All-In Summit: Ray Dalio on the rise and fall of nations and the changing world order

00:00:00.000 | So first off, please join me in welcoming Ray Dalio to the stage

00:00:04.200 | Wow! Fuck yeah! Ray Dalio! Oh my god, real legit! We got Ray Dalio!

00:00:13.200 | Don't let your winners ride

00:00:16.200 | Rain Man David Sass

00:00:19.200 | And it's said we open sourced it to the fans and they've just gone crazy with it

00:00:25.200 | Love you guys, I mean queen of quinoa!

00:00:31.200 | Ray, I don't know how we got you to this stage

00:00:34.200 | It must have been the fact that I just said your name 400 times last year

00:00:38.200 | This guy's read your book

00:00:40.200 | Do not be bored

00:00:41.200 | Yeah, but I will say you were by far my top choice as a guest to have at the All in Summit 2023

00:00:46.200 | Which I took advantage of because I got to produce it this year

00:00:48.200 | You guys have heard me talk about Ray's book, Principles for Dealing with the Changing World Order

00:00:52.200 | Why Nations Succeed and Fail on the Pod a lot

00:00:56.200 | And I think it really encapsulates so well why we are observing a lot of the social, economic and political shifts

00:01:03.200 | that are underway in the US and around the world today

00:01:07.200 | Increasing civil unrest, divisive politics, our desire for external conflict, inflation, budget and debt problems, etc

00:01:15.200 | They've all played out before as nations have risen and fallen

00:01:19.200 | Jason likes to make fun of the term "declinists"

00:01:21.200 | But I think it's more broader than that, which is what is the cycle that happens with social systems that we call nation states over time

00:01:30.200 | Ray's book was my content pick of the year in 2021

00:01:33.200 | And I first learned about Ray when he published Principles as a PDF in 2011

00:01:37.200 | You put that out for free on the internet, thank you

00:01:39.200 | Which was an internal document you used at Bridgewater

00:01:42.200 | And I don't know if anyone else downloaded it and read it

00:01:45.200 | But I was a young CEO in 2011

00:01:47.200 | And I read that PDF and it made a big impact on me and how I thought about management, prioritization, decision making and myself

00:01:53.200 | As a kid growing up in Nassau, New York, Nassau County, New York

00:01:57.200 | Ray earned money mowing lawns, shoveling snow, delivering newspapers and caddying for Wall Street tycoons

00:02:03.200 | He later got a summer job with a Wall Street trader that he caddied for

00:02:07.200 | And ended up starting Bridgewater two years after he got his MBA at Harvard in 1973

00:02:13.200 | Make sure I get that right

00:02:14.200 | By 2013, Bridgewater was the largest hedge fund in the world

00:02:18.200 | Today managing well over $100 billion in assets

00:02:21.200 | Ray spends much of his time sharing his analyses and thoughts today

00:02:25.200 | And his viewpoints openly and freely

00:02:27.200 | And for that we appreciate him and thank him and excited to welcome him here today

00:02:30.200 | So Ray, maybe you could just very briefly kind of summarize the cycle that you highlight in your book that I mentioned

00:02:40.200 | And the five great kind of drivers that you've observed

00:02:43.200 | And tell us a little bit about the simple kind of macro picture

00:02:46.200 | I know you've got something you could share on it as well

00:02:48.200 | Yeah, sure

00:02:50.200 | First I should explain that experience I had of learning that many of the things that surprised me

00:02:57.200 | Surprised me because they didn't happen in my lifetime before

00:03:00.200 | But they happened many times in history

00:03:02.200 | The first time I was clerking on the floor of the New York Stock Exchange in 1971

00:03:06.200 | And the United States, Nixon defaulted on the promise to deliver gold for money

00:03:12.200 | Because they didn't have enough money, real money, gold

00:03:15.200 | And it went down, I went on the floor of the New York Stock Exchange expecting a big down

00:03:20.200 | It went up a lot

00:03:21.200 | That's because I never had a devaluation on behalf of that

00:03:25.200 | I found that in March 1933 the exact same thing happened with Roosevelt on the radio

00:03:32.200 | Same thing

00:03:33.200 | So then I studied the 30s, what happened in 1938 in terms of the depression leading to the wars and so on

00:03:42.200 | And the interest rates hitting zero

00:03:44.200 | Is the exact same thing that happened in 2008

00:03:47.200 | It was because I studied that that we were able to make a lot of money in the 2008 financial crisis

00:03:53.200 | So three things started to happen in my lifetime, our lifetimes, that never happened before

00:03:59.200 | And I needed therefore to study them in history

00:04:02.200 | The first is the amount of debt and money creation

00:04:06.200 | Huge amounts of debt and money creation

00:04:08.200 | Does that matter?

00:04:09.200 | What is the rise and decline of a reserve currency?

00:04:13.200 | How does that all work?

00:04:14.200 | I needed to see the cycles for that

00:04:16.200 | The second was the amount of internal political conflict

00:04:20.200 | In particular populism of the left and populism of the right

00:04:24.200 | And a populist is a person who will not accept losing

00:04:28.200 | They fight with their contingency

00:04:30.200 | And that dysfunction and that lack of willingness to lose

00:04:34.200 | Then had January 6th, came out after the book

00:04:38.200 | And there's a dynamic that we're going on for that

00:04:41.200 | And the third of course is the great power conflict

00:04:44.200 | In other words the rise of a comparable economic and military power

00:04:48.200 | In the form of China rising and competing with the United States

00:04:52.200 | Which is also changing that world order

00:04:54.200 | Those three things never happened in my lifetime

00:04:57.200 | But are big things that are affecting things

00:05:00.200 | When I went back in history

00:05:02.200 | I said I needed to study how these things work

00:05:05.200 | Sometimes we overlook the really big things

00:05:07.200 | So I went back and I studied that

00:05:10.200 | And I saw that there were two others that had enormous impact

00:05:14.200 | The two others were acts of nature

00:05:18.200 | In particular droughts, floods, and pandemics

00:05:21.200 | And they killed more people

00:05:23.200 | And they toppled more empires

00:05:25.200 | And changed more world orders than anything

00:05:28.200 | And certainly big issue now

00:05:31.200 | And then number five is technological changes and how they evolve

00:05:36.200 | So I needed to study those five forces

00:05:39.200 | I saw that there's this cycle that repeats over

00:05:44.200 | For good cause-effect relationships

00:05:46.200 | I don't believe in a cycle just because it repeats

00:05:49.200 | I started to understand the cause-effect relationships

00:05:51.200 | I have a clip here if I can show you

00:05:54.200 | Just four minutes, just a brief summary of the cycle

00:05:57.200 | Can you hit it with the clip?

