out together.
1:07:37And then what I would do,
1:07:40that leadership, that core, I would have
1:07:43um something like a bipartisan
1:07:46commission,
1:07:48in which smart people,
1:07:50meaning who understand how economics and
1:07:52these things work,
1:07:54of both parties work together
1:07:56to uh come up with a small uh and
1:08:00difficult plan. In other words, you're
1:08:02going to have to make difficult changes
1:08:05in order to make that um work well. But,
1:08:08if you can achieve that, you know, like
1:08:11sometimes in history, great leaders of
1:08:14opposing sides have been able to come up
1:08:17with a plan. I mean, that's how the
1:08:19Constitution was made. You come up with
1:08:21a plan for operating that way, and then
1:08:24you impose those difficult changes. And
1:08:28then when I say this, I I say that
1:08:31that's very difficult and very long
1:08:33shot. But, um unless you have bipartisan
1:08:37support, unless you do it in a way where
1:08:41the pain is shared,
1:08:44um
1:08:46and there's a sense that there is a um
1:08:50we're doing the right thing,
1:08:52as well as not a sense, just a reality
1:08:54of doing the right thing,
1:08:56to make most people productive, that is
1:08:59the best path forward.
1:09:01>> If you were a young entrepreneur,
1:09:05you know, 21 years old, would you
1:09:09build a company in the UK now if you had
1:09:11a choice? And if not, why not? And if
1:09:13so, why?
1:09:14>> I would uh exist without and try to
1:09:17exist without borders.
1:09:18>> What does that mean practically?
1:09:19>> In other words, put aside all of these
1:09:22things that we're talking about to a
1:09:23large extent and say where are the
1:09:26places in the world
1:09:28that are that have the vibrancy, that
1:09:31have the capital, that have uh the
1:09:34elements that are needed. There are
1:09:36bright spots in the world and I'd want
1:09:39to be around the most intelligent, doing
1:09:42the most cutting-edge, terrific things
1:09:45and be global. In other words, don't be
1:09:48just stuck in a provincial place. Go to
1:09:51these places that are what I might call
1:09:54almost Renaissance states that are good
1:09:57things are happening and these qualities
1:10:00exist that not only good education, the
1:10:02civility, the vibrancy. Be in those
1:10:06places, but be able not just in one.
1:10:08There's a Chinese
1:10:10not a Chinese, Hong Kong expression. I
1:10:12think that a smart rabbit has three
1:10:14holes. And what it means is like if the
1:10:17one place that you go to,
1:10:19uh it may not be the place that
1:10:23uh remains the best place. They're
1:10:24riskier places. The riskier places are
1:10:27those that don't have the elements I
1:10:29mentioned. The education, the civility,
1:10:31the productivity, all of those things.
1:10:34>> So, would you Would one of those places
1:10:35be be the United Kingdom? Cuz me and my
1:10:37friends talk about this sometimes, you
1:10:38know, I've got I've invested in lots of
1:10:39companies there and the founders come to
1:10:41me and ask me these kinds of questions,
1:10:42which is is based on everything that's
1:10:44going on with this turmoil and the big
1:10:46cycle, um what's going to happen if I
1:10:49continue to build my company here in the
1:10:50United
1:10:51>> I think that um I think the United
1:10:53Kingdom,
1:10:54as it goes through these difficulties is
1:10:58as a whole a more difficult place.
1:11:02And then there are pockets of it that
1:11:05when they're operating are in their
1:11:08pockets very stimulative
1:11:11having those elements just like in the
1:11:13United States there are places and
1:11:15pockets that have those. However,
1:11:18they're within a system in a place that
1:11:21is um
1:11:22not um
1:11:24not healthy.
1:11:26>> The real dominant narrative we're seeing
1:11:27as I said this week is that
1:11:29because there's this problem you said
1:11:30there's not enough money
1:11:32the
1:11:33the most popular
1:11:35narrative which I think is supported by
1:11:37about 70% of people is that people over
1:11:4110 million net worth
1:11:43this this is something proposed by one
1:11:44of my former guests Gary Stevenson who
1:11:45did a documentary last week should have
1:11:48a 2% wealth tax.
