YT YouTube2Text

YouTube2Text → Transcripts → Ray Dalio: This is the Holy Grail of Investing

Ray Dalio: This is the Holy Grail of Investing — Transcript

by My First Million · 11,362 words · 1,671 segments · language en · Watch on YouTube

Open in transcriber Summarize with AI Download SRT/VTT

Full transcript

0:00You want to be successful? Here's the
0:01mantra for investing.
0:03>> I got one.
0:03>> And most fundamental question is how do
0:05I have the upside without having the
0:08downside? That approach was the basis of
0:11Bridgewater 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 Reed Hastings. Maybe
0:25I should probably not tell stories, but
0:27um
0:27>> No, no, no. That's what we do here. You
0:28don't have to make it to the top to be
0:30happy.
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
0:41that question.
0:49>> You 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
0:57two kids, I think. You had just laid off
1:00the five employees that you had had. And
1:02you're like, "Look,
1:04Dad, I've lost it all." Can you like
1:06close your eyes and like remember that
1:07conversation?
1:08>> So, I started Bridgewater in 1975.
1:13And in 1981
1:16and '82, interest rates went up. The
1:19emerging countries had a lot of debt.
1:21And I calculated that those countries
1:23were not going to be able to pay their
1:24debts. And and they were going to have
1:27big debt crisis. And that was a very
1:29controversial point of view. And then
1:32Mexico defaulted in August of 1982.
1:35So, I was asked to testify to Congress
1:37about what this is all about and and
1:40what might happen to the economy. I
1:42thought that the economy was going to be
1:43a disaster. I couldn't have been more
1:45wrong. Okay. So, I lost money for me, I
1:49lost money for my clients, and I had to
1:51lay off everybody. I was so broke, I had
1:54to borrow $4,000 from my dad. So, then
1:57my choice was am I going to you know,
2:00put on a suit and tie, go in, commute,
2:03and work for somebody in that capacity.
2:06And I knew that I wasn't very good at
2:09working for people. Now, that was
2:11painful. That changed everything in my
2:14life. That created the bottom of
2:16Bridgewater and just kept going up
2:18because of what I learned. I learned two
2:21things. First of all, I I learned
2:23humility
2:25to balance my audacity. Okay? I didn't
2:28have much humility. I'd say, "I'm right.
2:30I'm going to be right." and all that.
2:31And then I learned how to diversify my
2:35bets and substantially reduce my risk
2:39without reducing my returns. Because I
2:41didn't want to have reduced the upside.
2:44I knew that I had to reduce the
2:46downside. And so, um I really learned
2:51and taught myself, really, my mantra.
2:54Okay, here's the mantra for investing.
2:56You want to be successful? This will
2:59This is the holy grail of investing.
3:02Find 15 good uncorrelated return
3:06streams.
3:07>> W- 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
3:20correlation? And I
3:23have that on a chart that keeps
3:25reminding me, "Okay, if you can get out
3:27to 15, you can get down to about reduce
3:32about 80% of your risk without reducing
3:36your return." That means that you
3:39increase your return to risk ratio by
3:42something like a factor of five. Okay?
3:45In other words, wow. So, that means you
3:47can get the upside without having the
3:50downside. Okay? And then humility, you
3:53know, I wanted people to kick the
3:56out of whatever I thought, you know, to
3:58try to do that and then have that. And
4:00that change in that approach was the
4:04basis of Bridgewater going from, you
4:06know, being having to borrow $4,000 from
4:08my dad to the largest hedge fund, most
4:11successful hedge fund in the world.
4:13>> wanted to be better investors,
4:15what do you think the most common
4:16mistake smart guys can make when it
4:19comes to investing?
4:20>> They don't have a game 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
4:28um every time I would make a decision
4:31that this is the building of all
4:32principles I did, but particularly in
4:34the markets. Every time I would be make
4:36a decision, I would go back and study if
4:39I made that decision in these
4:40circumstances, how would it have worked
4:42in the past?
4:44And I would know the track record of
4:46that decision. And it that would give me
4:48also
4:50greater understanding of how things
4:51work.
4:53And so
4:54then I would have a decision rule. And
4:56then I would program it into the market
4:59into the computer. And when this thing
5:01come along, then I started to realize,
5:04okay, now I've got criteria. So rather
5:07than just the one that I would see, I
5:10would say in the computer
5:12dubbed in all of them and where do they
5:14exist anywhere in the world?
5:16And what what will So give it give me
5:18one good decision rule that wherever it
5:20happens in the world
5:22that I have a track record of knowing
5:24how those work. And wherever it is in
5:26the world, you bring me that. And then
5:29make a collection of those kinds of
5:31things and make them uncorrelated so it
5:33provides your dis your
5:36diversification. And so now you're
5:38executing a game plan. So like I have
5:41rules that it should be timeless and
5:43universal. And cuz if it didn't work in
5:45a long period in time, I would need to
5:47understand 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
5:54a game plans and execute the game plans.
5:57>> Did Bridgewater have any revenue coming
5:58in?
5:59>> Um, nothing.
6:00>> And so you're waking up in the morning
6:01and you're like, I got to figure this
6:02out.
6:03>> It was like um, I'm on the edge of
6:07a jungle. I could go stay out of the
6:10jungle
6:12and I can go to safety
6:14and have a safe
6:17life, employed
6:19regular job, great, okay.
6:22Or I could go into the jungle and try to
6:25work across get through the jungle that
6:28have all the things that can kill me and
6:31I made a choice of what I wanted in
6:33life. I mean like I have to have this
6:37great upside. I can't not do that. And
6:40also part of it was if I'm going in the
6:42jungle
6:43I want to go with people
6:46um, who want to go in the jungle with
6:48me, who see things differently than I
6:50do. So, it's like going through this
6:52jungle with these uh, animals or
6:54something that can kill you, but if
6:56you're in it together, then you are you
6:58can sort of see the animals that'll kill
7:00you and then I loved being in the jungle
7:03so much I didn't want to get out of the
7:04jungle even after I've achieved all the
7:07success.
7:08>> You'd rather be in the jungle than the
7:09zoo.
7:10>> Yeah, almost, yeah.
7:11>> To to play off that analogy, I think
7:12that like I think a lot of successful
7:14people and I think you've even said this
7:16where you're like, "As long as I could
7:17like do what I want during the day and
7:18what I love then I'll be happy." But I
7:20have to imagine that when you're like 33
7:22or 34 or something like that and you
7:24have young kids and you are like you got
7:25a little bit of a tiger in you, you're
7:27like, "I want to provide. I want to win.