00:05:59.200 | I studied the ten most powerful empires

00:06:02.200 | Over the last 500 years

00:06:04.200 | And the last three reserve currencies

00:06:07.200 | It took me through the rise and decline

00:06:10.200 | Of the Dutch Empire and the Gilder

00:06:12.200 | The British Empire and the Pound

00:06:15.200 | The rise and early decline

00:06:17.200 | In the United States Empire and the Dollar

00:06:20.200 | And the decline and rise of the Chinese Empire

00:06:23.200 | And its currencies

00:06:25.200 | As well as the rise and decline of the Spanish

00:06:28.200 | German, French, Indian, Japanese, Russian

00:06:33.200 | And Ottoman Empires

00:06:35.200 | Along with their significant conflicts

00:06:38.200 | As measured in this chart

00:06:41.200 | To understand China's patterns better

00:06:44.200 | I also studied the rise and fall of Chinese dynasties

00:06:47.200 | And their monies back to the year 600

00:06:50.200 | Because looking at all these measures at once

00:06:53.200 | Can be confusing

00:06:55.200 | I'll focus on the four most important ones

00:06:58.200 | The Dutch, British, US and Chinese

00:07:02.200 | You'll quickly notice the pattern

00:07:05.200 | Now let's simplify the form of it

00:07:09.200 | As you can see, they transpired in overlapping cycles

00:07:13.200 | That lasted about 250 years

00:07:16.200 | With 10 to 20 year transition periods between them

00:07:19.200 | Typically these transitions have been periods of great conflict

00:07:23.200 | Because leading powers don't decline without a fight

00:07:27.200 | So how am I measuring an empire's power?

00:07:31.200 | In this study I used eight metrics

00:07:35.200 | Each country's measure of total power

00:07:37.200 | Is derived by averaging them together

00:07:40.200 | They are education, inventiveness and technology development

00:07:46.200 | Competitiveness in global markets

00:07:49.200 | Economic output, share of world trade

00:07:52.200 | Military strength

00:07:54.200 | The power of their financial center for capital markets

00:07:58.200 | And the strength of their currency as a reserve currency

00:08:02.200 | Because these powers are measurable

00:08:05.200 | We can see how strong each country is now

00:08:08.200 | Was in the past

00:08:10.200 | And whether they're rising or declining

00:08:13.200 | By examining the sequences from many countries

00:08:17.200 | We can see how a typical cycle transpires

00:08:21.200 | And because the wiggles can be confusing

00:08:24.200 | We can simplify it a bit

00:08:26.200 | To focus on the pattern of cause-effect relationships

00:08:30.200 | That drive the rise and decline of a typical empire

00:08:34.200 | As you can see, better education

00:08:37.200 | Typically leads to increased innovation and technology development

00:08:42.200 | And with a lag, the establishment of the currency as a reserve currency

00:08:48.200 | You can also see that these forces then declined in a similar order

00:08:53.200 | Reinforcing each other's decline

00:08:56.200 | Let's now look at the typical sequence of events going on inside a country

00:09:00.200 | That produces these rises and declines

00:09:04.200 | In a nutshell, the big cycle typically begins after a major conflict

00:09:09.200 | Often a war, establishes the new leading power

00:09:13.200 | And the new world order

00:09:15.200 | Because no one wants to challenge this power

00:09:18.200 | A period of peace and prosperity typically follows

00:09:22.200 | As people get used to this peace and prosperity

00:09:25.200 | They increasingly bet on it continuing

00:09:28.200 | They borrow money to do that

00:09:30.200 | Which eventually leads to a financial bubble

00:09:33.200 | The empire's share of trade grows

00:09:36.200 | And when most transactions are conducted in its currency

00:09:40.200 | It becomes a reserve currency

00:09:42.200 | Which leads to even more money

00:09:45.200 | At the same time, this increased prosperity

00:09:48.200 | Distributes wealth unevenly

00:09:51.200 | So the wealth gap typically grows between the rich haves

00:09:55.200 | And the poor have-nots

00:09:57.200 | Eventually, the financial bubble bursts

00:10:00.200 | Which leads to the printing of money

00:10:04.200 | There is an increased internal conflict between the rich and the poor

00:10:08.200 | Which leads to some form of revolution to redistribute wealth

00:10:12.200 | This can happen peacefully or as a civil war

00:10:16.200 | While the empire struggles with this internal conflict

00:10:20.200 | Its power diminishes relative to external rival powers on the rise

00:10:26.200 | When a new rising power gets strong enough to compete with the dominant power

00:10:31.200 | That is having domestic breakdowns

00:10:33.200 | External conflicts, most typically wars, take place

00:10:38.200 | Out of these internal and external wars

00:10:41.200 | Come new winners and losers

00:10:44.200 | Then the winners get together to create the new world order

00:10:49.200 | And the cycle begins again

00:10:52.200 | The book's amazing

00:10:59.200 | And the amount of work you put into this is extraordinary

00:11:01.200 | And it's just really great intellectually

00:11:03.200 | I'm curious, when we look at those four groups

00:11:06.200 | Since you wrote the book

00:11:07.200 | China, I think we'd all agree, has changed significantly

00:11:10.200 | Perhaps, I think, best described as maybe being in decline in many ways

00:11:14.200 | And disconnecting from the West

00:11:16.200 | And it's also, I believe, when you look at the countries you studied

00:11:21.200 | Perhaps one of the only modern authoritarian countries

00:11:24.200 | To, you know, perhaps have an ability to take the crown

00:11:29.200 | If they were to continue

00:11:31.200 | So, two-part question

00:11:33.200 | How does everything you've learned and studied

00:11:36.200 | Impact your thinking when one person, an authoritarian, Xi Jinping

00:11:42.200 | Is running China and disconnecting it from the rest of the world

00:11:45.200 | In terms of their ability

00:11:47.200 | And then, do you consider this

00:11:49.200 | If they did succeed in becoming the dominant power in the world

00:11:52.200 | What do you think that does for humanity?

