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Ray Dalio: The one rule that cuts investment risk by 80% — Transcript

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0:00You want to be successful? Here's the
0:01mantra for investing. I got my pen. The
0:04most fundamental question is how do I
0:06have the upside without having the
0:08downside? That approach was the basis of
0:11Bridgewwater going from having to borrow
0:13$4,000 from my dad to the largest hedge
0:16fund, most successful hedge fund in the
0:18world. I created personality tests. I
0:20gave it to Elon Musk. I gave it to Bill
0:22Gates. I gave it to Rick Hastings. Maybe
0:25I should probably not tell stories, but
0:27um No, no, no. That's what we do here.
0:28You don't have to make it to the top to
0:30be happy.
0:30>> What's the top? There's no correlation
0:32between the level of happiness in your
0:34life and the amount of money that you
0:36make. So, you have to have a purpose.
0:38What do you want to do with the money
0:39that is so important? You better answer
0:42that question.
0:49You were in some regard a little bit of
0:51a late bloomer in terms of like
0:52traditional metrics of success.
0:54>> Oh, yeah.
0:55>> I think you were 34, 35. you had like
0:58two kids. I think you had just laid off
1:00the five employees that you had had and
1:02you're like, "Look, Dad, I've lost it
1:05all." Can you like close your eyes and
1:07like remember that conversation? So I
1:09started Bridgewater in 1975
1:13and in 1981
1:16and 82 interest rates were not the
1:19emerging countries had a lot of debt and
1:22I calculated that those countries were
1:23not going to be able to pay their debts
1:25and and they were going to have big debt
1:28crisis and that was a very controversial
1:30point of view and then Mexico defaulted
1:33in August of 1982. So, I was asked to
1:36testify to Congress about what this is
1:39all about and and what might happen to
1:41the economy. I thought the economy was
1:43going to be a disaster. I couldn't have
1:45been more wrong. Okay? So, I lost money
1:48for me. I lost money for my clients and
1:51I had to lay off everybody. I was so
1:54broke I had to borrow $4,000 for my dad.
1:56So then my choice was am I going to, you
2:00know, put on a suit and tie, go in,
2:03commute, and work for somebody in that
2:06capacity. And I knew that I wasn't very
2:08good at working for people. Now, that
2:11was painful. That changed everything in
2:14my life. That created the bottom at
2:16Bridgewater. And then it just kept going
2:18up because of what I learned. I learned
2:21two things. First of all, I I learned
2:23humility to balance my audacity. Okay, I
2:28didn't have much humility. I'd say I'm
2:30right. I'm going to be right and all
2:31that. And then I learned how to
2:34diversify my bets and substantially
2:38reduce my risk without reducing my
2:40returns because I didn't want to have
2:43reduce the upside. I I knew that I had
2:46to reduce the downside. And so um I
2:49really learned and taught myself really
2:53my mantra. Okay, here's the mantra for
2:55investing. You want to be successful th
2:58this will um this is the uh holy grail
3:01of investing. Find 15 good uncorrelated
3:06return streams.
3:07>> How did you come up with 15?
3:09>> Well, I just looked at the math of it.
3:11Okay. So in other words, what are the
3:14marginal benefits of diversification
3:18given the different levels of
3:21correlation? And I I have that on a
3:24chart that keeps reminding me. Okay, if
3:27you can get out to 15, you can get down
3:31to about reduce about 80% of your risk
3:35without reducing your return. That means
3:38that you increase your return to risk
3:41ratio by something like a factor of
3:44five. Okay? In other words, wow. So that
3:47means you can get the upside without
3:49having the downside. Okay? And then
3:52humility, you know, I wanted people to
3:55kick the [ __ ] out of whatever I thought,
3:58you know, to try to do that and then
4:00have that. And that change in that
4:02approach was the basis of Bridgewater
4:05going from, you know, be having to
4:07borrow $4,000 from my dad to the largest
4:10hedge fund, most successful hedge fund
4:12in the world.
4:12>> If we wanted to be better investors,
4:15what do you think the most common
4:17mistake smart guys can make when it
4:19comes to investing? They don't have a
4:21game plan.
4:22>> So, what's a good game plan look like?
4:23How do you know if you have a good game
4:24plan?
4:25>> Well, the way that I did it was um um
4:28every time I would make a decision, but
4:31this is the building of all principles I
4:33did, but particularly in the markets,
4:35every time I would be make a decision, I
4:38would go back and study if I made that
4:39decision in these circumstances, how
4:42would it have worked in the past? And I
4:44would know the track record of that
4:46decision. And it that would give me also
4:50greater understanding of how things
4:52work. And so then I would have a
4:55decision rule and then I would program
4:57it into the market into the computer and
5:00when this thing come along then I
5:02started to realize okay now I've got
5:05criteria. So rather than just the one
5:08that I would see, I would say in the
5:11computer dump in all of them and where
5:14do they exist anywhere in the world and
5:16what what will so give me give me one
5:18good decision rule that wherever it
5:20happens in the r world world that I have
5:23a track record of knowing how those work
5:26and wherever it is in the world you
5:28bring me that and then make a collection
5:30of those kinds of things and make them
5:32uncorrelated. So it provides your dis
5:35your uh diversification and so now
5:38you're executing a game plan. So like I
5:41have rules that it should be timeless
5:42and universal because if it didn't work
5:45in a long period in time I would need to
5:48understand why it didn't work then and
5:50would work now. So that's how I would
5:52build you know that's how I I did build
5:55game plans and execute the game plans.
5:57>> Did Bridgewater have any revenue coming
5:58in?
5:59>> Um nothing. And so you're waking up in
6:01the morning and you're like, I got to
6:02figure this out.
6:03>> It was like um I'm on the edge of a
6:07jungle. I could go stay out of the
6:11jungle and I can go to safety
6:14and have a safe life employed
6:19regular job. Great. Okay. or I could go
6:23into the jungle and try to work across
6:27get through the jungle that have all the
6:29things that can kill me. And I made a
6:32choice of what I wanted in life. I mean
6:34like I have to have this great upside. I
6:38can't not do that. And also part of it
6:41was if I'm going in the jungle, I want
6:44to go with people um who want to go in
6:47the jungle with me who see things
6:49differently than I do. So, it's like
6:51going through this jungle with these uh
6:54animals or something that can kill you,
6:55but if you're in it together, then you
6:58are you can sort of see the animals
7:00that'll kill you. And then I loved being
7:02in the jungle so much I didn't want to
7:04get out of the jungle even after I've
7:06achieved
7:07>> You didn't want to go to the success.
7:08>> You'd rather be in the jungle than the
7:09zoo.
7:10>> Yeah. Almost. Yeah. to to play off that
7:12analogy. I think that like I think a lot
7:14of successful people and I think you've
7:15even said this where you're like as long
7:17as I could like do what I want during
7:18the day and what I love, then I'll be
7:20happy. But I have to imagine that when
7:21you're like 33 or 34 or something like
7:23that and you have young kids and you are
7:25like you got a little bit of a tiger in
7:27you. You're like, I want to provide. I
7:28want to win. I want to be the best.
7:30>> No, it wasn't like that at all. For me,
7:32it was like two levels. Just very
7:34simple. Uh can I pay for the basics?
7:38Like I don't need a big house. I don't
7:40need a bigg. My kids can go to a good
7:42public school. They have great public.