7:29I want to be the best."
7:30>> No, I wasn't like that at all. For me it
7:32was like two levels, just very simple.
7:34Um, can I pay for the basics? Like I
7:38don't need a big house. I don't need a
7:40big anything. My kids can go to a good
7:42public school. They have great public
7:44schools.
7:44>> a number where you like, "Man, if I can
7:45make a hundred grand a year?"
7:46>> I counted what I started to do was I
7:48started to count how many months
7:52then
7:53and and then years
7:55of living that way could I afford if it
7:59shut down.
8:00>> But you said two levels. That was level
8:02one.
8:02>> It's freedom money.
8:04Basically, you money.
8:06>> What was that number for you?
8:07>> I don't remember what the number was,
8:08but you know, it wasn't
8:11It wasn't my It wasn't easy to achieve
8:13number.
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 where or
8:21was it always like, "Well, what's the
8:22next level? Let's see if we can do
8:23that."
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 Associates to
8:36others, that I want to be an investor,
8:37let them run the business, and I want to
8:40uh do that cuz I'm hooked on the
8:41markets. I created personality tests. I
8:45started with Myers-Briggs, and then I
8:47went to various kinds of personality
8:50tests.
8:51And I then gave the personality tests to
8:55people like Elon Musk, I gave it to Bill
8:58Gates, I gave it to Reed Hastings, I
9:00gave it to Muhammad Yunus, I gave it to
9:03other people to see the elements of what
9:07they uh are like. I put it online for
9:10free. I created it.
9:11>> We took it in the last episode.
9:12>> it. Okay. Well, there's a type of
9:14There's a type of person that represents
9:17um a very small percentage of the
9:19population. And Elon Musk is it, then
9:22Bill Gates, and and um Reed A number of
9:25these people are are this that I would
9:27call a shaper. And they are people who
9:30love to go from visualization to
9:33actualization. And to be on that
9:35mission, and so on. And that's my
9:37personality type. I have a certain type
9:39personality type. Then they have to do
9:41certain things. And I'm remember
9:44Elon
9:46and he's that personality type. Okay,
9:48making money is not a big deal for him.
9:51I should probably not tell stories, but
9:53>> No, no, no. That's what we do here. We
9:54tell stories. We can all take [laughter]
9:56it out later.
9:57>> the excitement
9:59you know, the compulsive
10:01thrill
10:02of climbing that and and aspiring to
10:06that was my personality type. And he
10:08doesn't need to He doesn't need a house,
10:11he doesn't need security, he doesn't
10:13need anything. I mean, he didn't even
10:16need my level of needing.
10:18>> It sound like you had a story of him
10:20where that's an example of
10:21>> Well, yeah.
10:23>> Hey 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
10:49can scan the QR code right here. All
10:51right, back to the episode.
10:54>> When he first started Tesla, he had
10:57made something like
11:00a $180 million from PayPal. And he
11:02decided that he was going to take half
11:04of that money and he was going to go to
11:06the
11:07Mars. And he had no experience in terms
11:10of going to Mars. And so he had this
11:12vision. And
11:14you know, when I said to him,
11:16I suggest that you put aside a little
11:18bit of money, take a piece of that and
11:21just so that way
11:23you know, things don't work out, you've
11:24got that num I don't know need to do
11:27that. And he had that
11:29strong compulsive need, but there is I
11:32think everybody has a certain nature.
11:35Okay, whether you're born in your
11:37environment, you have a nature. And it
11:40That's why I created these personality
11:41tests for any of your listeners.
11:43Principles You is what it is. It's It's
11:46free. It's online. Take it. You'll
11:48understand more about your nature. And
11:50there's a feature in there where you can
11:53have 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.
11:59>> Okay.
11:59>> It's done on your after we talked the
12:01other day. So, Sam tells me, he's like,
12:04"I'm a shaper." And you had told me
12:06you're a shaper, Elon. And so, I was
12:07like I was like, "Wow, okay. I hope I
12:09get 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?
12:16>> [laughter]
12:16>> Did you get degenerate?
12:17>> Happy, but sort of foolish.
12:20>> New new type.
12:21is that one?
12:22>> So, so I got explorer. And I was like,
12:25that was not what I expected at all.
12:27Um
12:27>> Did it characterize you?
12:29>> Yeah, I mean
12:30it called it it very much called like
12:32I'm driven very much by curiosity,
12:34seeking in seeking new new knowledge,
12:36new experiences, learning, getting being
12:39very like objective and truthful about
12:42what I'm experiencing, and almost taking
12:43pleasure even when you have a bad result
12:47because it means you got to learn. And
12:48so, there was I which is so true for me.
12:50I get the most fun doing that. So, I
12:52guess it really was true. And I think
12:53why I may not have been a shaper, a lot
12:55of the questions would ask about part of
12:57the visualization to acquisition. And I
12:59I think I do it a lot of that, but I'm
13:01not very detail-oriented. I don't care
13:03about the details. I overlook details.
13:04I'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.
13:11>> Okay, one of the elements of a shaper is
13:14um and and
13:16by the way, that's where you're seeing
13:17your nature. And you know what your
13:18satisfaction is and what you're likely
13:21to be most successful. It is that.
13:23>> Yes.
13:24>> What the issue of um uh uh
13:26a shaper is um they could want to go
13:29from visualization to actualization and
13:32then they go from like this very big
13:34picture down to what are those details.
13:37So I remember Elon gave me the key to
13:40his car and you know had a little button
13:43and he showed the screen and he got into
13:46the details a lot and we're talking
13:49about how he wants to put a
13:52a watering can with a plant on a rocket
13:57to send it to Mars to say first life on
14:00Mars to inspire things and so on and so
14:02>> 10,000 foot level and the 10 centimeter
14:05level.
14:05>> Right. That that liking and then taking
14:08that and going okay.
14:10So yeah, we all have a and so the
14:13success in life the joy really is
14:16knowing your nature and finding the
14:18right path for your nature cuz you can't
14:21fight against your nature, right?
14:22>> So look Ray, we've only known each other
14:24for 30 minutes but I'm going to I'm
14:26going to show you something that might
14:27might gross you out but when I was young
14:29and drunk I gave myself a tattoo. And
14:31the tattoo that I gave myself is on my
14:34feet and it says act now.
14:37>> Oh good.
14:38>> [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. You get a sewing needle
14:51and you uh
14:53dip it in ink and then you just make
14:54little little dots on your skin.
14:57And that's a tattoo. And so when I was
14:59like I was actually maybe 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.