00:11:54.200 | There are a bunch of questions in there

00:11:57.200 | I'll try to remember them and take them once at a time

00:12:01.200 | I think China is going to be a big power for the foreseeable future

00:12:07.200 | I think the basic picture in China

00:12:10.200 | The United States, the emergence of India and so on

00:12:13.200 | The world order is going to change in a very profound way

00:12:17.200 | We can't say who's going to be the winner and the loser of this game

00:12:21.200 | But I think we do know that

00:12:24.200 | This conflict is going to be with us

00:12:26.200 | And it's totally changing the world order

00:12:28.200 | When you're asking, like, who's going to be the winner of this game

00:12:32.200 | Like, I'll tell you history

00:12:35.200 | In the history of democracy

00:12:38.200 | As Plato described in the Republic

00:12:44.200 | There's a cycle

00:12:46.200 | And one of the great vulnerabilities of democracies

00:12:50.200 | Is the disorderliness, the anarchy that comes from a conflict

00:12:55.200 | And so you're asking me to compare democracy

00:12:59.200 | And also what I'll call capitalism

00:13:03.200 | With authoritarianism

00:13:06.200 | And let's call it communism, that version of it

00:13:11.200 | Or quasi-capitalism, maybe

00:13:13.200 | But we know what we mean

00:13:15.200 | Yeah

00:13:16.200 | Okay, so

00:13:19.200 | So when

00:13:23.200 | The risk of capitalism

00:13:27.200 | Is when you have the wealth gap clash

00:13:31.200 | And the opportunity gap clash

00:13:35.200 | And the risk, and that produces a risk for democracy

00:13:39.200 | So in the '30s, four major democracies

00:13:44.200 | Because of that dynamic

00:13:46.200 | Chose to be, their parliaments chose to be autocracies

00:13:51.200 | That happened in Germany, Italy, Spain, and Japan

00:13:55.200 | So the risk, both have risks

00:13:58.200 | I came from, and I've been, we've all been blessed

00:14:03.200 | With this amazing environment

00:14:06.200 | That equal opportunity, the ability to be creative

00:14:09.200 | Rule of law, civility

00:14:12.200 | But if we risk those things, in both of those

00:14:16.200 | Then we have a great risk

00:14:19.200 | So on this war, I think it depends more on

00:14:23.200 | How we are, with our circumstances

00:14:26.200 | To be strong and capable

00:14:29.200 | And relative to them

00:14:31.200 | It certainly is going to be a test of the systems

00:14:33.200 | Yeah

00:14:36.200 | So in a way, us focusing inward

00:14:40.200 | On what we do here in America

00:14:42.200 | With our democracy, and making it high function

00:14:45.200 | Is as important as managing our relationship with China

00:14:48.200 | And if you were to look at China and India

00:14:51.200 | And those two countries specifically

00:14:54.200 | And you were to handicap them, as you are uniquely qualified to do

00:14:57.200 | Maybe you could just broadly handicap India versus China for us

00:15:01.200 | Because this is a topic we've been talking about, Chamath and I

00:15:03.200 | And the other besties on the show, a whole bunch

00:15:06.200 | And it's now the largest population in the world

00:15:08.200 | I guess people don't realize that

00:15:10.200 | And they're continuing to grow

00:15:12.200 | And the birth rate is in decline in China

00:15:14.200 | So maybe a little bit on India and how you look at it

00:15:16.200 | Yeah, and I should emphasize that every conclusion that I have

00:15:19.200 | Is a function of measuring statistics

00:15:22.200 | And having them as leading indicators

00:15:25.200 | And we have 10 year growth rate estimates for China

00:15:29.200 | Excuse me, India, and all the countries, top 22 countries

00:15:32.200 | And you can see it online if you want, country by country

00:15:35.200 | And the reasons for it

00:15:36.200 | India has the highest potential growth rate

00:15:38.200 | I think India is where China was when I started to go

00:15:44.200 | I started to go in 1984

00:15:46.200 | So if you look at the complexion, the per capita income

00:15:50.200 | And I think Modi is a Deng Xiaoping

00:15:54.200 | So that you have a massive reform, development, creativity

00:16:04.200 | All those elements

00:16:06.200 | There are of course issues, risk issues

00:16:09.200 | But India is very important

00:16:13.200 | Now of course there's a religious internal issue

00:16:16.200 | Having to do with the population

00:16:18.200 | Has 240 million Muslims

00:16:21.200 | And I don't think that any of these issues is going to stop India

00:16:25.200 | Also in history, the countries that were the neutral countries

00:16:30.200 | Did the best

00:16:32.200 | So in other words, better than the winners in wars

00:16:35.200 | So as we have this conflict between the United States and China

00:16:40.200 | And its allies, Russia and so on

00:16:43.200 | As we see that line up

00:16:45.200 | Countries that are in the middle, like India

00:16:47.200 | Are going to be net beneficiaries of that

00:16:50.200 | Middle East is again

00:16:52.200 | So there are two big epicenters where things are happening fast

00:16:56.200 | And quick and getting better

00:16:59.200 | And one of them is, well let's say three

00:17:02.200 | There's the ASEAN countries

00:17:04.200 | We can say that Singapore is essentially a hub

00:17:08.200 | But the ASEAN countries, which is Indonesia, Philippines, Vietnam

00:17:13.200 | And all of that, that's going to be a great area

00:17:16.200 | The Middle East in terms of particularly the Gulf countries

00:17:20.200 | The amount of money and they're making talent magnets

00:17:23.200 | They're attracting people

00:17:25.200 | You look at how the change in wealth is taking place

00:17:28.200 | That's certainly it, and India

00:17:31.200 | Ray, can I just ask back on China

00:17:34.200 | You know Chinese leadership

00:17:37.200 | You've spoken and had relations there for many years

00:17:40.200 | Can you share with us your point of view

00:17:42.200 | On how they think about their position in the world

00:17:45.200 | And how you understand their intentions

00:17:47.200 | Yes, I'll give you my thoughts

00:17:50.200 | I'm not making judgments, I'm just passing along, okay

00:17:55.200 | They think there are two different systems, two different approaches