7:44>> Did you have like a number you're like,
7:45man, if I can make 100 grand a year?
7:46>> I counted what I started to do was I
7:49started to count how many months then
7:53and and then years of living that way
7:57could I afford if it shut down?
8:00>> But you said two levels. That was level
8:02one.
8:02>> It's freedom money. Basically, you
8:05money.
8:06>> What was that number for you? I don't
8:07remember what the number was, but it,
8:09you know, it wasn't it wasn't m it was
8:12an easy to achieve number
8:13>> like a million dollars,
8:14>> but but Oh, no.
8:16>> less.
8:17>> Oh, much less at that time.
8:19>> Was there ever a grand vision or or was
8:21it always like, well, what's the next
8:22level? Let's see if we can do that.
8:23>> No, no, no, no, no. It was
8:26I could imagine great things. I'll tell
8:28you a personality test. Um, when I
8:31decided that I wanted to pass uh
8:34leadership of Bridgewater along to
8:36others, I want to be investor, let them
8:38run the business, and I want to uh do
8:40that cuz I'm hooked on the markets. I
8:42created personality tests. I started
8:45with MyersBriggs and then I went to
8:48various kinds of personality tests and I
8:52then gave the personality tests to
8:55people like Elon Musk. I gave it to Bill
8:58Gates. I gave it to Reed Hastings. I
9:01gave it to Muhammad Eunis. I gave it to
9:03other people to see the elements of what
9:07they are are like. I put it online for
9:10free. I created it.
9:11>> We took it like you took it. Okay. Well,
9:14there's a type of there's a type of
9:15person that represents um a very small
9:18percentage of the population and Elon
9:21Musk is it then Bill Gates and and U
9:24Reed number of these people are this
9:26that I would call a shaper and they are
9:29people who love to go from visualization
9:33to actualization and to be on that
9:35mission and so on and that's my
9:37personality type. I have a certain type
9:40personality type. Then they have to do
9:41certain things. And I'm uh remember um
9:45Elon um and he's that personality type.
9:48Okay. Making money is not a big deal for
9:50him. I should probably not tell stories,
9:52but um
9:53>> No, no, no. That's what we do here. We
9:55tell stories. We can all [laughter] take
9:56it later.
9:57>> The excitement, you know, the compulsive
10:01thrill of climbing that and and aspiring
10:05to that was my personality type. And he
10:08doesn't need to. He doesn't need a
10:10house. He doesn't need security. He
10:13doesn't need anything. I mean, he didn't
10:16even need my level of needing.
10:18>> It sound like you had a story of him
10:20where that's an example of
10:22>> Well, yeah.
10:23Hey, everyone, pausing really quick
10:25because I know that you are probably
10:27scrambling to write down all the stuff
10:28that Ray's talking about. Well, the good
10:30news is that we did it for you. So, we
10:33made a guide. The link is in the
10:34description on YouTube. And this guy
10:36breaks down the five frameworks behind
10:38one of the greatest investing track
10:40records of all time. So you can actually
10:41use them and also spend time listening
10:43versus taking all the notes that you're
10:45probably taking right now. So you can
10:46get it for free right now. You can click
10:48the link below in the description or you
10:50can scan the QR code right here. All
10:51right, back to the episode.
10:54when he first started Tesla, he had made
10:58something like um $180 million from
11:01PayPal and he decided that he was going
11:03to take half of that money and he was
11:06going to go to the mo um to Mars and he
11:08had no experience in terms of going to
11:10Mars. And so we had this vision and um
11:14you know and I said to him um I suggest
11:17that you put aside a little bit of money
11:19take a piece of that and just so that
11:22way you know things don't work out
11:24you've got that no I don't no need to do
11:27that and he had that strong compulsive
11:30need but there is I think everybody has
11:33a certain nature okay whether you're
11:36born in your environment you have a
11:39nature and it that's why I created these
11:41personality tests for any of your
11:42listeners. Principles U is what it is.
11:45It's it's free. It's online. Take it.
11:48You'll understand more about your nature
11:50and there's a feature in there where you
11:52can have somebody else that you have a
11:54relationship with take it and then
11:56they'll tell you about the relationship.
11:58>> So, we took it last night based on on
12:00your after we talked the other day.
12:02>> So, Sam tells me he's like, "I'm a
12:04shaper." And you had told me you're a
12:06shaper, Elon. And so, I was like I was
12:08like, "Wow, okay. I hope I get shaper.
12:10>> [laughter]
12:10>> I think I want to be in that club. So,
12:12I'm taking it. I'm answering as honestly
12:13as I can.
12:14>> Is degenerate an option. [laughter]
12:17>> Degenerate.
12:17>> Happy but sort of foolish.
12:20>> New new type.
12:21>> You a [ __ ] Is that what
12:22>> So, so I got explorer and I was like
12:25that was not what I expected at all. Um
12:28did it characterize you?
12:29>> Yeah. I mean it called it it very much
12:31called like I'm driven very much by
12:34curiosity seeking in seeking new new
12:36knowledge new experiences learning
12:38getting being very like objective and
12:41truthful about what I'm experiencing and
12:43almost taking pleasure even when you
12:46have a bad result because it means you
12:47got to learn and so there was which is
12:49so true for me I get the most fun doing
12:51that so I guess it really was true and I
12:53think why I may not have been a shaper a
12:55lot of the questions would ask about
12:57part of the visualization to acquisition
12:59And I think I do a lot of that, but I'm
13:01not very detail oriented. I don't care
13:03about the details. I overlook details.
13:05I'm I'm not a perfectionist. I don't
13:06care like I'm I'm much less than Sam.
13:09Sam really wants everything to be great.
13:11Okay. One of the elements of a shaper is
13:14um and by the way, that's where you're
13:17seeing your nature. And you know what
13:18your satisfaction is and what you're
13:21likely to be most successful is that.
13:23>> Yes. What the issue of um a a a shaper
13:27is um they want to go from visualization
13:30to actualization and then they go from
13:33like this very big picture down to what
13:36are those details? So, I remember El
13:38Elon gave me the key to his car and and
13:42that, you know, had a little button and
13:44he showed the screen and he got into the
13:46details a lot and we're talking about
13:50how he wants to put a a watering can
13:54with a plant on a rocket to send it to
13:58Mars to say first life on Mars to aspire
14:01things and so on. So,
14:02>> it's a 10,000 foot level and 10 cm
14:05level,
14:06>> right? that that liking and then taking
14:08that and going. Okay. Um so yeah that we
14:12all have our p and so the success in
14:14life the joy really is knowing your
14:17nature and finding the right path for
14:19your nature because you can't fight
14:21against your nature. Right.
14:22>> So look Ray, we've only known each other
14:24for 30 minutes but I'm gonna I'm gonna
14:26show you something that might might
14:27gross you out. When I was young and
14:29drunk, I gave myself a tattoo and the
14:32tattoo that I gave myself is on my feet
14:35and it says, "Act now."
14:37>> Oh, good. [laughter]
14:40>> So, tell me, you you were at the tattoo
14:42parlor.
14:43>> Have you ever heard of the phrase stick
14:44and poke?
14:44>> No.