15:05Uh I was like angry that I wasn't moving
15:08fast enough in life and I was like I'm
15:09so I'm so you know angsty and at the
15:12time I was I partied a lot and so I was
15:14drunk and I was like I'm going to tattoo
15:16act now on my feet so when I wake up
15:18that's the first thing that I see is I
15:19got to take action.
15:20>> And does that work for you?
15:22>> Yeah, I I tend to need to tone it down
15:25where I'm like I I need to think and
15:27plan cuz I you know, I've had a little
15:28bit of 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 bull in a china shop.
15:33>> And the thing about it is that you have
15:35to find the people who are different
15:38from you, who complement 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
15:47like connecting, supporting, kind of the
15:50a lot of the like social side. So, my
15:51business partner Ben, who's the guy who
15:53emailed 77 times to you and your team to
15:56get you to be on this podcast. He's for
15:58I think for 4 years has been emailing
16:00trying to make this happen because he's
16:01an amazing connector. He's an amazing
16:03supporter. 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.
16:10And so, he's my he's been my business
16:11partner. We've had this unbelievable
16:13success as a partnership even though we
16:14couldn't be more more different you
16:17know, if we tried. So, this let's
16:20>> pause them and reflect on that very
16:22important point in for success that
16:26people who think differently from you,
16:28who you ordinarily can get annoyed at,
16:31are your paths to success. That if you
16:33can understand it It was very
16:35interesting when I did this in
16:36Bridgewater. I did the personality test
16:39and and then they start saying, "Oh,
16:42you're a ESTP and I'm a whatever it is."
16:47And then they started to understand and
16:50they understood how they would work
16:51together rather than get annoyed by the
16:55other person. Yeah, that that was
16:58big deal, you know? And so, success
17:01comes from that. Success comes from
17:03failure, right? And learning from it.
17:06Okay? And success comes from working
17:08together. I would say meaningful work
17:11and meaningful relationships. If you're
17:13on a mission to do something great,
17:15okay, go to Mars or whatever it is that
17:17you're going to go do together and you
17:20have meaningful relationships and you
17:22have radical transparency and you know
17:24your nature and you know how to work
17:26with others. That's the formula for
17:27success, right?
17:29>> Yeah, another example is Dr. Dalio is
17:32when when Shawn came in the notes were
17:34already printed off. There you go.
17:35>> [laughter]
17:36>> I'm late. I don't have it printed. But,
17:39you know, so we have a very different
17:41dynamic, but for 6 years we've built one
17:42of the biggest business podcasts in the
17:44world despite being completely different
17:46in our nature.
17:46>> your audience hears this, right?
17:49>> Yeah.
17:50>> It's pause and reflect. Like cuz okay,
17:52what 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
17:58want 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 uh
18:06you're obviously not only are your goal,
18:07but your effectiveness in being able to
18:10help people, otherwise I wouldn't be
18:11listening. Okay, so I just wanted to
18:13pause on that formula. Okay, that it
18:17once you get that formula, pain plus
18:20reflection equals progress and how do
18:21you work together and all that? Wow, and
18:24follow your nature.
18:25>> Can you can you guide us on the
18:26reflection part? Cuz I think everybody
18:28understands the word, but I bet we don't
18:30really talk a lot about how each
18:31individual person does it. And so, are
18:34you is writing your reflection? Do you
18:36talk to Do you have two or three people
18:37you call who tend to give you high
18:39signal like feedback or advice? Like
18:41what is your process to actually do the
18:43reflection? Pain part comes
18:44involuntarily. That that hits you.
18:46>> When the pain comes,
18:48um eventually the pain will go away, but
18:51you can skip that. 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'd I've done
19:01meditation transcendental meditation
19:04since 1969.
19:06>> Explain what that even is. So, I've I've
19:07only heard you and Jerry Seinfeld swear
19:09by transcendental meditation. What is
19:11it?
19:12>> Transcendental meditation is a very
19:14simple exercise.
19:16Um
19:16you sit there calmly and you repeat a
19:20sound that is a word that is called a
19:23mantra that doesn't have any meaning.
19:26And so, um let me an example might be
19:30om. Okay, so you're sitting there and
19:32you repeat om in your head. And when you
19:35do that, you can't have thoughts because
19:37when your thoughts are in om, your
19:40thoughts are in om and no other thoughts
19:42can come in. And then eventually, when
19:45you get this habit down, then the om
19:47goes away and you go into pretty much a
19:51subconscious state. You know, very
19:53relaxing, very uh calm. And so, it's a
19:55real calming exercise and it brings you
19:58into your subconscious mind. Okay, your
20:01subconscious mind is really controlling
20:04you a lot almost, right? There's a
20:06conscious mind, a logical conscious mind
20:09that you're logical and you're aware of.
20:12And then subconscious means below your
20:14awareness. There are all the things in
20:17your mind that influence you, your
20:20emotions, your subliminal stuff. And it
20:23goes into that subliminal stuff and it
20:26calms you down and it's also where
20:28creativity comes from. It's like if you
20:30take a hot shower and these ideas come
20:33to you, but you try to muscle ideas, you
20:35can't make them you can't make them
20:36come. But that hot shower, that
20:38relaxation and so on. I found that very
20:41helpful, you know. I know I've I've
20:43developed a uh an instinct. Habit is a
20:47very
20:48uh important tool. Like if you know how
20:50to develop the right habit. So, the
20:52habit means that you have an instinctual
20:55positive reaction to something. So, I
20:58have a uh a reaction which is, "Okay,
21:02that is that that's a lesson in
21:04reality." In other words, "Pay." Okay,
21:07so it's now like a puzzle for me.
21:10Okay, the puzzle is
21:13how does reality work? It'll tell me
21:16something about how reality works and I
21:19have to deal with reality to make it
21:22successful.
21:24And so what is my principle for dealing
21:27with my that reality to deal with it in
21:30the best possible way. Okay, that's my
21:33now instinct. So now when you got that
21:36instinct, it's a whole different thing,
21:39right? Because you you start to say,
21:40"Okay, there's pain." And you have your
21:42curiosity. Okay, now you take your
21:45curiosity and you say, "What does that
21:47tell me about how reality works?"
21:51And how I should deal with reality.
21:53Okay, and if you solve that puzzle, then
21:57you will get a gem and that gem is a
21:59principle that you can carry with you to
22:02be better, right? And so if you start to
22:05recognize it as that. And then I do
22:08write.