1:11:49>> My preferred way is to stop people from
1:11:51hoarding enormous amounts of wealth for
1:11:53enormous amounts of time. That's my
1:11:55that's basically my preferred method.
1:11:56There's also the wealth tax method.
1:11:58There's also capital gains as a method.
1:12:00There's a lot of different ways to
1:12:01There's a lot of different ways to but
1:12:02you have to deal with the problem of if
1:12:04you do not do not tax very wealthy
1:12:05individuals and very wealthy families
1:12:08their share of the pie will obviously go
1:12:09over time and they will and they are as
1:12:12we are watching squeezing out ordinary
1:12:14families.
1:12:15>> And this is kind of it would raise I
1:12:17think it's I think they said 20 billion
1:12:18dollars or something like that but it
1:12:20would raise some money.
1:12:21Um so the the big debate in the country
1:12:23at the moment is yeah do we one way to
1:12:25raise money would be this wealth tax.
1:12:27Proponents of that or I should say um
1:12:28people that are against that say people
1:12:31will leave.
1:12:32>> If you took
1:12:34all of the money of people in the in the
1:12:37top
1:12:39not in other words taxed at 100% you're
1:12:42not going to come up with enough money
1:12:45because it's a such a small percentage
1:12:46of the population and and but and that
1:12:49but it in addition yes the people will
1:12:52leave. Then you change the laws so that
1:12:55you make them retroactive.
1:12:58In other In other words, you say the law
1:13:01means you're going to be taxed as of a
1:13:05past date, so that if you leave,
1:13:08um we're going to get your money.
1:13:12Or then you put in capital controls. All
1:13:15of this has happened before. Wealth
1:13:16taxes would be new. Wealth taxes are
1:13:19administratively difficult. Cuz how do
1:13:22you value all this wealth that is not
1:13:24easily valued and such things. But yes,
1:13:27what you've just said is um well
1:13:30recognized.
1:13:31>> You mentioned earlier that this big
1:13:32cycle takes place, this one here on the
1:13:34front of your book, The Changing World
1:13:35Order, happens roughly every 80 years.
1:13:39>> Yes, it's like health.
1:13:42What I mean is
1:13:44it varies. On average, let's say,
1:13:47what is the life expectancy of a person,
1:13:51but life expectancies or how long people
1:13:53live vary. I wouldn't uh
1:13:56uh emphasize too much um the amount of
1:13:59time exactly as much as I would uh look
1:14:03at your condition.
1:14:05>> Where are we in this um at the moment
1:14:07with in terms of the symptoms or markers
1:14:09of the next big
1:14:10>> Well, Chrysler over in this vicinity
1:14:13over here,
1:14:14um you know, uh we're on the
1:14:18um when we say that um
1:14:20the US, the UK,
1:14:23number of other countries
1:14:24are um later in that cycle when there's
1:14:29the loss of the things that we've been
1:14:31talking about.
1:14:32Uh over-indebtedness,
1:14:33moreover-indebtedness, the loss of
1:14:35power.
1:14:36>> So, in the collapse period of decline
1:14:38>> I'll call that the the decline.
1:14:40>> And you've studied this for how long in
1:14:43terms of
1:14:43>> years. The cycles for 500 years and in a
1:14:46number of countries that's in that book.
1:14:48These are objective measures. This is
1:14:51not subjectivity. You can measure these
1:14:55things. You can measure the level of
1:14:57indebtedness. You can measure the
1:14:59education levels and the
1:15:01competitiveness. You can measure all
1:15:03these things in clearly measurable
1:15:06numbers that show the health just like a
1:15:10physical exam.
1:15:11>> When there's a new world order because
1:15:13of this decline through history over the
1:15:15last 500 years, has there ever been two
1:15:18superpowers that emerge as the dominant
1:15:19superpowers?