14:45>> Okay. So, basically, if you're in jail,
14:47this is kind of like where it comes out
14:49of, but like a lot of like punk rock
14:50people do it. get a sewing needle and
14:52you uh dip it in ink and then you just
14:54make lots of little dots on your skin
14:56and that's a tattoo. And so when I was
14:59like I was actually maybe I sometimes I
15:01say 19 in reality I was probably 22. I
15:03just don't want to be that mature when I
15:04say I did it. Uh, I was like angry that
15:07I wasn't moving fast enough in life and
15:09I was like I'm so I'm so you know angsty
15:12and at the time I was I partied a lot
15:14and so I was drunk and I was like I'm
15:15going to tattoo act now my feet so when
15:18I wake up that's the first thing that I
15:19see is I got to take action
15:20>> and has that worked for you? Yeah, I
15:23tend to need to tone it down uh where
15:25I'm like I need to think and plan
15:27because I you know I've had a little bit
15:29of success in my career and I think
15:30occasionally you need to like be a
15:31little more strategic but yeah I'm
15:32usually like a bowl in a China
15:33>> and the thing about it is that you have
15:35to find the people who are different
15:38from you who compliment you.
15:40>> Well like on my on the leadership test
15:42you don't just say the personality that
15:44you are. It's also where you're very
15:45weak. So it was like on mine it was like
15:47connecting supporting kind of the a lot
15:50of the like social side. So, my business
15:52partner, Ben, who's the guy who emailed
15:5477 times to you and your team to get you
15:57to be on this podcast. He's for, I
15:58think, for four years, has been emailing
16:00trying to make this happen because he's
16:02an amazing connector. He's an amazing
16:04supporter. He wanted this moment to
16:05happen even though he's not at the
16:06table. And to him, that's a win. To him,
16:08connecting is the win. And so, he's my
16:11he's been my business partner. We've had
16:12this unbelievable success as a
16:14partnership even though we couldn't be
16:16more more different, you know, if we
16:17tried. So this let's pause and and
16:21reflect on that very important point for
16:25success that people who think
16:27differently from you who you ordinarily
16:29can get annoyed at are your paths to
16:32success that if you can understand it
16:35was very interesting when I did this in
16:36Bridgewater I did the personality tests
16:39and and then they start saying oh you're
16:42a ESTP and I'm a whatever it is and Then
16:48they started to understand and they
16:50understood how they would work together
16:52rather than get annoyed by the other
16:55person. Yeah. That that was big deal,
16:58you know. And so success comes from
17:01that. Success comes from failure, right?
17:05And learning from it. Okay. And success
17:07comes from working together. I would say
17:10meaningful work and meaningful
17:12relationships. If you're on a mission to
17:14do something great, okay, go to Mars or
17:17whatever it is that you're going to go
17:18do together, and you have meaningful
17:21relationships and you have radical
17:23transparency and you know your nature
17:25and you know how to work with others,
17:26that's the formula for success, right?
17:29>> Yeah. Another example is Dr. Dalio is
17:32when when Sean came in, the notes were
17:34already printed off. There you go.
17:35[laughter]
17:36>> I I'm late. I don't have it printed.
17:39But, you know, so we have a very
17:40different dynamic. For six years, we've
17:42built one of the biggest business
17:43podcasts in the world despite being
17:45completely different in our
17:46>> So, I hope your audience hears this,
17:49>> right?
17:49>> Yeah.
17:50>> It's pause and reflect like cuz Okay,
17:53what are we here for? We're here for
17:54pretty much the same reason just a
17:56little bit different settings. I'm 76. I
17:59want to pass along whatever I had to
18:00help people in that way, right? That's
18:02my goal. Okay. your goal also is to
18:06you're obviously not only your goal but
18:08your effectiveness in being able to help
18:10people otherwise I wouldn't be listening
18:12okay so I just wanted to pause on that
18:15formula okay that if once you get that
18:18formula pain plus reflection equals
18:21progress and how do you work together
18:22and all that wow and follow your nature
18:25can you can you guide us on the
18:26reflection part because I think
18:27everybody understands the word but I bet
18:29we don't really talk a lot about how
18:31each individual person does it and So
18:33are you is writing your reflection do
18:36you talk to do you have two or three
18:37people you call who tend to give you
18:39high signal like feedback or advice like
18:41what is your process to actually do the
18:43reflection pain part comes involuntarily
18:45that that hits you when the pain comes
18:48um eventually the pain will go away but
18:51you can skip the people can skip the
18:53reflection and they can be hung up in
18:55their pain so you first have to make
18:57this transition now meditation has
19:00helped me a lot I I've done meditation
19:02transcend al meditation since 1969.
19:06>> Explain what that even is. I' I've only
19:08heard you and Jerry Seinfeld swear by
19:10transcendental meditation. What is it?
19:12>> Transcendental meditation is a very
19:14simple exercise of um you sit there
19:17calmly and you repeat a sound that is a
19:22word that is called a mantra that
19:25doesn't have any meaning. And so um let
19:28me an example might be okay so you're
19:32sitting there and you repeat m in your
19:33head and when you do that you can't have
19:37thoughts because when your thoughts are
19:39in your thoughts are in m and the
19:42thoughts can't come in and then
19:44eventually when you get this habit down
19:47then the m goes away and you go into
19:50pretty much a subconscious state you
19:52know very relaxing very uh calm and so
19:55it's a real calming exercise and it
19:58brings you into your subconscious mind.
20:00Okay, your subconscious mind is really
20:04controlling you a lot almost, right?
20:06There's a conscious mind, a logical
20:08conscious mind that you hope is logical
20:10and you're aware of. And then
20:12subconscious means below your awareness.
20:15There are all the things in your mind
20:18that influence you, your emotions, your
20:21subliminal stuff, and it goes into that
20:24subliminal stuff, and it calms you down.
20:27And it's also where creativity comes
20:29from. It's like if you take a hot shower
20:32and these ideas come to you, but you try
20:34to muscle ideas, you can't make the m
20:36you can't make them come, but that hot
20:38shower, that relaxation and so on. I
20:40found that very helpful. You know, I
20:43know I've I've developed a an instinct.
20:46Habit is a very uh important tool like
20:50if you know how to develop the right
20:51habit. So the habit means that you have
20:54an instinctual positive reaction to
20:57something. So I have a uh a reaction
21:00which is okay that is that that's a
21:04lesson in reality. In other words, pain.
21:07Okay. So it's now like a puzzle for me.
21:10Okay. The puzzle is how does reality
21:14work? It'll tell me something about how
21:17reality works and I have to deal with
21:20reality to make it successful. And so
21:24what is my principle for dealing with my
21:28that reality to deal with it in the best
21:31possible way? Okay, that's my now
21:34instinct. So now when you've got that
21:36instinct, it's a whole different thing,
21:39right? Because you you start to say,
21:41okay, there's pain and you have your
21:43curiosity. Okay. Now you take your
21:45curiosity and you say, "What does that
21:47tell me about how reality works and how
21:51I should deal with reality?" Okay. And
21:54if you solve that puzzle, then you will
21:57get a gem. And that gem is a principle
22:00that you can carry with you to be
22:02better, right? And so if you start to
22:05recognize it as that and then I do write
22:09>> So what's that? What does that mean? You
22:10journal every morning, every night?