22:09>> So is that What does that mean? Do 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
22:15come 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
22:24all those reflections are cause-effect
22:27relationships because principles are if
22:30this happens, what do you do? And that
22:32kind of thing. And then I put those in
22:34computer code. Okay, that's how I built
22:36Bridgewater. I built Okay, if this
22:39happens, you do that. Okay, and you put
22:40it in computer code and I made then this
22:44all computerized sit decision-making
22:46systems for markets and almost
22:50everything. And because I've done this,
22:52you know, for 35 years or something on
22:56almost everything, I've got thousands of
22:59these principles that I've written down
23:02and they are, you know, the ways of uh
23:04achieving success in whatever kind of
23:06decision. If, you know, if the Fed does
23:09this, or if somebody you love dies, or
23:11whatever it is. Okay, how do you reflect
23:14on them? What does that mean? I would
23:16recommend I put out a journal that
23:19people can do so that they can journal
23:21their own principles, and they have the
23:22reflections, and so on. If they if they
23:25start to think that way, painless
23:27reflection equals that, and you reflect
23:29well, what happens in the meditation is
23:32it connects your subliminal self to your
23:35conscious.
23:36>> I'm I'm on board with all that.
23:38I think that if I put myself in your
23:39shoes between the ages of like 35 to 32,
23:42you went 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
23:49years of starting your business anew,
23:52I would have to think, like most all
23:54small business owners, you're like, I
23:55just got to pay the bills.
23:56>> I could always find a 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?
24:09And how do you weigh one thing against
24:10another thing?
24:12Okay. I mean, like, I want I want
24:15survival and opportunity, and I want to
24:18play the game, and I want Okay, and I
24:20don't really care.
24:22I I don't care much about convention. I
24:25don't care about much about how I look
24:27to the outside world. I don't care about
24:30things that can inhibit maybe that
24:33choice. I think people also get stuck.
24:37Um they get stuck cuz they don't realize
24:40there are multiple possibilities. And so
24:42some people say to me, you know, but you
24:45don't understand. I'm in this job. I
24:47don't like the job. I think my boss is a
24:50jerk, and this isn't where I want to go.
24:53Okay. And And but they feel I have to be
24:57there. Okay. And the reality is if
25:00you're clever and you figure it out and
25:02whatever and you try, there are many
25:04ways to have a really happy life. And
25:07And by the way, a lot of money is not
25:09important thing. Sometimes we get hung
25:12up on this like it's got to be this
25:14conventional life which is
25:16you know, okay, I've got to do this this
25:18Okay, is that really what it is? Even
25:21experiment with it.
25:22>> Listen to this quote Sean that he had.
25:24He said, "I cannot say that having an
25:25intense life filled with accomplishments
25:27is better than having a relaxed life
25:29with savoring. Though I can say that
25:32being strong is better than being weak
25:33and that struggling gives one strength."
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>> the top? You work your ass off to get a
25:46lot of money?
25:48Okay, just think about that. Is that it?
25:51What's the money for? Money doesn't have
25:53any intrinsic value, right? So you have
25:56to have a purpose. Why are you getting
25:58the money? What do you want to do with
26:00the money that is so important? You
26:02better answer that question. What is
26:04that going to get you? Okay? Does that
26:06get you better friends? Okay? Does it
26:08get you better marriage, a better
26:10relationship with your 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 and
26:23you say, "Ah, that was the life I wanted
26:25to 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
26:37time. And it made me start asking these
26:39questions cuz one of your core
26:41principles is like figure out what you
26:42want and then understand the rules of
26:44nature. You study cause and effect to
26:45understand what patterns of behavior and
26:47actions might lead to the thing you
26:49want. So here's what I wrote. You can
26:50you can judge it. I said, "What I want
26:52out of life 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 so
27:03I never forget what each day is for. I
27:05want to rewrite the list every year so I
27:06see myself evolving.
27:08I want to focus on what matters. Number
27:09one, my loved ones because they love me
27:11even if I don't do anything on this
27:12list. Number two, my health because
27:14without it I can't do anything on the
27:15list. Number three, my work because it
27:17makes life fun. Number four, being
27:18somebody who lights up the room because
27:19it feels good to make others feel good.
27:21And number five, learning because it's
27:22the master key that unlocks all doors.
27:24And I I keep going a little bit. And
27:26then I say some of the things that I'm
27:27I'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
27:35um and I want to win not but not just
27:36win. I want to win on my terms uh
27:38because that's the most satisfac-
27:40satisfying way to do it."
27:41>> Congratulations. That's fantastic.
27:43>> And this is 10 years ago.
27:45[clears throat]
27:45>> And then you you reflect and you modify.
27:47Okay. And then so now you know what you
27:50want.
27:51>> Do you change your goals every year or
27:52anything?
27:53>> No, I'm I It's like my nature.
27:55My nature really doesn't change.
27:58My phase of life changes. Okay. So I'm
28:01at a different phase of life. Like right
28:03now I'm really feel compelled to
28:06pass along everything that I have that
28:08is a value to other people, right? And
28:10so cuz I'm late and I'm approaching my
28:12end. So that whole is
28:15my joy. We have different joys. We have
28:17different circumstances. In the middle
28:19part of our lives there's work-life
28:21balance and your kids and your whatever
28:24and so these arcs of life there's an arc
28:27of life. Almost like a script. I mean,
28:30you know exactly, you know, at this age
28:33I graduate and at each phase you know
28:36what it's like. And so you have that arc
28:39but your nature doesn't change I don't
28:41think.
28:42>> You uh
28:43I was listening to a podcast about you
28:45and there's was funny story. I think
28:46this was when you were selling research.
28:48You said
28:49uh that you hired a guy. I forget his
28:51name, but I think he was a door-to-door
28:53Bible salesman.
28:54>> Yeah.
28:54>> And you
28:55Did he know anything about research or
28:56finances?
28:58>> Uh not much, but he was curious. And he
29:01was you know like I say that there are
29:03three things.
29:04Um there's skills, abilities, and
29:08values.
29:09And most people look at skills.
29:13And they look at the resume to determine
29:15what skills they have.
29:16In my opinion, it's the opposite order
29:19is 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 is
29:34going to be the most important people.
29:36And maybe even you know, all of a sudden
29:38you were growing up with okay, man, you
29:40need to program because you're doing
29:41this and then all of a sudden, man,
29:43that's a lousy job. Because, you know,
29:45something comes along, right? So, how do
29:48you adapt? What are you going after? And
29:50then the least So, the least important
29:52is the skills. And so, in thinking about
29:55that, what's our relationship going to
29:56be like? When the How do we pursue a
29:58dream? Is he bright? Is he
30:01What is his abilities? What can we do?
30:03What How do you discover? I mean, most
30:05of like your curiosity, most of
30:07everything is in the discovery. Okay?