1:15:21Or is it just tends to be one?
1:15:23>> In the past, prior to World War I,
1:15:27there was no
1:15:29World War I happened and then World War
1:15:32II happened because the world came
1:15:34together and there was one world
1:15:37essentially.
1:15:39Before that, there were regions and they
1:15:41would have the different powers and you
1:15:44could have a powerful China or India
1:15:47could be very powerful at the same time
1:15:49as the UK or
1:15:51the Dutch and whatever would be powerful
1:15:54and they weren't in that one world. And
1:15:57the basic issue is when you have one
1:15:59world and you have disagreements,
1:16:03you're always going to have
1:16:04disagreements. How do you resolve those
1:16:07disagreements?
1:16:08>> Cool.
1:16:09>> War, okay. It maybe it's not physical
1:16:12war, maybe it's whatever it is, but
1:16:13there's a disagreement. Where does the
1:16:15border lie? Where does this Okay, the
1:16:19rules-based
1:16:20order is a theoretical
1:16:24conception
1:16:26of the United States coming out of World
1:16:29War II because there's the idea of how
1:16:31do you govern and you have
1:16:32representatives and you have them in the
1:16:35United Nations and so on. And you know,
1:16:38that's a nice theory, but the reality is
1:16:42when that comes in is inconsistent with
1:16:45power,
1:16:46which wins? Power or that rule-based
1:16:49system? So, by nature, with to answer
1:16:52your question, it means tends to be a
1:16:55dominant power. We will see. China and I
1:16:57think the United States I think
1:16:59the most likely beneficial
1:17:02outcome is that it becomes more
1:17:05regional.
1:17:06Okay? China has no desire to occupy,
1:17:12control other countries for for various
1:17:15cultural reasons and things that I can
1:17:17go into. And and they their basic
1:17:19objective is to not be cut off, not be
1:17:22harmed, and then also be as good as they
1:17:24can be and and be competitive following
1:17:28their approach to a system, which is
1:17:30very much a top-down controlled system
1:17:34that's an extension of Confucianism,
1:17:36which is like the family, and that's
1:17:39what they want to do. You can possibly
1:17:41have this region thing, but you're not
1:17:43going to have the dominant world power
1:17:45if that's the case. You have some chance
1:17:48that there's a great conflict, but I
1:17:51think that there's enough wisdom in a
1:17:54sense to
1:17:56not want to go there.
1:17:57>> So, there's always there's pretty much
1:17:58always been a superpower through
1:18:00different cycles. There's been one
1:18:01dominant power through these historical
1:18:03cycles. You're saying that you believe
1:18:07in the next decline there won't be one
1:18:09dominant power, which has been the US
1:18:11for the last 80 odd years, there will be
1:18:13two.
1:18:14Because you you can't foresee there
1:18:16being a conflict at the scale that would
1:18:18result in one dominant power.
1:18:20>> The strength of each country
1:18:23will be how they take care of
1:18:24themselves.
1:18:26Uh are they going to be strong or are
1:18:28they going to be weak based on how they
1:18:30educate their population, how they spend
1:18:33their money, how they manage to
1:18:36Those will determine the relative powers
1:18:39of those countries, right? And so,
1:18:42that'll be true certainly for the United
1:18:44States and China. And so, as we go
1:18:46forward, how will those systems deal
1:18:49with those issues in the best possible
1:18:51way? And that I would say, as long as
1:18:54the United States remains a power, but
1:18:57it's in it has a risk of of having a
1:19:00very bad set of circumstances through
1:19:03debt and conflict and these things that
1:19:05erode it, it'll be from within that
1:19:09those things, particularly,
1:19:12could change that relative balance of
1:19:15power. And similarly, if China managed
1:19:17itself badly, it I could change that.