22:11>> No, no, no, no, no. I it's just when
22:13thoughts come to me or circumstances
22:16come to me and or I'm also making
22:18decisions I'm I'm reflecting and then
22:21what has happened to me is I found that
22:24um all those reflections are cause
22:27effect relationships because principles
22:29are if this happens what do you do and
22:32that kind of thing and then I put those
22:34in computer code okay that's how I built
22:36Bridgewater I built okay if this happens
22:39you do that okay and you put it in
22:41computer code and I made then this all
22:44computerized
22:46decisionmaking systems for markets and
22:49almost uh everything and because I've
22:51done this you know for 35 years or
22:55something on almost everything I've got
22:58thousands of these principles that I've
23:01written down and they are you know the
23:04ways of achieving success in whatever
23:06kind of decision if you know if the Fed
23:09does this or if somebody you love dies
23:11eyes or whatever it is. Okay. How do you
23:14reflect on them? What does that mean? I
23:16would recommend I I put out a journal
23:18that people can do so that they can
23:20journal their own principles and they
23:22have the reflections and so on. If they
23:25if they start to think that way, pain
23:27plus reflection equals that and you
23:29reflect well. What happens in the
23:30meditation is it connects your
23:33subliminal self to your conscious.
23:36>> I'm I'm on board with all that. I think
23:38that if I put myself in your shoes
23:40between the ages of like 35 to 52, you
23:43went from like nothing to like the
23:44largest hedge fund in the world, which
23:45we I want to hear all that. But when
23:47you're like 34, 35, 36 in the first 3
23:50years of starting your business a new I
23:52would have to think like most all small
23:54business owners, you're like I just got
23:55to pay the bills.
23:56>> I could always find the way to pay the
23:58bills. The question is what was it? And
24:00I think by the way along those lines,
24:03that's where your priorities get tested.
24:05You know, you think about what do you
24:07really want and how do you weigh one
24:10thing against another thing? Okay. I
24:13mean, like I want I want survival and
24:17opportunity and I want to play the game
24:18and I want Okay. And I don't really care
24:22I I don't care much about convention. I
24:25don't care about much about how I look
24:28to the outside world. I don't care about
24:31things that can inhibit maybe that
24:33choice. I think people also uh get stuck
24:37um they get stuck because they don't
24:40realize there are multiple
24:41possibilities. And so some people say to
24:44me uh you know but you don't understand
24:46I'm in this job. I don't like the job. I
24:49think my boss is a jerk and this isn't
24:52where I want to go. Okay. And and but
24:55they feel I have to be there. Okay. And
24:59the reality is if you're clever and you
25:01figure it out and whatever and you try
25:03there are many ways to have a really
25:05happy life and and by the way a lot of
25:08money is not an important thing.
25:10Sometimes we get hung up on this like
25:13it's got to be this conventional life
25:15which is you know okay I've got to do
25:18this okay is that really what it is even
25:21experiment with it. Listen to this quote
25:23Sean that uh he had. He said, "I cannot
25:25say that having an intense life filled
25:26with accomplishments is better than
25:28having a relaxed life with savoring.
25:30Though I can say that being strong is
25:33better than being weak and that
25:34struggling gives one strength." Though
25:35that was pretty cool.
25:36>> That's true.
25:38[laughter]
25:40>> Yeah. I guess like you don't have to
25:41make it to the top to be happy. And I
25:42think that's been like our biggest
25:43>> What's the top? You work your ass off to
25:46get a lot of money. Okay. Just think
25:49about that. Is that it? What's the money
25:52for? Money doesn't have any intrinsic
25:54value, right? So, you have to have a
25:57purpose. Why are you getting the money?
25:59What do you want to do with the money
26:01that is so important? You better answer
26:03that question. What is that going to get
26:05you? Okay. Does that get you better
26:07friends? Okay. Does it get you a better
26:09marriage, a better relationship with
26:11your kids?
26:12>> What is your definition of success?
26:14>> Success is you knowing your nature and
26:18then finding the best path through that
26:20nature. So that you look back on that
26:23and you say, "Ah, that was the life I
26:25wanted him to have."
26:26>> Do you think that you could answer that
26:27for yourself?
26:28>> Uh, I tried to do it. I'll read what I
26:29wrote. So when I was 27 years old, I
26:32wrote I tried to write this out cuz I
26:33was like I think I had actually read
26:35your principles PDF around the same time
26:38and it made me start asking these
26:40questions cuz one of your core
26:41principles like figure out what you want
26:43and then understand the rules of nature.
26:45Study cause and effect to understand
26:46what patterns of behavior and actions
26:48might lead to the thing you want. So
26:49here's what I wrote. You can you can
26:51judge it. I said, "What I want out of
26:52life." I said, "I want to have the
26:54ability to shape my own life. I want to
26:56be my own biggest fan. I want to make
26:58adversity part of the recipe. I want to
27:00treat other people well. And I want to
27:01reread this every year, every morning,
27:03so I never forget what each day is for.
27:05I want to rewrite the list every year so
27:06I see myself evolving. I want to focus
27:09on what matters. Number one, my loved
27:10ones, cuz they love me, even if I don't
27:11do anything on this list. Number two, my
27:13health, because without it, I can't do
27:15anything on the list. Number three, my
27:16work, because it makes life fun. Number
27:18four, being somebody who lights up the
27:19room because it feels good to make
27:20others feel good. And number five,
27:22learning because it's the master key
27:23that unlocks all doors. And I I keep
27:25going a little bit and I say some of the
27:26things I'm weak at. I said, I want to be
27:28somebody who doesn't just want things,
27:29who makes them happen. I need my
27:30execution to catch up with my ideas. I
27:33want to be the most optimistic person,
27:34you know, um and I want to win, not but
27:36not just win. I want to win on my terms.
27:38Uh because that's the most satis
27:40satisfying way to do it.
27:41>> Congratulations. That's fantastic.
27:43>> And this was 10 years ago.
27:45[clears throat] Yeah. And then you you
27:46reflect and you modify. Okay. And then
27:49so now you know what you want.
27:51>> Do you change your goals every year or
27:53>> No, I'm it's like my nature. My nature
27:56really doesn't change. My phase of life
27:59changes. Okay. So I'm at a different
28:02phase of life. Like right now I'm really
28:04feel compelled to pass along everything
28:07that I have that is a value to other
28:09people. Right. And so cuz I'm late and
28:12I'm approaching my end. So uh that hole
28:14is my joy. We have different joys. We
28:17have different circumstances. In the
28:19middle part of our lives there's work
28:21life balance and your kids and your
28:24whatever. And so these arcs of life
28:26there's an arc of life almost like a
28:29script. I mean you know exactly you know
28:32at this age I graduate and at each phase
28:35you know what it's like and so you have
28:38that arc but your nature doesn't change.
28:41I don't think
28:42>> you uh I was listening to a podcast
28:44about you and there was this funny
28:46story. I think this was when you were
28:47selling research. You said uh that you
28:50hired a guy. I forget his name, but I
28:52think he was a doortodoor Bible
28:53salesman. Yeah.
28:54>> And you're Did he know anything about
28:56research or finances?
28:58>> Um not much, but he was curious and he
29:01was, you know, like I say, there are
29:03three things. Um there's skills,
29:07abilities, and values. And most people
29:10look at skills and they look at the
29:14resume to determine what skills they
29:15have. In my opinion, it's the opposite
29:19order is what's the most important.
29:21First, values. What are the person's
29:23values? Like, then what are their
29:26abilities? Because if you have
29:28abilities, you can change what your
29:30skills are. We're we're in a world now
29:32that maybe programmers are no longer
29:34going to be the most important people.