30:10It's not in the you know, remember these
30:13rules and and so on. The future is in
30:15the discovery. So, So, that's what I'm
30:18you know, I'm looking for, right? I
30:20mean, that that's what even talent
30:22identification is. Because talent is
30:25more important than money. Okay? The The
30:28money people are trying to find those
30:30people. Okay? So, if you look at okay,
30:33what did Elon Musk have? He didn't have
30:35money. And how did people make money?
30:37They invested in Elon Musk. They found
30:39him and they invested in Elon Musk.
30:40Human capital versus financial capital,
30:42right?
30:43>> right. Let's talk about you when you
30:44were younger. Uh what would people have
30:46seen in the talent identification at
30:48that phase?
30:48>> I think it would have been tough. I was
30:51um you know, a C student. I didn't like
30:54a high school education. I liked
30:56markets. I had a passion for markets. I
30:59got into um C.W. Post College, which is
31:02LIU, on probation, but I had a passion.
31:05>> So t- tell the story if you can of how
31:07you got that passion. How you started
31:08You said, "I loved markets." I mean,
31:10most teenagers don't know they love
31:11markets.
31:12>> I 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
31:21uh would uh walk around. I
31:23got $6 a bag. And when I would get up to
31:26$50, then I would talk to people about
31:29the people I was caddying with about the
31:31markets, cuz everybody talked about the
31:33markets then. This was a time where if
31:36you got a haircut, your barber's talking
31:37about what stocks to buy. So then,
31:40naturally, I I took my caddying money
31:43and I put it in the markets.
31:45Um and the uh first stock I bought was
31:50the only
31:52company I heard of that was selling for
31:54less than $5 a share.
31:56And I stupidly believed that if I bought
32:00more shares, I could make more money if
32:02it went 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
32:13game." You know, and I thought that this
32:15game must be probably an easy game,
32:17because like in the newspapers, the Wall
32:19Street Journal, and the news, they had
32:21all these thousands of names of stocks,
32:24you know, on all of those things, and I
32:26just figured I have to pick one or two
32:28that go up. I mean, there's big
32:30selection. I should be able to do that.
32:32And then I started in the game. And then
32:35I realized the game is not easy. I still
32:37know the game isn't easy, but then I got
32:40hooked 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
32:45kids who were doing that.
32:46>> So, books or what Where were you getting
32:47smarter? How did you start doing
32:48>> I remember Fortune had the Fortune 500
32:53and they had in the when they had the
32:54Fortune 500, they would have a little
32:57tear sheets and you could say which
32:58annual report you would want you would
33:01check it off and mail it in and I
33:03checked off all of them. And then uh you
33:06know, they all remember all of these
33:08things that to the house and then I
33:10became my little library and I would
33:12talk and then I fiddle around and yeah,
33:15that's how I did it.
33:16>> Whenever I was reading Snowball Warren
33:18Buffett and now I'm hearing you talk
33:19about it, I think like the lucky thing
33:21that I don't know like I don't know what
33:23it is that you found something that you
33:24liked at such a young age.
33:26>> The for a lot of people I know that are
33:28like that, Bill Gates was like that, a
33:30lot of people are like that. They found
33:32something and then also learning is
33:34different. Learning prior to puberty is
33:37different or at around 12 or 13. It's
33:40like learn a language, learn something,
33:43learn a sport and so on. When you learn
33:45it prior to that, it almost goes into
33:47your, you know, into you.
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 guy who's very wise,
33:59he's sharing all his knowledge and when
34:01I studied Buffett, it was kind of the
34:03same. Buffett is this charming, wise,
34:05patient sort of guy, but if you read
34:07about him as a kid, he was at the horse
34:09tracks, he was studying betting, he was
34:11finding slips on the ground and cashing
34:13them in that others had overlooked, he
34:15was setting up pinball machines and
34:16barber shops and fishing golf balls out
34:19of the pond and reselling them.
34:20>> Oh, I did that. He was a hustler. Were
34:21you a hustler of of any sort?
34:22>> No, in the golf course that I had I was
34:25at,
34:26they would hit they would hit them into
34:28the pond and I could walk around in the
34:32pond and feel them. And then I would
34:34pick up the golf balls and sell them
34:36there.
34:36>> That's what I didn't know he did that.
34:38>> Sam called you a late bloomer. I find
34:40that term interesting.
34:41You don't know this about Sam, but he
34:43was really wanted to be successful. He
34:45studied a bunch of successful people. He
34:46had a spreadsheet he shared with you. We
34:47met when he was we were 24 years old
34:49maybe. He shared this thing of when did
34:51our heroes make it? And he showed that
34:54like he had a timeline for Bezos, for
34:56Jack Dorsey, for all the kind of tech
34:58entrepreneurs that we were admiring.
34:59When did they start?
35:00>> How many years did it take for them to
35:02actually win? And he had mapped them all
35:04out.
35:04>> it down into
35:05their apprenticeship. So, like to learn
35:08and then starting their first hit.
35:11>> And he reverse engineered it almost hit
35:12it exactly. He's like, "By 30, I'm going
35:14to have this many millions in the bank
35:15because and I know I'm today I'm here,
35:17but I will be here." And that's like
35:18almost the median
35:19>> But but okay, two things. First of all,
35:22I think you should publish that. Okay.
35:26And I suspect it has a big range around
35:29it. Okay. Like I was thinking Ray Kroc,
35:32McDonald's. He was like 55 years old or
35:35something. Okay. So, there's a big
35:37range, but they certainly 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 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
35:51I want to be free. I want to feel you
35:53know, I want to I want to I don't know.
35:55I want to feel free and I was like,
35:56"What's the number I need?" And he said,
35:57"$20 million." So, I said, "All right,
35:59that's the number. I have to make $20
36:01million 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
36:10was 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, all
36:17right, step two, step three.
36:18>> Great. And and that was smart. Because
36:2120 million, right, will do it. Okay. And
36:25do it. And you also thought um
36:28being free.
36:30>> Yeah.
36:31>> And then you can go for it. That was
36:33what I was trying to tell Elon, and he
36:35said, "No, I don't need it." Okay.
36:37>> Don't need the safety net. Cuz if I'm if
36:38I'm listening to this, I'm hearing you
36:40say like, "Yeah, I just need a nice bed
36:42to sleep in and I want my freedom. I
36:43like to I want my kids to be going to a
36:45good public school." All of that. At the
36:46same time, you've made like $20 billion,
36:49right? So, this is so somebody listening
36:50can say, "Well, at some point did he did
36:51he just way overshoot his his his
36:53needs?"