00:17:59.200 | They would think that an autocratic system

00:18:04.200 | They used to have a committee that would make it

00:18:07.200 | But they would say it would be very much like a company

00:18:10.200 | If you had a company, you have a board

00:18:12.200 | You have the executive committee and so on and so forth

00:18:15.200 | And you make sure you get the leadership

00:18:17.200 | And then they would say that the world should have a competition

00:18:21.200 | And that throughout history

00:18:23.200 | There were these competitions in all the various ways we talk about

00:18:26.200 | And there's an emergence of that

00:18:28.200 | And that there's an inevitability

00:18:31.200 | And I think we say that there's an inevitability

00:18:34.200 | For a conflict

00:18:38.200 | Because there's a containment

00:18:40.200 | And then there's a desire to expand

00:18:43.200 | And it's like almost keeping a lid on a boiling pot

00:18:47.200 | That's the type of situation

00:18:49.200 | I can go on at length about the particulars of their thing

00:18:52.200 | They have a very good historical perspective

00:18:54.200 | Because their history has been literally 5,000 years

00:18:57.200 | Like we think of ours

00:18:59.200 | They remember the particulars and all the leaders study that

00:19:02.200 | And there is a cycle that they're very conscious about

00:19:05.200 | So for example, the big risk that they believe is instability

00:19:10.200 | So she says that the big storm on the horizon

00:19:19.200 | He keeps referring to the big storm on the horizon

00:19:22.200 | And that relates to the conflict in the world that we're talking about

00:19:28.200 | But it also relates to the fact that they've got a debt problem

00:19:31.200 | They have a debt restructuring problem

00:19:33.200 | And their instinct through history, the learning of history

00:19:37.200 | Is that during such periods of time

00:19:39.200 | Internal conflict is a big threat

00:19:42.200 | And therefore autocracy, strong controls are the things to have

00:19:47.200 | Okay, now we can explore the relative merits of that internal conflict

00:19:52.200 | And so on, but that's basically their perspective

00:19:55.200 | One of the things that I'm struck by is if you look in the past

00:19:59.200 | A lot of these conflicts were started because it's about commerce

00:20:07.200 | Or some form of capital or some critical resource

00:20:11.200 | And then it just kind of like escalates

00:20:14.200 | And then you have these large re-transformations and reallocations of power

00:20:18.200 | But in a world where we are now sort of almost on the precipice

00:20:23.200 | Closer than we've ever been to this sort of form of abundance

00:20:26.200 | Whether it's quasi-costless energy

00:20:29.200 | Whether it's food that's available to be printed or made or what have you

00:20:34.200 | What do we fight over in this next great conflict?

00:20:38.200 | What is worth fighting over?

00:20:40.200 | Okay, so let me first deal with the productivity thing

00:20:45.200 | Throughout history, productivity has been the greatest

00:20:49.200 | And so if you take the '20s, we had the productivity

00:20:52.200 | Most inventions, most patents and so on in the '20s

00:20:55.200 | You also had a debt problem

00:20:57.200 | And you also had a wealth gap problem

00:20:59.200 | So I believe that in terms of the new technology

00:21:04.200 | We're going to really see new technologies

00:21:06.200 | Now, they can be used for weapons or they can be used for productivity

00:21:10.200 | But we're going to have to have a reorganization

00:21:13.200 | Of how are we going to redistribute the wealth and opportunities and so on

00:21:18.200 | So if we come back, I think we just have to look at

00:21:20.200 | What are we fighting for now?

00:21:22.200 | What's going on?

00:21:23.200 | And I think that, of course, there's a fight over money

00:21:28.200 | If you have a downturn, if you have a debt problem

00:21:31.200 | And I think there's good reason to believe we will

00:21:33.200 | We can get into that in a minute

00:21:35.200 | But they fight over money

00:21:38.200 | And they fight over differences in values

00:21:40.200 | In other words, the differences in values

00:21:42.200 | Like how do you educate your children?

00:21:45.200 | What is transgender issues and education issues

00:21:50.200 | And those types of things

00:21:51.200 | And so I think you're seeing those things to fight over

00:21:54.200 | You're seeing plenty to fight over

00:21:56.200 | And let's say we don't fight

00:21:58.200 | Let's pray we don't fight

00:21:59.200 | What we need is to come together

00:22:01.200 | But if, let's say we don't fight

00:22:04.200 | You're still going to have to deal with

00:22:06.200 | How do you redistribute not only money

00:22:08.200 | But how do you redistribute opportunities?

00:22:10.200 | And that's going to take figuring it out, right?