29:36And maybe you know all of a sudden you
29:38were growing up with okay man you need
29:40to program because you're doing this and
29:42then all of a sudden man that's a lousy
29:44shot because you know something comes
29:46along right so how do you adapt what are
29:49you going after and then the least so
29:51the least important is the skills and so
29:54in thinking about that what's our
29:56relationship going to be like when how
29:58do we pursue a dream is he bride is he
30:01uh what is his abilities what can we do
30:03what how do you discover I mean most of
30:05like your curiosity. Most of everything
30:08is in the discovery. Okay? It's not in
30:11the, you know, remember these rules and
30:14and so on. The future is in the
30:16discovery. So, so that's what I'm, you
30:18know, I'm looking for, right? I mean,
30:21that that's what even talent
30:22identification is because talent is more
30:26important than money. Okay? The the
30:28money people are trying to find those
30:30people, right? Okay. So, if you look at,
30:32okay, what did Elon Musk have? He didn't
30:35have money. And how did people make
30:36money? They invested in Elon Musk. They
30:38found him and they invested in Elon
30:40Musk.
30:41>> Human capital versus financial capital.
30:42Right.
30:43>> That's right.
30:43>> Let's talk about you when you were
30:45younger. Uh what would people have seen
30:46in the talent identification at that
30:48phase?
30:48>> I think it would have been tough. I was
30:51um you know a C student. I didn't like a
30:54high school education. I liked markets.
30:57I had a passion for markets. I got into
31:00um CW Post College with LU on probation,
31:04but I had a passion.
31:05>> So tell the story if you can of how you
31:07got that passion, how you started. You
31:08said I loved markets. I mean most
31:10teenagers don't know they love markets.
31:12I used to do odd jobs as a kid, mow
31:14lawns, shovel driveways, and then caddy.
31:18And so I uh I would caddy. I uh would uh
31:22walk around. I got $6 a bag when I would
31:26get up to $50. And I would talk to
31:28people about the people I cing with
31:31about the markets cuz everybody talked
31:33about the markets then. This was a time
31:35where if you got a haircut, your
31:37barber's talking about what stocks to
31:39buy. So then naturally I I took my
31:43catting money and I put in the markets.
31:45Um and the uh first stock I bought was
31:50the only company I heard of that was
31:54selling for less than $5 a share. And I
31:57stupidly believed that if I bought more
32:00shares, I could make more money if it
32:02went up. Okay? And so I uh I did. The
32:06company was about to go bankrupt.
32:09Another company acquired it. It tripled
32:11in price and I said, I like this game,
32:14you know, and I thought that this game
32:16must be probably an easy game because
32:18like in the newspapers, the Wall Street
32:19Journal and the news, they had all these
32:21thousands of names of stocks, you know,
32:25on all of those things and I just figure
32:27I have to pick one or two that go up. I
32:30mean, this big selection, I should be
32:31able to do that. And then I started in
32:34the game and then I realized the game is
32:36not easy. I still know the game isn't
32:38easy, but then I got hooked on the game.
32:41>> Did you have any peers at the time or
32:42were you an oddity?
32:43>> No, I there were no kid kids who were
32:46doing that.
32:46>> So books or where were you getting
32:48smarter? How did you start?
32:49>> I remember Fortune had the Fortune 500
32:53and they had in the when they had the
32:54Fortune 500, they would have little tear
32:57sheets and you could say which annual
32:59report you would want. You would check
33:01it off and mail it in. And I checked off
33:04all of them. And then uh you know the
33:07mail would log these things to the house
33:10and then I it became my little library
33:12and I would talk and then I'd fiddle
33:14around and yeah that's how I did it
33:16>> whenever I was reading snowball warren
33:18Buffett and now I'm hearing you talk
33:20about it. I think like the lucky thing
33:21that I don't l I don't know what it is
33:23that you found something that you liked
33:25at such a young age
33:26>> that for a lot of people I know that are
33:28like that Bill Gates was like that a lot
33:30of people are like that they found
33:32something and then also learning is
33:34different learning prior to puberty is
33:37different at around 12 or 13 it's like
33:41learn a language learn something learn a
33:43sport and so on when you learn it prior
33:46to that it almost goes into your you
33:48know into
33:50Um, so yeah, that was part of it.
33:53>> Were you a hustler? Cuz you know, now we
33:57see you as this this guy who's very
33:59wise. He's sharing all his knowledge.
34:01And uh, when I studied Buffett, it was
34:02kind of the same. Buffett is this
34:04charming, wise, patient sort of guy. But
34:07if you read about him as a kid, he was
34:08at the horse tracks. He was studying
34:10bedding. He was finding slips on the
34:13ground and cashing them in that others
34:14had overlooked. He was setting up
34:16pinball machines and barber shops and
34:18fishing golf balls out of the pond and
34:20reselling them. He was a hustler. Were
34:21you a hustler as well?
34:23>> No, in the golf course that I had I was
34:25at uh they would hit they would hit them
34:28into the uh pond and I could walk around
34:31in the pond and feel them. Yeah. And
34:34then I would pick up the golf balls and
34:35sell them. Now that's funny. I didn't
34:37know he did that.
34:38>> Sam called you a late bloomer. I find
34:40that term interesting. Uh you don't know
34:42this about Sam, but he was really wanted
34:44to be successful. He studied a bunch of
34:46successful people. He had a spreadsheet
34:47he shared with you. We met when he was
34:48we were 24 years old maybe. He shared
34:50this thing of when did our heroes make
34:53it and he showed that like he had a
34:55timeline for Bezos, for Jack Dorsey, for
34:57all the kind of tech entrepreneurs that
34:58we were admiring. When did they start?
35:00How many years did it take for them to
35:02actually win? And he had mapped all
35:06their apprenticeship. So like to learn
35:08and then starting their first hit
35:11>> and he reverse engineered it and almost
35:12hit it exactly. He's like by 30 I'm
35:14going to have this many millions in the
35:15bank because and I know I'm today I'm
35:17here but I will be here and that's like
35:18almost the median.
35:19>> But but okay two things. First of all uh
35:22I think you should publish that. Okay.
35:26Um and I suspect it has a big range
35:29around it. Okay. Like I was thinking uh
35:32Ray Croc McDonald's he was like 55.
35:36Okay. So, it's a big range, but they
35:39certainly are driven.
35:40>> Yeah. I basically when I was younger, I
35:42met someone who's actually my partner
35:44now, and he was uh successful at a very
35:46young age, and he was probably 15 years
35:48older than me, and I was like, I didn't
35:49grow up with a lot of money. And I was
35:50like, I want to be free. I want to feel,
35:53you know, I want to I want to I don't
35:54know. I want to feel free. And I was
35:56like, what's the number I need? And he
35:57said, $20 million. So, I said, uh, all
35:59right, that's the number. I have to make
36:00$20 million by the age of 30. And it was
36:04definitely I was money oriented and it
36:07worked. I I got I basically 31. But it
36:11was so I felt it was so easy to like
36:13have a goal and then like reverse
36:14engineer and back into it cuz then all I
36:16had to think was like step one, right?
36:18Step two, step three.
36:19>> Great. And and that was smart because 20
36:22million, right? We'll do it. Okay. And
36:25do it. And you also thought um being
36:29free.
36:30>> Yeah. and then you can go for it. That
36:33was what I was trying to tell Elon and
36:35he said, "No, I don't need it.