36:54>> I didn't want anything for that. I
36:56I I played a game that I love that pays
36:59well if you do play it well.
37:00>> Right.
37:01I'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
37:07follow, um or spend less than you make,
37:10which people don't tend to follow.
37:12Do you still do anything in your life
37:15that is a pretty frugal thing?
37:17>> Oh, yeah. I I I instinctively
37:21can't waste.
37:23I'm reluctant to fly a private plane. Uh
37:26I'm I don't like expensive watches.
37:29>> I heard someone make a joke that most of
37:31your suits are from Banana Republic or
37:32something like that.
37:33>> It's something like that.
37:35>> Where where do you spend well, right?
37:37So, like spending is also a skill.
37:39>> I spend money on the things that I
37:41enjoy. I love boats.
37:44Uh I have a house on the water. I don't
37:46have a yacht, but I have a ocean
37:48exploration ship that I'm a 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, Jacques
38:01Cousteau had an effect on me.
38:04When I was uh growing up, uh I watched
38:07um him dive and do exploration, and then
38:10my son I have a son who
38:12um I took my sons diving and they
38:15learned how to dive, and he then went to
38:17work 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
38:32I'm Listen, I'm not against anybody
38:35doing any of these things. I just want
38:36to be clear. It's not like I think
38:39whatever brings you joy, it's okay. It's
38:42kind of like that, right? And we're
38:44uncomfortable. My numbers are my family,
38:46my wife would not be comfortable with
38:49much jewelry, you know, or anything that
38:51would be fancy jewelry or so something.
38:53That's just Let me how we grew up.
38:56And, you know, I mean,
38:58so and the kids are the same thing. My
39:00kids have grown up. And I would say,
39:02whatever you enjoy is like if you enjoy
39:05the the you know, the threads and the
39:07beauty or the the watch and you're
39:10really are enjoying it, that's
39:11fantastic.
39:13>> I know you're into the ocean. Do you
39:14believe in aliens and have you Do you
39:16have access to any cool insight into
39:18things like that?
39:20>> I have no knowledge of aliens and I have
39:22no
39:22>> What do you What do you believe?
39:24>> What do I believe? I have no beliefs
39:27that are just beliefs. So, people who
39:30I've heard different people
39:32saying things and and here's what I
39:35believe and which is there's the
39:37enormity, you know, of our galaxy. There
39:41are something like 100 billion
39:45solar systems. Okay.
39:48And in the universe, there is something
39:51like a
39:53100 billion galaxies. And so, there are
39:56a lot of combinations out there. So,
39:59I would have to believe that the
40:02probabilities of
40:04there being life in the other forms and
40:06so on are great, okay, out there.
40:09However, I've also heard scientists say
40:13that there is that that's much smaller
40:16than one would think about those things,
40:18but I haven't gotten into the subject.
40:20Well, 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
40:29like
40:30probability weighted beliefs or
40:32something like that, right? It's like
40:33not all beliefs are obviously equal.
40:36Some you have high conviction in and
40:37some you have much lower based on
40:39an analysis or an assessment.
40:41>> It's just my way, you know, and also
40:43markets teach you this way, right? What
40:45is expected value? How to go have
40:47humility. Okay, if you have an opinion,
40:49what'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 and um
40:57very little of it was about business or
40:59finances. How much time of your day do
41:02you spend thinking about some of this
41:04high-level 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 cuz it brings
41:19you into
41:20Okay, global, that's cool. You deal with
41:22the whole world. Macro, that means big
41:24stuff, foreign stuff, okay? And then how
41:27do you place your bets? And and so it's
41:29connected 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 do
41:39a study
41:41um of last 500 years of how things are
41:44working only because I learned in my
41:47life that if I haven't seen something
41:49before in my that didn't happen to me in
41:51my lifetime,
41:53I should see whether it happened before
41:55my lifetime and so on. And then when I
41:57did that, cuz there are these big
41:59cycles. Uh um like there's um there are
42:03orders, right? We'll call there's a
42:05monetary order. There is a political
42:08order.
42:09Okay, political and social order. There
42:11is a geopolitical order. In other words,
42:14systems and how they work, they all
42:16break down. Okay? There's it
42:18throughout 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 the changing world order,
42:37I plot things and so you see them on
42:39graphs and you could see these things
42:41happening. The simple measures of
42:43financial health and how does that all
42:46work and what are the consequences when
42:47you see that? So, yeah, I'm into that
42:50cuz so it's connected. When you said,
42:52"Do I see the big stuff?" Okay? Yeah,
42:54the big stuff matters a lot, right? But
42:58you see it in these you you realize that
43:01a lot of people are looking at the news.
43:04The news lasts a minute. Okay? Can you
43:07put the news in the context of what's
43:10happening? Watch what's happening. I
43:12mean, just let let's take a look at
43:14those things. You want to take a minute
43:15on that?
43:16>> Yeah, 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 over period of time
43:26to determine that. And that is the
43:29debt money economic force.
43:33Okay? And there is a big debt cycle.
43:36Okay? So, it's and it's a very simple
43:38thing.
43:39Um it uh if you acquire more debt
43:43than you and then you're earning over
43:45that, you your debt service payments
43:47will squeeze out your spending.
43:50Uh okay? So, they grow and that is like
43:54in your circulatory system, that's like
43:56plaque being built up in your
43:57circulatory system. And when that
43:59happens and it becomes painful, you have
44:02a debt restructuring. And also, one
44:04man's debts are another man's assets.
44:06So, if you're producing a lot of debt,
44:09uh let's say government's running a
44:10large budget deficit, that means it has
44:12to sell bonds. And then who are the
44:15buyers of the bonds? And how does that
44:17work? So, it has a mechanical part of
44:18it. That's one of the forces. The other
44:21forces is wealth and values differences.
44:25So, there's the political force, which
44:27has to wealth gaps, values gaps. As they
44:31become greater, that's a greater threat
44:33to democracy. That's a greater threat to
44:36In other words, when you get to do you
44:37have irreconcilable differences, so
44:40you're not going to compromise and
44:42you're not going to even follow the
44:44system, that's a risk. Okay, that's a
44:47risk now, okay? We have the first risk,
44:49we have the second risk,
44:50>> Right. Okay.
44:51>> Check, check.