1:19:20Given that the if they both remain
1:19:22powerful entities, then what you're
1:19:25going to see is,
1:19:27I believe, more the recognition that
1:19:30there are regions, okay? Just like the
1:19:35there's the Americas, okay? And that
1:19:38becomes heavily much more the region and
1:19:41where that spills over. And then there's
1:19:43the region
1:19:45around China, the
1:19:49APAC countries,
1:19:51and though that region. And that there
1:19:54would be the development within those
1:19:56regions, and I do believe the avoidance
1:20:00of the big war that would be very
1:20:04detrimental. There are issues like the
1:20:06Taiwan issue, but the Taiwan issue will
1:20:09be handled by,
1:20:11in my opinion, most likely not
1:20:13militarily
1:20:15in the sense that
1:20:17there will be a great war between the
1:20:19United States and China over it, but in
1:20:21the pressures that are going to be
1:20:23created so that there is a reunification
1:20:27of China.
1:20:28>> You mentioned conflict there. The United
1:20:30States are at war with Iran, and it
1:20:32seems to be a war that they can't seem
1:20:33to get out of.
1:20:35This is going to have an impact,
1:20:36presumably, on
1:20:38lots of things you've described here,
1:20:40but also the feelings of people at home.
1:20:42As, you know, we we face the prospect of
1:20:45the United States sending troops on the
1:20:46ground into Iran, because this the
1:20:48Strait of Hormuz is going to become this
1:20:50choke point to global energy, and
1:20:52they're going to, you know, and what
1:20:53does Trump do about that? He can't It's
1:20:54like Vietnam, he can't leave. Or else he
1:20:57is going to look bad.
1:20:59Um he If he stays, he looks bad.
1:21:02Midterms coming up.
1:21:04What's your thoughts on this war in
1:21:05Iran? Do you think it was a bad idea? Do
1:21:07you think it was a good idea? Do you
1:21:08think it was
1:21:10Do you think it's Does it play a role in
1:21:11all of this stuff here? The US Please
1:21:13elaborate.
1:21:13>> this war in
1:21:16Iran, I think it
1:21:18Here's what's happening.
1:21:19Internationally, I
1:21:21I I get I get to speak to world leaders
1:21:23and and so on, and and particularly uh
1:21:26in Asia, there's a a recognition
1:21:30that um the United States
1:21:33uh doesn't want to uh fight a war. So,
1:21:36the the litmus test is uh do you Who
1:21:40controls the Strait of Hormuz? And that
1:21:42the United States,
1:21:44um because the population in the United
1:21:47States is worried about uh gas prices
1:21:50and losing people, and and they want it
1:21:54to be be all over fast, that uh you
1:21:58can't fight a war that way. And so, what
1:22:01you have is the United States will not
1:22:04show up in Asia.
1:22:06>> What does that mean, show up in Asia?
1:22:08>> In Asia, there are all these countries
1:22:11who believe that the United States was
1:22:14going to play an important role as a
1:22:16counterbalancing
1:22:18influence for power in the region,
1:22:21because China's the dominant power, and
1:22:24the others are much less power. And so,
1:22:27the United States being in there was
1:22:29going to balance those power, and
1:22:32because they have a military presence,
1:22:34the idea of having bases in their
1:22:37countries was believed to be that will
1:22:40help that happen. Okay, now there's a
1:22:45recognition that not only they would
1:22:47show up, but maybe these bases can
1:22:50become liabilities, and that the Chinese
1:22:54have a lot of influence and power under
1:22:57that set of circumstances. For example,
1:23:00chips come out of Taiwan. We could
1:23:02imagine what would happen if they
1:23:04blockaded chips leaving Taiwan. Okay,
1:23:07you'd see the world stock markets crash.
1:23:10You would see terrible terrible things.
1:23:13That represents a non-military power,
1:23:15just even the ability to threaten that.