36:37>> Don't need the safety net." Because if
36:38I'm if I'm listening to this, I'm
36:40hearing you say like, "I just need a
36:41nice bed to sleep in. I want my freedom.
36:43I like to I want my kids to be going to
36:45a good public school." All of that. At
36:47the same time, you made like $20
36:48billion, right? So, so somebody
36:50listening could say, "Well, at some
36:51point, did he did he just way overshoot
36:53his his his needs?" I wasn't paying for
36:55that. Yeah, it's I I played a game that
36:58I love that pays well if you play it
37:00well.
37:00>> Right.
37:01>> I'm very passionate with personal
37:03finances and particularly amongst the
37:04average Joe of like don't buy [ __ ] you
37:06don't need, which people don't tend to
37:08follow. Um or spend less than you make,
37:10which people don't tend to follow. Do
37:12you still do anything in your life that
37:15is a pretty frugal thing?
37:17>> Oh, yeah. I I I instinctively
37:21can't waste. I'm reluctant to fly a
37:24private plane. I'm I don't like
37:27expensive watches.
37:29>> I heard someone make a joke that most of
37:31your suits are from Banana Republic or
37:32something like that.
37:34>> It's something like that.
37:36>> Where do you spend? Well, right. So,
37:38like spending is also a skill. I spend
37:40money on the things that I enjoy. I love
37:43boats. Uh have a house on the water. I
37:46don't have a yacht, but I have a ocean
37:48exploration ship that I'm very excited
37:51about that I give to scientists and I'll
37:53tag along. I cannot do a normal yacht.
37:57Okay. But when I'm but when they're
37:59doing this ocean exploration, Jacqu
38:01Custoau had an effect on me. When I was
38:05growing up, uh I watched um him dive and
38:08do exploration. And then my son, I have
38:11a son who um I took my son's diving and
38:14they learned how to dive and he then
38:16went to work at National Geographic as a
38:19filmmaker and so on. And then we have
38:21this common passion of ocean
38:23exploration. So to create a ship that's
38:26a laboratory that they do research and
38:28so on and so forth. That's a great joy.
38:31But I couldn't be I'm listen I'm not
38:34against anybody doing any of these
38:35things. I just want to be clear. It's
38:38not like I think whatever brings you joy
38:40it's okay. It's kind of like that,
38:43right? And we're uncomfortable. My
38:45members of my family, my wife would not
38:47be comfortable with much jewelry, you
38:50know, or anything that would be fancy
38:52jewelry or something. That's just I mean
38:55how we grew up and you know I mean and
38:58the kids are the same thing. my kids who
39:00have grown up and I would say whatever
39:02you enjoy like if you enjoy the, you
39:06know, the threads and the beauty or the
39:09the watch and you really are enjoying
39:11it, that's fantastic.
39:13>> I know you're into the ocean. Do you
39:14believe in aliens? And have you do you
39:16have access into any cool uh insight
39:18into uh things like that?
39:20>> I have no knowledge of aliens and I have
39:22no
39:23>> What do you believe? What do I believe?
39:25I have no beliefs that are just beliefs.
39:29So people who I've heard different
39:31people saying things and and here's what
39:34I believe and which is there's the
39:38enormity you know of our galaxy there
39:42are something like 100 billion
39:45solar systems okay and in the universe
39:50there are something like a 100red
39:53billion galaxies and so there are a lot
39:56of combinations out there So um I would
40:00have to believe that the probabilities
40:03of um there being life in other forms
40:06and so on are great okay out there.
40:09However, I've also heard scientists say
40:12that there is that that's much smaller
40:16than one would think about those things.
40:18But I haven't gotten into the subject.
40:20All I'm giving you is, you know, like
40:22what I heard about those things and, you
40:25know, like it's not a subject that I've
40:27spent much time with,
40:28>> right? Yeah. I think you had a phrase
40:30like uh probability weighted beliefs or
40:32something like that, right? It's like
40:33not all beliefs are are obviously equal.
40:36Some you have high conviction in and
40:37some you have much lower based on an
40:39analysis or an assessment.
40:41>> It's just my way, you know, and also
40:43markets teach you this way, right? What
40:45is the expected value? How do you go
40:46have humility? Okay. If you have an
40:49opinion, what's the opinion worth?
40:51>> Hey, how much time like we've spent
40:52almost all of this time talking about
40:54like frameworks for thinking and um
40:57very little of it was about business or
41:00finances. How much time of your day do
41:02you spend thinking about some of this
41:04highle stuff versus like actually
41:06picking or deciding making a decision on
41:09a trade?
41:10>> They're connected to me. Okay. I'm a
41:12global macro investor.
41:15Okay. which is by the way I think it's
41:17the best kind of investing because it
41:18brings you into okay global that's cool
41:21you deal with the whole world macro that
41:24means big stuff important stuff okay and
41:26then how do you place your bets and and
41:29so it's connected to all of this stuff
41:31you know it's connected to um the the
41:34politics and the geopolitics and all of
41:37that and it's connected to history I did
41:39a study um of the last 500 years of how
41:43things are working only because I
41:46learned in my life that if I haven't
41:48seen something before in my that didn't
41:51happen to me in my lifetime I should see
41:54whether it happened before my lifetime
41:56and so on and then when I did that cuz
41:58there are these big cycles um like
42:01there's um there are orders right we'll
42:04call there's a monetary order there is a
42:08political order okay political and
42:10social order there is a geopolitical
42:13order in other words systems of how they
42:15work. They all break down. Okay, there's
42:18it throughout history. You read history,
42:20but they happen like, you know, in these
42:22big sort of cycles and they break down
42:24kind of for the same reasons all the
42:26time. They break down for the same
42:28reasons. So, as a global macro investor
42:30in a sense, I'm connected to that. So,
42:33the book that I ended up writing, you
42:35know, which is a changing world order, I
42:37plot things and so you see them on
42:39graphs and you could see these things
42:41happening. simple measures of financial
42:44health and how does that all work and
42:46what are the consequences when you see
42:48that so yeah I'm into that because so
42:50it's connected when you said do I see
42:52the big stuff okay yeah the big stuff
42:55matters a lot right but you see it in
42:58these you you realize that um a lot of
43:01people are looking at the news the news
43:04lasts a minute okay can you put the news
43:08in the context of what's happening watch
43:11what's happening I mean just let let's
43:14take a look at those things. You want to
43:15take a minute on that? Yeah.
43:16>> Okay. Okay. So, one of the things that I
43:19learned about is that there are five big
43:22forces that interact o over a period of
43:26time to determine that and that is the
43:29debt money economic force. Okay. And
43:34there is a big debt cycle. Okay. So,
43:37it's and it's a very simple thing. uh if
43:40uh if you acquire more debt than you and
43:44then you're earning over that your debt
43:47service payments will squeeze out your
43:49spending. Uh okay, they grow and that is
43:54like in your circulatory system that's
43:56like plaque being built up in your
43:57circulatory system and when that happens
44:00and it becomes painful you have a debt
44:02restructuring and also one man's debts
44:05are another man's assets. So if you're
44:07producing a lot of debt, uh let's say
44:09government's running a large budget
44:11deficit, that means it has to sell
44:13bonds. And then who are the buyers of
44:15the bonds and how does that work? So it
44:17has a mechanical part of it. That's one
44:19of the forces. The other forces is
44:22wealth and values differences. So
44:25there's the political force which has to
44:28wealth gaps, values gaps as they become
44:32greater. That's a greater threat to
44:33democracy. That's a greater threat to in
44:36other words when you get to do you have
44:38irreconcilable differences. So you're
44:41not going to compromise and you're not
44:43going to even follow the system. That's
44:45a risk. Okay. That's a risk now. Okay.