00:22:13.200 | And there's going to be an argument over how they do that

00:22:16.200 | No, I think this is really interesting

00:22:17.200 | Because I think you're saying

00:22:18.200 | If you don't fight over the historic area of battlefields

00:22:23.200 | If we're not fighting over resources

00:22:25.200 | We are going to fight over social issues

00:22:27.200 | Or social constructs or social beliefs

00:22:29.200 | But I'm also saying you're going to fight over resources

00:22:33.200 | Like, we have debt

00:22:36.200 | And we'll operate as though it doesn't matter

00:22:41.200 | And we'll continue to have the pile

00:22:43.200 | If you look at history

00:22:44.200 | And we can get into why it is

00:22:46.200 | It is not that that goes on a while

00:22:48.200 | And you can't continue to increase your living standards

00:22:51.200 | By borrowing more than you're spending

00:22:55.200 | You know, you can't keep accumulating your debt

00:22:58.200 | Because it has to matter

00:22:59.200 | So these types of things, as they build up

00:23:02.200 | As the debt builds up

00:23:03.200 | As the wealth gaps build up

00:23:05.200 | And the values gaps build up

00:23:07.200 | And then there's difference in reaction to controls

00:23:10.200 | Some people, so you see the movement

00:23:12.200 | We will have things to fight over

00:23:14.200 | At the same time

00:23:15.200 | As we hopefully will have a productivity miracle

00:23:19.200 | I think that in the next five years

00:23:22.200 | I think year by year

00:23:25.200 | We're going to go through a time warp

00:23:27.200 | You're going to see radical disorder

00:23:31.200 | In the next five years

00:23:32.200 | As each one of those things comes to pass

00:23:35.200 | First with the elections as we have

00:23:37.200 | Then we have the conflict with the geopolitical conflict

00:23:41.200 | Then we have the climate issue

00:23:44.200 | Which by the way is a very expensive issue

00:23:47.200 | We should talk about how costly that issue is

00:23:49.200 | And then we're going to have this issue of technology

00:23:53.200 | Which can provide the greatest miracle

00:23:56.200 | But also is a weapon

00:23:58.200 | Just frame for us your thoughts on debt for a second

00:24:00.200 | How do you think about debt as an absolute construct

00:24:03.200 | Or a relative construct?

00:24:05.200 | Especially sovereign debt

00:24:07.200 | There is a US debt

00:24:09.200 | But then there are also every other 182 countries

00:24:12.200 | Who have a ton of debt

00:24:13.200 | And so how do you think about debt

00:24:15.200 | Debt to GDP relatively and in absolute terms?

00:24:18.200 | For any country

00:24:19.200 | And quite often many countries

00:24:22.200 | Because they go through the cycle together

00:24:24.200 | As they did in the 30s

00:24:27.200 | What happens is debt rises relative to incomes

00:24:31.200 | And what that means mechanistically

00:24:34.200 | Is that debt service payments rise relative to incomes

00:24:39.200 | And so it squeezes out consumption

00:24:44.200 | As the compound

00:24:46.200 | And what happens is there's a realization

00:24:49.200 | That they have to print money

00:24:51.200 | So I think you're going to see

00:24:53.200 | In the next downturn

00:24:55.200 | Another move to print money

00:24:57.200 | There are certain things that are going on now

00:24:59.200 | That means that the big risk comes

00:25:01.200 | When they don't want to hold those bonds anymore

00:25:04.200 | Because the supply demand

00:25:06.200 | Think about that supply demand

00:25:08.200 | It has a deficit

00:25:10.200 | It has to borrow

00:25:12.200 | And so it sells its bonds

00:25:14.200 | Who are the buyers of the bonds?

00:25:16.200 | Why do they buy?

00:25:17.200 | The buyers of the bonds buy

00:25:19.200 | Because there's an attractive return

00:25:21.200 | Not only do you have to sell those amounts of bonds

00:25:24.200 | But when they start to realize

00:25:26.200 | That I'm not getting good returns on those bonds

00:25:29.200 | They can sell those bonds

00:25:31.200 | There are 31 trillion dollars in bonds

00:25:34.200 | What would they own instead?

00:25:36.200 | They always own tangible things

00:25:40.200 | And those things can also be

00:25:42.200 | It could be equities

00:25:44.200 | It could be many other things

00:25:46.200 | It could be gold

00:25:48.200 | Gold has always been accepted as a money

00:25:52.200 | Because nobody else

00:25:54.200 | There's a saying that gold is the only asset you can have

00:25:57.200 | Not somebody else's liability

00:25:59.200 | In other words, dependent on getting paid

00:26:01.200 | You can have that intrinsic value

00:26:03.200 | And for a long period of time

00:26:05.200 | It's been valued and you can move it between countries

00:26:07.200 | But also, different countries prosper

00:26:10.200 | So you'll see the countries

00:26:12.200 | Some of the countries that we mentioned

00:26:14.200 | They will prosper through that

00:26:15.200 | The United States made most of its money

00:26:18.200 | Because it didn't enter the war

00:26:20.200 | It was before, on World War II and World War I

00:26:23.200 | The United States became the richest country

00:26:25.200 | Because of the money it made before it entered the war

00:26:29.200 | So those countries will prosper

00:26:31.200 | And in those countries

00:26:33.200 | Then certain real estate will profit

00:26:35.200 | Hard assets

00:26:36.200 | But where you have that is very, very important

00:26:39.200 | There's something about wealth inequality

00:26:42.200 | That I just wanted to get your thoughts on as well

00:26:44.200 | Which is, I saw a chart in The Economist recently

00:26:48.200 | Where they showed on a purchasing price parity basis

00:26:52.200 | Normalized across all the Western countries

00:26:55.200 | That US median income

00:26:57.200 | So median, so not thinking about means

00:26:59.200 | Is now 45, almost 47 thousand dollars

00:27:04.200 | Doing much better than Britain, most of continental Europe, etc.

00:27:07.200 | So on a functional purchasing power parity basis

00:27:11.200 | A lot of Americans are doing much, much better

00:27:14.200 | There was a UPS renegotiation for their labor contracts

00:27:17.200 | Drivers can now make 180 grand a year

00:27:20.200 | I mean, there's a lot of money to be made

00:27:22.200 | But then there's this real but also hyper-perceived imbalance

00:27:30.200 | And I just wanted to get your sense of

00:27:32.200 | How much of this is the social media phenomenon

00:27:36.200 | Of just never having enough

00:27:38.200 | And how much of it is true when you look at data like that?