1:23:18Say the Chinese say for 5 days we're not
1:23:21going to have it. What will the United
1:23:22States literally do? Or if you go to
1:23:26countries like the Philippines, which
1:23:28has a treaty with the United States
1:23:31that's like a NATO treaty. How would the
1:23:33American public react that we're going
1:23:35to send
1:23:37military, you know, aircraft carriers
1:23:40and so on into the Philippines to stop
1:23:43the Filipinos from being picked on by
1:23:46the Chinese? I mean, so what you're
1:23:49seeing is a change that is very similar
1:23:53to the British Empire in terms of
1:23:56being weaker. I remember a time not long
1:24:00ago that the United States would just
1:24:03have to almost hint to a country that we
1:24:06would like this thing
1:24:08to be this way, or you would like it to
1:24:10do that that, and they would do it
1:24:12because of the American power, not just
1:24:15military power, but economic power and
1:24:18so on. Well, as you're seeing that power
1:24:21being eroded, For example, China is a
1:24:24larger trading partner with most
1:24:27countries than the United States is. Or
1:24:30capital turning up. So, these things
1:24:33matter. So, you're you're seeing that
1:24:36kind of a shift in power. I'm a global
1:24:39macro investor. And my goal is to be as
1:24:42accurate as I possibly can. I can't let
1:24:45biases stand in my way of doing that.
1:24:48So, I look at statistics and measures
1:24:50and indicators and so on. So, what I'm
1:24:53saying is clear. It is
1:24:56you know, it's apparent. It's mechanics.
1:24:59>> So, what does that mean for the Iran
1:25:00situation then?
1:25:02Does it mean that
1:25:02>> Well, it means that it's a very, very
1:25:04difficult situation. What what is
1:25:08all through history
1:25:09and the Chinese know this very well
1:25:12because their way of having a war is
1:25:15conveyed in the art of war and also the
1:25:18tribute system as they call it. You
1:25:21cannot easily go in and control a
1:25:25country for a long period of time
1:25:27occupying. There are, you know, 90
1:25:29million Iranians and they will be there
1:25:33no matter what happens. Now, the
1:25:35question is do you have what it takes to
1:25:40take control of the Strait of Hormuz by
1:25:43way of example and allow and in other
1:25:45words, do you allow that to be in the
1:25:47hands of the Iranians or do you not? And
1:25:51are you willing to pay the price to be
1:25:54able to
1:25:55put yourself in the position, which
1:25:57means take a lot of pain and then
1:26:01enforce that for
1:26:04the I don't know, forever and ever
1:26:06future because it's not just take
1:26:08control today, it means okay, how is
1:26:11that going to go on and what does that
1:26:13mean in these other locations? Does the
1:26:16United States we're going to do the same
1:26:18thing with the Chinese in Asia? They're
1:26:21going to do the same thing all around?
1:26:23Probably. Okay. So, what does that mean?
1:26:26Okay, a change in the world order.
1:26:29>> It sounds like a big mistake.
1:26:30>> Oh, yeah. It It was a big mistake. And
1:26:33also,
1:26:34what it did is it shown a light
1:26:37on
1:26:39the vulnerability. Before, it didn't It
1:26:41wasn't apparent.
1:26:43>> Vulnerability of?
1:26:45>> The United States in being able to
1:26:46enforce.
1:26:48You know, when there's always the
1:26:49threat,
1:26:50we'll come in there.
1:26:52Uh the strait is open.
1:26:55We're not dealing with this.
1:26:57And there's always the threat that the
1:26:59United States will
1:27:01uh remain control. And that would be
1:27:03true in Asia and other places. Now, a
1:27:07light bulb goes off. In other words, the
1:27:10like the British in uh the Suez Canal,
1:27:13we didn't realize. Now, we realize.
1:27:16>> That threat no longer work.
1:27:17>> That that power no longer exists.
1:27:21>> I guess we shall see.
1:27:22Ray, thank you so much for uh committing
1:27:24this season of your life to being more
1:27:26of a public educator.