44:52>> Okay. Third risk is um
44:55uh the geopolitical risk. So, there's
44:57orders, right? The way the order works
44:59is who's in control? What are the rules
45:01of the game for the world? And um so,
45:05the way it works is you have a war, the
45:07winner of the war sets the rules, and
45:09that we call that's the order. 1945, we
45:13ended the war, America sets the rules,
45:15and so on, and we created what was a
45:18multilateral type of system, though uh
45:20you know, almost representative, the
45:22United Nations, the World Health
45:24Organization, the World Trade
45:25Organization. So, all those world
45:27organizations are out the picture. We no
45:30longer have a multilateral world order.
45:32Okay, so how do you resolve differences?
45:35You fight, okay? You're going to have
45:37conflict. How How do you get past the
45:39disagreement? There's no court you go
45:41to. You can't do it that Okay. So, now
45:43you have those three things, okay?
45:46That's hap- that's happening. Number
45:48four, um force always through nature, uh
45:51is nature um in particular, droughts,
45:54floods, and pandemics historically have
45:56killed more people than wars, and they
45:58are a big force as they come up. And
46:01number five all through history is man's
46:04inventiveness particularly of new
46:05technologies and that raises living
46:08standards and so so if you were to see
46:11life expectancy
46:13always rises
46:15productivity per capita GDP by all
46:18measures as we learn more we have that
46:21and so there's the interaction of those
46:23five forces. Those five forces you can
46:26measure them and you can measure their
46:27interactiveness and that is what is now
46:30happening. So if you know those cause
46:32effect relationships I think they're
46:34connected.
46:35>> I've read something that your family
46:36office I don't know if this is right you
46:38can correct the record. Your family
46:39office has like 70% or 75% in gold ETFs
46:42right now.
46:42>> No no no no.
46:42>> Is that wrong that headline was wrong?
46:44>> Totally wrong totally wrong. I believe
46:46that from an investor's point of view
46:48that they should um
46:50depends what their portfolio is
46:52constructed and they should have between
46:54uh 5 and 15% of a portfolio on getting
46:59that 15 uncorrelated difference
47:01that's they should have something like
47:03that and they should have it over
47:05weighted if they're tactically doing it.
47:07Tactically means let's say there's a
47:09certain time to own it and certain time
47:11not to own it. Certain time to own it is
47:14um
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 strate- create
47:26a strategic asset allocation that's
47:29meaning what is my best balanced
47:31portfolio if I have no opinions. What is
47:34it's not going to be cash cuz cash
47:36always is the worst performing over a
47:38period of time. People think it's the
47:39safest it's the surest to do poorly over
47:42the longest period of time.
47:44>> So you have high certainty low
47:45performance.
47:46>> So what you want to have the best thing
47:48to do is have a well balanced portfolio
47:51of assets because you can lower their
47:54risk as by through the diversification
47:56cuz if you have one, it goes like this,
47:59but if you have another that does the
48:01opposite with it, you can have that. So,
48:03there's a strategic asset allocation
48:05next, and then you make your tactical
48:07bets relative to that
48:09and so on. But, here's what I would
48:12describe, the mechanics, let's say.
48:14There is such a thing as bubbles. What
48:16is a bubble? A bubble is not whether the
48:19stock will pay off in the long run
48:21because in bubbles, even the most
48:23successful companies go down 80% or
48:25something along those lines. So, uh
48:27typically when there's
48:29uh borrowing of money or whatever and
48:31there's an increase in wealth relative
48:34to money. Okay, wealth and money are two
48:37different things. Okay, wealth is um you
48:40can make up wealth. If If you have a 50
48:43billion a 50 million-dollar offering on
48:46a billion-dollar valuation,
48:48um then all of a sudden you're
48:50you're called a billionaire, and it was
48:5350 million dollars, but and then the the
48:56world has a billion dollars in wealth.
48:58But, what happens is as wealth builds
49:01up, you can't spend wealth. You have to
49:03sell wealth in order to get money
49:05because you can only spend money. And
49:07so, when wealth builds up a lot and then
49:10there comes the need for money. Now,
49:12what creates the need for money? The
49:14need for money often is uh that they
49:17borrowed the money to buy the wealth uh
49:20to invest in the wealth, and then maybe
49:23interest rates go up, and then all of a
49:25sudden they have to pay their debt back,
49:28and so where do they get that money
49:30from? They sell the wealth in order to
49:32get the money, and there's so there's
49:34this dynamic that's taking place. And
49:37then it has another number of
49:39ingredients like it's all the rage to
49:41buy it, and everybody buys it. Everybody
49:44buys maybe more than they should because
49:47they don't diversify, or and what What
49:50is it's all the rage and so is it
49:54logical and there are these elements
49:56that create a bubble. Okay, there are
49:59right now on that scale, I have a bubble
50:02gauge. I measure measure all these
50:04things and I have this bubble gauge
50:06going back across countries to about
50:081900 and so I can see where they are and
50:12these by the way typically take place
50:15quite often when there's great new
50:17technologies.
50:18>> A reason to be exuberant.
50:20>> The reason to be exuberant and and to
50:22bet and and people confuse
50:25investing in they say, I believe that
50:29technology is going to be great and
50:30revolutionary and it is, okay, but that
50:33doesn't mean the stock will be great.
50:35Okay, there's a lot of reasons that the
50:37stock could be too high and competitors
50:39come and and they, you know, there's a
50:41Google and there's a Yahoo.
50:43>> So so what's the bubble gauge saying
50:44right now?
50:45>> So the bubble gauge is saying it's about
50:4975%
50:51toward where it was both in 2000 and
50:541929. So it's pretty high up there,
50:57okay, and Japan and its bubble in 1990,
51:01it got higher even than than those
51:03cases. So it's high, but people pay too
51:05much attention. Let's say if I just did
51:08the bubble gauge, I could tell you
51:10probably with good probability that it
51:13won't be good to for the next I couldn't
51:16tell you whether it's going to be 3
51:17years or 10 years, but it won't be a
51:20good investment.
51:21But it won't tell you timing. Timing you
51:24need the prickling the bubble. Okay, so
51:27what causes it to prick the bubble? So
51:29if you've got a bubble and then you see,
51:31okay, here 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 prickling of the bubble. The
51:40prickling of the bubble it typically is
51:42the creating the need for the cash for
51:45the
51:45converting that wealth into cash for one
51:49reason or another. Quite often it's the
51:51most typical thing is tightening
51:52monetary policy. Okay. So what you have
51:55typically is that when stocks go up and
51:59bonds go down, then what you have is the
52:03future 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
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 a
52:22wealth tax, then whoever has the wealth
52:25is going to have to sell some of the
52:27sell some of the wealth to get the money
52:29in order to be able to pay. So looking
52:31out for those things in terms of the
52:33timing is my machine. Take what that for
52:36whatever it's worth. I don't want people
52:38to trade on that this and so on, but I'm
52:40just trying to answer the question that
52:42there are mechanics. Okay. Everything
52:45that happens has causes that make it
52:48happen. And if so you understand the
52:50mechanics of the cause-effect
52:52relationships, you can see all this and
52:54understand it that way.