44:48We have the first risk. We have the
44:50second risk. Okay. Check. Check.
44:52>> Okay. Third risk is um uh the
44:55geopolitical risk. So there's orders,
44:58right? The way the order works is who's
45:00in control? What are the rules of the
45:02game for the world? And um so the way it
45:05works is you have a war, the winner of
45:07the war sets the rules and that we call
45:10that's the order. 1945 we ended the war,
45:14America sets the rules and so on and we
45:16created what was a multilateral type of
45:20system, you know, almost representative
45:22the United Nations, the World Health
45:24Organization, the World Trade
45:26Organization. So all those world
45:28organizations are out the picture. We no
45:30longer have a multilateral world order.
45:32Okay. So, how do you resolve
45:34differences? You fight. Okay, you're
45:37going to have conflict. How How do you
45:38get past the disagreement? There's no
45:40court you go to. You can't do it that.
45:42Okay. So, now you have those three
45:45things. Okay, that's h that's happening.
45:48Number four, um force always through
45:50nature uh is nature um in particular.
45:54Droughts, floods, and pandemics
45:55historically have killed more people
45:57than wars and they are a big force as
46:00they come up. And number five, all
46:03through history is man's inventiveness
46:05particularly of new technologies and
46:07that raises living standards and so so
46:10if you were to see life expectancy
46:13um always rises uh productivity per
46:16capita GDP by all measures as we learn
46:19more we have that and so there's the
46:22interaction of those five forces those
46:24five forces you can measure them and you
46:27can measure their interactiveness and
46:29that is what is now happening So if you
46:31know those cause effect relationships, I
46:34think they're connected.
46:35>> I've read something that your family
46:36office I don't know if this is right.
46:38You can correct the record. Your family
46:39office has like 70% or 75% in gold ETFs
46:42right now. Is that wrong?
46:44>> Totally wrong. Totally wrong. I believe
46:46that from an investor's point of view
46:48that they should um it depends what
46:50their portfolio is constructed and they
46:53should have between uh five and 15% of a
46:57portfolio on getting that 15
47:00uncorrelated difference. Uh that's they
47:02should have something like that and they
47:04should have it overweighted if they're
47:06tactically doing it. Tactically means
47:09let's say there's a certain time to own
47:10it and a certain time not to own it.
47:12certain time to own it is um
47:15particularly when there's a debt crisis
47:18and the government is flooding with
47:19money. Uh that's that's an ideal time to
47:22own it. So there's a timing question. So
47:24I believe that one should create a
47:27strategic asset allocation mix meaning
47:30what is my best balance portfolio if I
47:32have no opinions. What is it's not going
47:34to be cash because cash always is the
47:37worst performing over a period of time.
47:39People think it's the safest. It's the
47:41shest to do poorly over the longest
47:43period of time. So
47:44>> high certainty, low performance.
47:46>> So what you want to have the best thing
47:48to do is have a wellbalanced portfolio
47:51of assets because you can lower their
47:54risk as by through the diversification
47:56because if you have one, it goes like
47:58this. But if you have another that does
48:01the opposite with it, you can have that.
48:03So there's a strategic asset allocation
48:05mix and then you make your tactical bets
48:08relative to that and and so on. But
48:11here's what I would describe the
48:13mechanics. Let's say uh there is such a
48:15thing as bubbles. What is a bubble? A
48:18bubble is not whether the stock will pay
48:20off in the long run because in bubbles
48:22even the most successful companies go
48:24down 80% or something along those lines.
48:27So typically when there's uh borrowing
48:30of money or whatever and there's an
48:32increase in wealth relative to money.
48:35Okay, wealth and money are two different
48:37things. Okay, wealth is um you can make
48:41up wealth. If if you have a 50 billion a
48:44$50 million offering on a billion dollar
48:47valuation,
48:49um then all of a sudden you're tech
48:51you're called a billionaire and it was
48:53$50 million but and and then the world
48:57has a billion dollars in wealth. But
48:59what happens is as wealth builds up, you
49:02can't spend wealth. You have to sell
49:04wealth in order to get money because you
49:06can only spend money. And so when wealth
49:09builds up a lot and then there comes the
49:11need for money. Now what creates the
49:13need for money. The need for money often
49:16is uh that they borrowed the money to
49:19buy the wealth uh to invest in the
49:21wealth and then maybe interest rates go
49:24up and then all of a sudden they have to
49:27pay their debt back. And so where do
49:29they get that money from? They sell the
49:31wealth in order to get the money. And
49:33there's so there's this dynamic that's
49:36taking place. And then it has another
49:38number of ingredients like it's all the
49:41rage to buy it and everybody buys it.
49:44Everybody buys maybe more than they
49:46should because they don't diversify or
49:49and what happens is it's all the rage
49:52and so is it logical and there are these
49:55elements that create a bubble. Okay,
49:58there are right now um on that scale I
50:02have a bubble gauge. I measure measure
50:04all these things and I have this bubble
50:06gauge going back across countries to
50:08about 1900 and so I can see where they
50:12are and these by the way typically take
50:14place quite often when there's great new
50:17technologies a reason to be exuberant
50:20>> the reason to be exuberant and and to
50:22bet and and people confuse
50:25um investing in they they say I believe
50:29that technology is going to be great and
50:30revolutionary and it is Okay, but that
50:33doesn't mean the stock will be great.
50:35There's a lot of reasons that the stock
50:37could be too high and competitors come
50:40in and they, you know, uh there's a
50:42Google and there's a Yahoo. So, so
50:43what's the bubble gauge saying right
50:45now?
50:45>> So, the bubble gauge is saying it's
50:48about 75%
50:51toward where it was both in 2000 and
50:541929. So, it's pretty high up there.
50:57Okay. in Japan in its bubble in 1990, it
51:01got higher even than than those cases.
51:04So, it's high. But people pay too much
51:06attention. Let's say if I just do did
51:08the bubble gauge, I could tell you
51:11probably with good probability um that
51:13it won't be good to um for the next I I
51:16couldn't tell you whether it's going to
51:17be 3 years or 10 years, but it won't be
51:20a good investment. Um but it won't tell
51:22you timing. Timing you need the
51:25prickling the bubble. Okay. So what
51:27causes it to prick the bubble? So if you
51:29got a bubble and then you see, okay,
51:32here are the things that prick the
51:33bubble, then you've got a good
51:35combination of things to do your market
51:37timing because the timing is going to be
51:39on the pricking of the bubble. The
51:40pricking of the bubble typically is the
51:43creating the need for the cash for the
51:45for converting that wealth into cash for
51:48one reason or another. Quite often it's
51:51the most typical thing is tightening
51:52monetary policy. Okay. So what you have
51:56typically is that when stocks go up and
52:00bonds go down then what you have is uh
52:03the future expected return of equities
52:06becomes low relative to interest rates
52:10and when interest rates go up let's say
52:12a tightening of monetary policy you you
52:14know that's that's a classic dynamic.