1:27:27Because your books here that have been
1:27:29read by millions millions and millions
1:27:30of people and the videos that you
1:27:31produced that have been watched by tens
1:27:33and tens hundreds of millions of people
1:27:35um have been so formative for so many of
1:27:36us understanding the world in simplified
1:27:38ways. And what I love about the work
1:27:40that you do is you explain the world
1:27:42through principles versus tactics and
1:27:44strategies which are a little bit more
1:27:46ephemeral than understanding the
1:27:48underlying principles. And I think it
1:27:49does two things. It helps us understand
1:27:51the world in ways that are allow us to
1:27:52see past the current short-term moment
1:27:54that we're in. But it also helps us
1:27:56think generally um from a more macro
1:27:58perspective about how all these things
1:28:00connect together. And I think that's
1:28:01broadly applicable. The idea of like
1:28:03principled thinking is broadly
1:28:05applicable to all areas of life, whether
1:28:06it's relationships or your business or
1:28:07your health whatever it might be. Um
1:28:09you've really written the definitive
1:28:11books on this subject matter. I've got
1:28:12all of them here.
1:28:13Um I mean, Principles is the first one
1:28:15that I ever read, but then I watched all
1:28:16of your your videos on your YouTube
1:28:18channel, which uh explain it in animated
1:28:21ways. Those are absolutely stunning
1:28:23videos. They're unbelievably stunning
1:28:25videos, and I It's funny cuz, you know,
1:28:26I've watched a lot of videos, YouTube
1:28:28videos in my life, but there's some that
1:28:29I have just never forgotten.
1:28:31And your book and your video are about
1:28:34the book on your YouTube channel, which
1:28:36I'll link to below, are a video on
1:28:38YouTube that I've just never forgotten,
1:28:39cuz it suddenly helped me understand the
1:28:41bigger picture
1:28:43in a way that I don't think I would have
1:28:44ever understood otherwise. There's no I
1:28:46didn't go I didn't go to my history
1:28:47classes in school. Um I'm never going to
1:28:49read history books necessarily. So, um
1:28:52that video you made, but also the book
1:28:54itself really helped me understand
1:28:55there's always a bigger picture. And
1:28:57funnily enough, I go looking for the
1:28:58bigger picture and the cycles, should I
1:29:00say, in all other facets of life and
1:29:03psychology. Because when you're dealing
1:29:04with humans, you are dealing with
1:29:06cycles. That's what what I've I've come
1:29:07to realize, and you can find them and
1:29:09spot them everywhere and then prepare
1:29:10for them accordingly. Thank you for the
1:29:12wonderful work that you do in this
1:29:13regard. I'll link all of these books
1:29:14below. Highly recommend reading them,
1:29:16and they're not for boffins or super
1:29:18smart people. They're for everybody, and
1:29:20uh they're written in such a way. So, I
1:29:21appreciate that.
1:29:22>> you for saying that. I find the videos
1:29:24are very digestible.
1:29:26One, how the economic machine works it I
1:29:28think it's
1:29:2930 minutes, and it's been watched by 140
1:29:32million people.
1:29:33>> Pretty sure.
1:29:34>> And and people get it. So, I think it's
1:29:36my responsibility to try to communicate
1:29:40also in a clear, simple, digestible way.
1:29:43So, I like to take a concept that's in a
1:29:47book and make it into a 30, which is to
1:29:50try to pass along what might be helpful
1:29:52to people. So, thank you.
1:29:54>> Thank you for committing your your this
1:29:55season of your life to that. I really
1:29:56appreciate it, and so do many millions
1:29:57of my listeners. So, thank you. YouTube
1:29:59have this new crazy algorithm where they
1:30:01know exactly what video you would like
1:30:03to watch next based on AI and all of
1:30:05your viewing behavior. and the algorithm
1:30:07says that this video is the perfect
1:30:10video for you. It's different for
1:30:12everybody looking right now. Check this
1:30:14video out, I bet you you might love it.

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This page contains the full transcript of Ray Dalio: I Predicted The 2008 CRASH, I Know What Comes Next! by The Diary Of A CEO, generated from the public captions YouTube serves with the video. The transcript has 15,392 words across 2,408 segments, with the original timestamps preserved so you can click any line to jump to that moment in the embedded player.

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