00:27:42.200 | There's a huge wealth gap

00:27:48.200 | And the nature of our economy is producing this

00:27:51.200 | So I can rattle off a bunch of statistics

00:27:54.200 | What happened, as happens in these cycles

00:27:58.200 | Is that when you have the type of situation we have

00:28:02.200 | The government will take on the debt

00:28:04.200 | And it'll send out the money

00:28:06.200 | So the mechanics of that were that

00:28:09.200 | There was more checks and more money sent

00:28:12.200 | Than there was loss of income, by a lot

00:28:16.200 | So a lot of money went out

00:28:18.200 | And as a result of that

00:28:20.200 | The financial conditions of the household sector

00:28:24.200 | Improved, generally speaking

00:28:26.200 | While the financial conditions of the government sector

00:28:30.200 | The government got into a lot more debt

00:28:32.200 | That's very classic at the end of the cycle

00:28:35.200 | Because there's an imbalance between demand and purchases of bonds

00:28:40.200 | There is the central bank buying those bonds

00:28:43.200 | That monetization

00:28:45.200 | So now, that's what the wealth gap looks like

00:28:48.200 | And that also creates more of the inflation

00:28:51.200 | Because the household sector, buying large benefits

00:28:55.200 | But when you look at the differences

00:28:58.200 | I'll tell you a personal case

00:29:01.200 | So that I can understand

00:29:03.200 | I live in Connecticut

00:29:05.200 | And Connecticut's usually one, two, or three

00:29:07.200 | Of the richest states in the country

00:29:09.200 | 22% of the high school students in Connecticut

00:29:13.200 | Either have dropped out of high school

00:29:16.200 | Or are failing classes with absentee rates of greater than 25%

00:29:21.200 | The $600 million a year goes to incarcerations

00:29:27.200 | There is a level below which

00:29:31.200 | No human beings should be allowed to

00:29:33.200 | Let alone raising kids and families

00:29:36.200 | I live in Greenwich, Connecticut

00:29:39.200 | A wealthy place

00:29:41.200 | My number won't be up to date

00:29:43.200 | Maybe five years old

00:29:45.200 | Per capita students in high school

00:29:48.200 | Costs would be $24,000 a person

00:29:51.200 | In Bridgeport, Connecticut, up the road

00:29:54.200 | $14,000 a person

00:29:56.200 | There were 60,000 kids in Connecticut

00:29:59.200 | That didn't have computers

00:30:01.200 | How were they going to get education?

00:30:03.200 | The state wasn't going to pay for it

00:30:05.200 | We philanthropically bought them

00:30:08.200 | So now, we don't create a bottom

00:30:12.200 | An acceptable bottom

00:30:14.200 | The idea of equal opportunity

00:30:16.200 | I was blessed with it

00:30:18.200 | I think we probably all were blessed with equal opportunity

00:30:20.200 | All you need is

00:30:22.200 | Parents will take care of you

00:30:24.200 | Go to a public school

00:30:26.200 | Come out to a world of equal opportunity

00:30:28.200 | Equal stability

00:30:30.200 | If you have those things

00:30:32.200 | If you take all those measures

00:30:34.200 | The gaps in those things are greater than they have ever been

00:30:37.200 | Right. Saxon?

00:30:39.200 | Let me ask. Ray, I think I fundamentally agree with your critique

00:30:42.200 | That America is looking more and more like a late-stage empire

00:30:46.200 | Like a late-stage Roman Empire

00:30:48.200 | We have this massive debt

00:30:50.200 | And we're debasing our currency

00:30:52.200 | Like the Roman Empire

00:30:54.200 | We have all these far-flung military wars

00:30:57.200 | Which we lose all over the world

00:31:00.200 | We're wracked by internal divisions

00:31:02.200 | So I think I agree with that part of it

00:31:04.200 | At the same time

00:31:06.200 | We do seem to be really good still at technological innovation

00:31:09.200 | In the last year, we've had this breakthrough with AI

00:31:12.200 | With large language models

00:31:14.200 | I'm wondering, is that

00:31:16.200 | Well, first of all, is that a mirage or do you agree with that?

00:31:18.200 | And then if you do agree that we're still really good at technology

00:31:22.200 | Is there anything in the historical pattern that's like that?

00:31:25.200 | Where you have an empire that's declining in every visible way

00:31:30.200 | Except for the one that really undergirds our power

00:31:33.200 | Which is technology

00:31:35.200 | Well, the late '20s in the United States was such a classic example

00:31:39.200 | We had more innovations, more technology

00:31:42.200 | All of these cycles

00:31:44.200 | If I was to go back to the Industrial Revolution

00:31:46.200 | Late 1800s

00:31:48.200 | And then you turn

00:31:50.200 | When there's a lot of debt

00:31:52.200 | And a big wealth gap

00:31:54.200 | In 1907, you have the Panic of 1907

00:31:58.200 | Boom, you have this internal conflict

00:32:02.200 | And you had the First World War

00:32:04.200 | In the '20s, you had the same kind of late '20s

00:32:07.200 | It was an era of great inventiveness

00:32:09.200 | The other things matter

00:32:11.200 | So just because we're really great at innovation

00:32:14.200 | Isn't going to save us if all these other things are broken

00:32:17.200 | It's a wonderful thing

00:32:19.200 | But ultimately, we as a society

00:32:22.200 | In an aggregate

00:32:25.200 | Are spending a lot more money than we're earning

00:32:28.200 | So, if we're doing such a good job on that technology

00:32:33.200 | Whatever it is

00:32:35.200 | Why is that happening?

00:32:37.200 | So now when you look at the debt

00:32:40.200 | Do you want to own the debt?

00:32:42.200 | Do you want to own that?