52:17Other things like wealth taxes could do
52:19it. So in other words, for example, if
52:21you say you're going to have to pay
52:22wealth tax, then whoever has the wealth
52:25is going to have someone sell some of
52:28the wealth to get the money in order to
52:29be able to pay. So looking out for those
52:32things in terms of the timing is my
52:34machine. Take what that for whatever
52:36it's worth. I don't want people to trade
52:38on this and so on. But I'm just trying
52:41to answer the question that there are
52:42mechanics. Okay? Everything that happens
52:46ha h has causes that to make it happen.
52:49And if so you understand the mechanics
52:51of the cause effect relationships you
52:53can see all this and understand it that
52:55way. Is Bridgewwater the biggest hedge
52:57fund because you were the you had the
53:00best performance. Is it the biggest
53:02because you were the best at marketing?
53:04Is it the big why did it become the
53:05biggest? It became the biggest hedge
53:07fund because we the most consistently
53:11made uh excellent returns with uh
53:16minimal risk and we were uncorrelated
53:19with the stock market or any other
53:21market. That's that was the main thing.
53:23It made I think 11.8% a year for uh for
53:28something like 31 years when I did it.
53:30The worst uh down in a year was 2000
53:34because uh of the COVID and we didn't
53:36know how to deal deal with the CO. Well,
53:39that was down through about 13. The next
53:41two times was down like 2%. Okay. And
53:46that was not correlated with anything.
53:49You know, the losses you lose 50%. You
53:51have to have 100% to make money. And so
53:54the compounded effect of that and it was
53:57comfortable. So that's that's that's why
53:59>> out of the 30 years, how many did you
54:00lose?
54:01>> I think it was like three three was
54:05what%
54:06>> three four whatever but not not
54:08significant. But it does help your your
54:10your your media, your work, your I mean
54:12you're you're charming, you're a good
54:14leader like and you've been doing it
54:15since you were in your 30s of like
54:17>> but I became the Bridgewater became the
54:19largest hedge fund before anybody
54:24knew me and it was the opposite reaction
54:26like I was trying to be below the radar
54:29and then two things happened. Uh we
54:31became the largest hedge fund in the
54:32world and at the same time uh we have
54:35this culture. Okay. and the culture uh
54:39was perceived as a cult. And then I put
54:43online the principles just so we we have
54:45a book of how we're going to be with
54:47each other the principles and then that
54:50got around 3 million copies were it was
54:53downloaded 3 million times. People
54:55passed it around otherwise it was going
54:57to be a problem like hiring people and
54:59so on. they wouldn't understand the
55:01culture which is the culture is an idea
55:03meritocracy in which we radical
55:06truthfulness and radical transparency
55:08but anyway so in answer to your question
55:12it was not my charm had anything to do
55:15with this I could explain the process
55:18and people can they can understand what
55:20was our process and I could show how it
55:23was back tested and it worked through
55:25all of those periods of time and that it
55:28was logical and then there were results
55:30and we helped people learn meaningful
55:33work and meaningful relationships. So I
55:34would have we would have relationships
55:36with them and we would teach them and
55:38they would learn and they became better
55:39investors. I was walking around New York
55:41cuz I this is my first time here in like
55:4310 years and I went to the Rockefeller
55:45Center and there's this like kind of
55:46this giant stone and it's John D.
55:49Rockefeller Jr. and he's just writing
55:51these things. I believe in the
55:53sacredness of a promise that a man's
55:54word should be as good as his bond. And
55:57he just has each there's like just 10 of
55:59these principles etched in stone sitting
56:02outside the building. You know, it's
56:03like I believe that love is the greatest
56:05thing in the world and that love alone
56:06can and will overcome hate. Right? And
56:10we are missing these now more than ever.
56:15Right? The idea of what are these
56:18principles? What are the principles that
56:21bind us together? Okay. What are the
56:23principles that we follow? Really, what
56:26is most important? People are not, you
56:30know, everybody should write down their
56:32principles and then be judged of how
56:34they're living by those principles. And
56:37are they together?
56:38>> Well, this is the best part of your
56:39book. It's you write the principle.
56:41You're not saying these are your
56:42principles for everybody. You're like
56:43these are my principles. If if you take
56:45away anything, it should be that you
56:46should have figure out what yours are.
56:48>> That's right.
56:49>> In Europe, most people don't know what
56:51theirs are. Even fewer will ever write
56:53them down. And then the fewest will be
56:55those who act in alignment, who walk
56:56their talk.
56:57>> But to get there, you have to write it
56:59down. You have to look at it. You have
57:01to have the [ __ ] kicked out of it. You
57:03have to, you know, and you say, "Yes,
57:05that's right.
57:07Those that are clear, etched in stone
57:12that bring us to a higher level of how
57:14we should be or so. We are short of
57:18those just like we're short of heroes,
57:20okay? role models that you say ah that
57:24was a great man or that's a way to be
57:27>> who was yours growing up and maybe do
57:28you have a hero now
57:29>> like one of them was Paul Vulker
57:32okay uh Lee Kuanu started Singapore and
57:36and ran that but no there were many many
57:39people who will sacrifice for for the
57:42things I believe that we we talk about
57:46love we uh karma uh okay or what I mean
57:50is you go across the world and you look
57:53at all religions and there's um
57:56something common. Everybody can have
57:58differences in their superstitions,
58:00their beliefs and so on, but there's a
58:02commonality which is do unto others as
58:06we would have them do unto you or karma.
58:09What goes around comes around and it is
58:12a reality that the whole is much better
58:17than the individual parts because a
58:19little bit of consideration and help for
58:23others can make such a world of
58:25difference. And if you do that both
58:27ways, you have a much better world,
58:30right? And then people who do that are
58:33role models to me as as you look at
58:35that. Okay. as the sting from
58:38selfishness and fight and in other words
58:41and what I mean that is mutually
58:43destructive and and you see that so I I
58:46think it's a question for humanity now
58:49can we rise above ourselves for dealing
58:53with you know what will certainly be
58:55better for everybody if we can get along
58:59I I bet I don't mean that idealistically
59:02this is practical right cuz it doesn't
59:04cost me a lot to help you doesn't cost
59:07you a lot to help me and but it but it
59:10could make a world of difference when
59:12you have that it's a practical thing and
59:14and then that what is heroism
59:17contributed to that I think that's
59:20literally what it is and and we're now
59:23operating a lot the opposite way I think
59:27you know we've been doing this podcast
59:28for for a little while here and we've
59:29been talking about lots of different
59:30angles some about investing some about
59:32life and principles and entrepreneurship
59:34um I'm curious It's like if somebody was
59:37listening to this and
59:40there's one thing that they were going
59:41to remember, what would be the thing
59:43that you hope people remember or take
59:45away? What's like what's the what's the
59:46one big one? Know what you want
59:50and understand that it's a it's a
59:53journey of having your nature and then
59:56running into your mistakes and learning
59:58from those mistakes to get what you
1:00:00want. And then I would say it's all
1:00:04about meaningful work and meaningful
1:00:05relationships.
1:00:07If you have work that you love and
1:00:09you've got relationships that you love,
1:00:11you're probably going to have a great
1:00:13life.
1:00:13>> Well, thanks for doing this, man.
1:00:14>> Yeah, we appreciate it. This was fun for
1:00:16us. I hope it was fun for you.
1:00:17>> It was fun. Yeah.

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