52:55>> Is Bridgewater the biggest hedge fund
52:58because you were the
52:59you had the best performance? Is it the
53:01biggest because you were the best at
53:03marketing? Is it the big Why did it
53:05become the biggest?
53:06>> It became the biggest hedge fund because
53:09we the most consistently made
53:13excellent returns with a minimal risk.
53:17And we were uncorrelated with the stock
53:20market or any other market. That's that
53:22was the main thing. It made it I think
53:2411.8% a year for for something like 31
53:29years when I did it. The worst down in a
53:32year was 2000 cuz of the COVID and we
53:36didn't know how to
53:37deal with the COVID well. That was down
53:39to about 13. The next two times was down
53:42like
53:442%. Okay? And that was not correlated
53:48with anything. You know, the losses, you
53:50lose 50% you have to have 100% to make
53:53money. And so the compounded effect of
53:56that, and it was comfortable, so that's
53:58that'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 three
54:04>> What was it? What was it? Was it 13%?
54:06>> Three, four, and whatever, but not not
54:08significant.
54:09>> But it does help your your your your
54:11media, your work, your I mean your your
54:13charming, your good leader, like and
54:14you've been doing it since you were in
54:15your 30s of like
54:17>> But I became the
54:18Bridgewater became the largest hedge
54:20fund before
54:22anybody
54:23knew me, and it was the opposite
54:25reaction. Like I was trying to be below
54:27the radar, and then two things happened.
54:31We became the largest hedge fund in the
54:32world, and at the same time, we have
54:35this culture. Okay? And the culture
54:39was perceived as a cult, and then I put
54:42online 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
54:49that got around. 3 million copies were
54:53it was downloaded 3 million times,
54:54people passed it around. Otherwise, it
54:56was going to be a problem like hiring
54:59people and so on that wouldn't
55:00understand the culture, which is the
55:02culture is an idea meritocracy in which
55:05we radical truthfulness and radical
55:07transparency. But anyway, so in answer
55:11to your question, it was not my charm
55:13had anything to do with this. I could
55:16explain the process, and people could
55:18they could understand what was our
55:20process. And I could show how it was
55:23back tested and it worked through all of
55:25those periods of time, and that was
55:27logical, and then there were results,
55:30and we helped people learn meaningful
55:32work 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.
55:40>> I was walking around New York cuz I this
55:42is my first time here in like 10 years
55:43and I went to the Rockefeller Center and
55:45there's this like kind of this giant
55:47stone and it's John D. Rockefeller Jr.
55:50And he's just writing these things. I
55:51believe in the sacredness of a promise
55:54that a man's word should be as good as
55:56his bond and he just has each it's
55:58there's like just 10 of these principles
56:00etched in stone sitting outside the
56:02building, you know, it's like I believe
56:04that love is the greatest thing in the
56:05world and that love alone can and will
56:08overcome hate.
56:09>> Right. And we are missing these.
56:13Now more than ever, right? The idea of
56:17what are these principles? What are the
56:20principles that bind us together?
56:22Okay, what are the principles that we
56:25follow? Really, what is most important?
56:28People are not
56:30you know, everybody should write down
56:32their principles and then be judged at
56:34how they're living by those principles
56:36and are 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 you figure out what yours
56:48are.
56:48>> That's right.
56:49>> And then you're most people don't don't
56:50know what theirs are.
56:52Even fewer will ever write them down and
56:54then the fewest will be those who act in
56:55alignment who walk their 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
57:08that 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 and that's a way to
57:26be.
57:27>> Who was yours growing up and maybe do
57:28you have a hero now?
57:29>> Like one One them was Paul Volcker.
57:32Okay. Uh Lee Kuan Yew started Singapore
57:35and and ran that. But no, there were
57:37many many people who will sacrifice for
57:42for the things. I believe that
57:45uh we we talk about love, we uh karma.
57:48Uh okay, or what I mean is you go across
57:52the world and you look at all religions
57:55and there is um something common. Every
57:57Everybody can have differences in their
57:59superstitions, their beliefs, and so on.
58:02But there's a commonality
58:04which is doing to others as they would
58:06have them do unto you, or karma, what
58:09goes around comes around, and it is a
58:12reality 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,
58:29right? And then people who do that are
58:33role models to me as I as you look at
58:35that, okay? As this thing from
58:37selfishness and fight and and other
58:40words and what I mean that is mutually
58:43destructive, and and you see that. So, I
58:46I think it's a question for humanity
58:48now, can we rise above ourselves for
58:52dealing with, you know, what will
58:54certainly be better for everybody if we
58:57can get along. I I bet the I don't mean
59:00that idealistically. This is practical,
59:03right? Cuz it doesn't cost me a lot to
59:05help you, doesn't cost you a lot to help
59:08me, and but it but it can make a world
59:11of difference. When you have that, it's
59:13a practical thing. And and then that
59:15What is heroism? Contributed to that. I
59:19think that's literally what it is. And
59:22and we're now operating a lot the
59:24opposite way, I think.
59:27>> You 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
59:33entrepreneurship. Um I'm curious like if
59:36somebody was
59:37listening to this and
59:40there's one thing that they were going
59:41to remember.
59:42What would be the thing that you hope
59:44people remember or take away? What's the
59:45What's the What's the one big one?
59:47>> 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
1:00:03it's all about meaningful work and
1:00:05meaningful relationships.
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
1:00:12life.
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.

About this transcript

This page contains the full transcript of Ray Dalio: This is the Holy Grail of Investing by My First Million, generated from the public captions YouTube serves with the video. The transcript has 11,362 words across 1,671 segments, with the original timestamps preserved so you can click any line to jump to that moment in the embedded player.

What you can do with it

Use the transcript to take notes, quote the speaker, build a study guide, generate a summary with ChatGPT or Claude via the YouTube Summary tool, or export it as a timed subtitle file with YouTube to SRT. You can also re-open it in the transcriber to choose a caption track available on the video.

Free YouTube transcript tool

YouTube2Text is a free YouTube transcript generator — no signup, no daily limit. Paste any YouTube link and get the full transcript instantly, with timestamps, click-to-jump, caption language selection, AI prompts for ChatGPT, Claude, and Gemini, and exports to TXT, SRT, VTT, or Markdown.