00:32:44.200 | Those who don't want to own it

00:32:46.200 | Then you have a financial problem

00:32:48.200 | When you have a financial problem

00:32:50.200 | At the same time as you have a wealth gap

00:32:52.200 | And populism

00:32:54.200 | That's a dangerous combination

00:32:56.200 | At the same time as you have an external

00:32:58.200 | So it's a very risky

00:33:00.200 | I'm with you, but

00:33:02.200 | - Let me just follow up there

00:33:04.200 | So you mentioned populism

00:33:06.200 | I mean, I think I have a slightly different definition

00:33:08.200 | I don't want to debate semantics with you

00:33:10.200 | I think populism is a reaction to the failure of elites

00:33:12.200 | So all the people managing our fiscal situation

00:33:16.200 | And our foreign policy

00:33:18.200 | Who have gotten us into all these industry conflicts

00:33:20.200 | Who have debased our currency

00:33:22.200 | I see populism as people rising up to reject their leadership

00:33:26.200 | Now it's a bad thing

00:33:28.200 | That they're not willing to accept the results of the election

00:33:30.200 | - I agree with your definition

00:33:32.200 | And then also

00:33:34.200 | At the same time that that's happening

00:33:36.200 | They'll win it all, of course

00:33:40.200 | They won't compromise

00:33:42.200 | They will win

00:33:44.200 | They will fight for that side and win

00:33:46.200 | - Fair enough, and that's not good

00:33:48.200 | I guess my question is

00:33:50.200 | Why don't you have more criticism for our elites

00:33:52.200 | Who are running all these institutions

00:33:54.200 | Who are making these decisions

00:33:56.200 | - I do

00:33:58.200 | [Applause]

00:34:00.200 | I wrote a piece about four years ago

00:34:02.200 | Which says

00:34:04.200 | Why and how capitalism needs to be reformed

00:34:06.200 | And I believe

00:34:08.200 | That on these issues

00:34:10.200 | Of equal opportunity

00:34:12.200 | We've got a big structural problem

00:34:14.200 | And that

00:34:16.200 | Everything needs to be reformed

00:34:18.200 | I'm not against capitalism, but it needs to be reformed

00:34:20.200 | And part of the big problem

00:34:22.200 | Just analytically, mechanically

00:34:24.200 | Is that

00:34:26.200 | The profit system alone

00:34:28.200 | Does not

00:34:30.200 | Direct resources adequately

00:34:32.200 | Let's say if we take

00:34:34.200 | Climate, for example

00:34:36.200 | There is costs

00:34:38.200 | Terrible costs that come from climate

00:34:40.200 | It's not built into the system

00:34:42.200 | Education

00:34:44.200 | Look at the gaps in education

00:34:46.200 | The structural system

00:34:48.200 | Means that the central government

00:34:50.200 | That state government

00:34:52.200 | Controls education

00:34:54.200 | Then you get to the town

00:34:56.200 | And at the town level, it's the town that controls the education

00:34:58.200 | And how much they pay

00:35:00.200 | And so then you create wealth gaps

00:35:02.200 | With rich people being able to take care of their kids

00:35:04.200 | In a way that other people can't take care of their kids

00:35:06.200 | And that creates an opportunity gap

00:35:08.200 | That's a structural problem

00:35:10.200 | It has to be taken on full

00:35:12.200 | Looked at, reformed

00:35:14.200 | And in order to pull this thing off

00:35:16.200 | We have to do it together

00:35:18.200 | Okay, we cannot do it

00:35:20.200 | With one side fighting the other side

00:35:22.200 | With irreconcilable differences

00:35:24.200 | -Ray, before we run out of time

00:35:26.200 | Amazingly well said

00:35:28.200 | And what an amazing conversation

00:35:30.200 | If we were to get prescriptive here

00:35:32.200 | In the last couple of minutes we have

00:35:34.200 | If America wants to

00:35:36.200 | Have a more

00:35:38.200 | If America wants to

00:35:40.200 | Continue to be the leader

00:35:42.200 | Or at least in a lead position here

00:35:44.200 | In the free world

00:35:46.200 | What should we focus on?

00:35:48.200 | What would you say are the top three things?

00:35:50.200 | -Let me add one question to that

00:35:52.200 | And it connects these two

00:35:54.200 | Is there a political solution

00:35:56.200 | In the US to avoid the

00:35:58.200 | End of empire?

00:36:00.200 | Or is it a function of physics?

00:36:02.200 | And I think this is a big part of

00:36:04.200 | Like Sax's point of view

00:36:06.200 | Is there a political solution?

00:36:08.200 | We need to change these people

00:36:10.200 | Or are there too many, call it

00:36:12.200 | Conflating forces, social forces, economic forces

00:36:14.200 | That all kind of rise and fall together

00:36:16.200 | And it becomes an inevitability

00:36:18.200 | That there's a side point

00:36:20.200 | -There are pre-existing conditions

00:36:22.200 | That represent challenges

00:36:24.200 | So for example

00:36:26.200 | The amount of debt that we're in

00:36:28.200 | Represents a

00:36:30.200 | You can't pretend it

00:36:32.200 | It exists

00:36:34.200 | It represents a challenge

00:36:36.200 | There are a lot of these challenges

00:36:38.200 | But it is not inevitable

00:36:40.200 | What is needed is

00:36:42.200 | First of all, a strong middle

00:36:44.200 | To bring the country together

00:36:46.200 | In terms of rather than

00:36:48.200 | To have this fighting

00:36:50.200 | Because if we continue the way we will

00:36:52.200 | We're going to have a conflict

00:36:54.200 | And then there needs to be a good engineering exercise

00:36:56.200 | That's going to produce

00:36:58.200 | But has to be bipartisan

00:37:00.200 | Has to be bipartisan

00:37:02.200 | And that strong middle

00:37:04.200 | Taking control of the extremes

00:37:06.200 | Because neither side is going to win

00:37:08.200 | -A great reformation

00:37:10.200 | -And that reformation

00:37:12.200 | I think should take the form of

00:37:14.200 | If I was president of the United States

00:37:16.200 | What I would do is

00:37:18.200 | -It's on the table

00:37:20.200 | -Bipartisan cabinet

00:37:22.200 | I'm not running for president

00:37:24.200 | But a bipartisan cabinet

00:37:26.200 | Bipartisan cabinet

00:37:28.200 | And then have

00:37:30.200 | An engineering exercise

00:37:32.200 | Much like the Manhattan Project

00:37:34.200 | In which those bipartisan people

00:37:36.200 | Get together

00:37:38.200 | And properly engineer

00:37:40.200 | Important changes that need to be made

00:37:42.200 | They have to be structural

00:37:44.200 | We will not agree with each other

00:37:46.200 | Ever

00:37:48.200 | We're going to kill each other

00:37:50.200 | Fighting over these things

00:37:52.200 | So structural changes have to be made

00:37:54.200 | And you need to have

00:37:56.200 | The country as a whole do those things

00:37:58.200 | -Do you guys think that's naive

00:38:00.200 | Or is it feasible?

00:38:02.200 | -I think that the way politics works

00:38:04.200 | Is that you don't somehow

00:38:06.200 | Come together in the middle

00:38:08.200 | I think one side has to win

00:38:10.200 | In the eyes of voters

00:38:12.200 | Voters have to choose a path

00:38:14.200 | -And that's

00:38:16.200 | I'm with you, that's what's going to happen

00:38:18.200 | -We've had moderate stuff

00:38:20.200 | -We're going to have an interesting two years

00:38:22.200 | Between where we are now

00:38:24.200 | And let's say

00:38:26.200 | Almost two years

00:38:28.200 | And let's say early

00:38:30.200 | 2025

00:38:32.200 | Okay?

00:38:34.200 | And not just interesting because

00:38:36.200 | We're going to have unbelievable elections

00:38:38.200 | And we'll see how power

00:38:40.200 | How we can come together

00:38:42.200 | We're going to have an interesting

00:38:44.200 | On how China-US relations are

00:38:46.200 | We're going to have an interesting

00:38:48.200 | Financial conflict

00:38:50.200 | And we're going to have radical technology changes

00:38:52.200 | Plus climate's going to be an issue

00:38:54.200 | So

00:38:56.200 | -Ray, you've, Mr. Dalio

00:38:58.200 | -Right

00:39:00.200 | -You've accomplished more than

00:39:02.200 | Anybody could ever expect in life

00:39:04.200 | Financially with your company

00:39:06.200 | And intellectually

00:39:08.200 | Obviously you've given this

00:39:10.200 | Tremendous amount of thought

00:39:12.200 | And you said you're not running for president

00:39:14.200 | I wonder, there's not much time left

00:39:16.200 | You should

00:39:18.200 | Maybe consider running for president

00:39:20.200 | And why not do it?

00:39:22.200 | Why not?

00:39:24.200 | What's the argument

00:39:26.200 | To be so successful, so rich

00:39:28.200 | So intellectually curious

00:39:30.200 | And not do what the country

00:39:32.200 | Needs you to do

00:39:34.200 | Which is get in the arena

00:39:36.200 | We need you, Mr. Dalio

00:39:38.200 | Get in the arena

00:39:40.200 | Who wants him in the arena?

00:39:42.200 | Let's go

00:39:44.200 | -Thank you

00:39:46.200 | -This is the same speech

00:39:48.200 | -I'm very confident

00:39:50.200 | -That's a very nice

00:39:52.200 | And generous compliment, thank you very much

00:39:54.200 | -Seriously, on a personal level

00:39:56.200 | Take me through it

00:39:58.200 | -Well, okay

00:40:00.200 | Mario Draghi

00:40:02.200 | I would give up my life for the country

00:40:04.200 | -Okay

00:40:06.200 | -But Mario Draghi

00:40:08.200 | In Italy, if you know the story

00:40:10.200 | He knows

00:40:12.200 | The system and how it works

00:40:14.200 | And that if you don't have

00:40:16.200 | Unitedness

00:40:18.200 | And operating in that way

00:40:20.200 | Everybody's going to be

00:40:22.200 | Torn apart

00:40:24.200 | And so I think

00:40:26.200 | Whatever thoughts I have

00:40:28.200 | If these are helpful thoughts

00:40:30.200 | I think my best role is to pass along

00:40:32.200 | Whatever helpful thoughts I have

00:40:34.200 | And then the population as a whole

00:40:36.200 | Deals with those thoughts

00:40:38.200 | So I'm making my best contribution

00:40:40.200 | That I can, I feel

00:40:42.200 | That's my best capacity

00:40:44.200 | And then it's up to the people

00:40:46.200 | Please join me in thanking Ray Dalio

00:40:48.200 | For his contribution

00:40:50.200 | -Amazing, give it up

00:40:52.200 | That was incredible

00:40:54.200 | Thank you Mr. Dalio

00:40:56.200 | Wow, look at this

00:40:58.200 | Standing out, first one

00:41:00.200 | First standing ovation

00:41:02.200 | Of all the designers

00:41:04.200 | -Thank you

00:41:06.200 | -Let your winners ride

00:41:08.200 | -Rainman David Sack

00:41:10.200 | -Thank you

00:41:12.200 | -And instead

00:41:14.200 | -I'm going to endorse it to the fans

00:41:16.200 | And they've just gone crazy with it

00:41:18.200 | -I'm the queen of Kinwani

00:41:20.200 | -Let your winners ride

00:41:22.200 | Let your winners ride

00:41:24.200 | Let your winners ride

00:41:26.200 | -Besties are gone

00:41:28.200 | -That's my dog taking a notice

00:41:30.200 | In your driveway

00:41:32.200 | -Oh man

00:41:34.200 | -My half a dash or we'll meet

00:41:36.200 | -We should all just get a room

00:41:38.200 | And just have one big huge orgy

00:41:40.200 | It's like sexual tension

00:41:42.200 | -We need to release that now

00:41:44.200 | -Let your beat be

00:41:46.200 | Let your beat be

00:41:48.200 | -We need to get

00:41:50.200 | -Besties are gone

00:41:52.200 | -I'm going all in

00:41:54.200 | I'm going all in

00:42:00.200 | I'm fallin' in.

00:42:02.200 | [BLANK_AUDIO]

All-In Summit: Ray Dalio on the rise and fall of nations and the changing world order

Chapters